Customers are being let down by the practice of greenwashing, with the loss of confidence threatening to impact the UK's race to reach net zero.
Under current regulations, energy companies can buy certificates to prove their electricity is acquired from renewable sources.
However, the use of these contentious certificates does not always signal investment in renewable energy and can disguise the use of fossil fuels instead.
In addition, the way the UK energy market works means each unit is sold at the price of the most expensive fuel source, usually gas. This means customers do not see the benefit of choosing the most eco-friendly renewable providers.
Customer confidence
The practice of greenwashing damages customer confidence in renewable energy and risks affecting the country's willingness to achieve net zero.
If a customer signs up to a green tariff that promises 100% renewable electricity, it is not unreasonable to expect that their money is going directly into renewable generation.
However, due to the use of Renewable Energy Guarantee of Origin (REGO) certificates, suppliers do not need to directly invest in renewable generation or prove the electricity they are providing has actually been matched by genuinely green energy.
The negative publicity surrounding the April 2022 energy price increases means more customers are looking into their energy tariffs and asking why the energy market is so reliant on international gas when they believed they were investing in renewable energy.
Choose want the Government to remove the loopholes that have allowed these problems to flourish and call on them to help restore consumer confidence in green tariffs before it is too late.
REGOs
REGO certificates are an entirely legal way for suppliers to say they match their green electricity with energy from renewable sources.
The problem is the way the REGO market works. It allows the energy to be separated from the certificate and sold on separately, meaning there is no guarantee that purchasing one of these certificates directly benefits generators at all.
Regulator Ofgem has pointed out they do not believe 100% REGO-backed tariffs offer substantial environment benefits on their own without additional demonstrable investment in tackling climate change.
Yet, even though the regulator has expressed doubt about the benefits of REGO-backed tariffs, energy suppliers are still free to advertise them as 100% renewable.
Until this changes, energy customers are unable to make informed choices about their energy and are rightfully angry that their investment in a green tariff does not seem to bear any relation to green investment here in the UK.
Energy market
Even customers who choose one of the three UK energy providers with a derogation from the price cap because they offer the greenest tariffs in the UK find their bills rising in line with those from other suppliers who use fossil fuels or REGOs.
This is because there is no mechanism in the UK energy market for renewables to be charged at a different rate, and so the cheaper fuels on the market are charged at the rate of the most expensive.
It means customers who have actively chosen to pay more for their energy in a bid to be greener are still exposed to the price of gas.
With the focus on renewables delivering a greater share of UK energy, policy must change to ensure the pricing of energy is not pegged at the most expensive source and is instead tied to renewable generation.
This would be inherently fairer and ensure that any levies required to fund the use of fossil fuels in the UK energy grid would be transparent.
What happens next?
The Government ran a consultation into the green energy system and the way REGOs work in late 2021.
Among other things, this review asked for responses from suppliers and other stakeholders to help understand how the existing energy market fails customers and how green tariffs can be regulated to help promote further investment in green energy.
To date, the results of this consultation have not been published and we expect them at some point in 2022.
However, as this was a call for evidence rather than a policy paper, it could be some time before any recommendations are acted on.
In the meantime, energy customers will continue to be mis-sold green tariffs in the belief they are investing in future renewables and greenwashing suppliers will continue to make profits without investing in more renewable capacity to help the UK achieve net zero.
