Comment: Consumers are not naive – only the tariffs should be green
Juliet Davenport,CEO of energy supplier Good Energy, on Ofgem's publication of guidelines on green erngy supply.
Ofgem’s publication last week of new guidelines to clear up confusion over ‘green’ electricity tariffs has caused outcry from some industry and NGO groups alike.
As one of the original signatories to these guidelines, and having called for clear rules, regulation and transparency over green tariffs for several years, I thought I would offer some clarity.
Ofgem has published these new guidelines in order to encourage greater uptake of ‘green tariffs’ from consumers after many questioned the environmental benefits that green tariffs could bring.
This was perhaps unsurprising given that a lot of unscrupulous energy retailers were simply repackaging electricity they were legally obliged to source or produce under the Government’s Renewable Obligation.
In other words they are charging consumers a premium tariff for electricity which had already been paid for through additions to standard tariff bills.
In other cases, suppliers have been taking advantage of the market structure to “double count”, or sell the same unit of renewable electricity two to three times due to the certificates awarded for renewable generation.
For each MW of renewable electricity produced the generator is awarded three certificates: a REGO (renewable energy guarantee of origin), a ROC (renewable obligation certificate), and a LEC (levy exemption certificate).
This allows the more underhand operators to, for example, sell once to a domestic customer using the REGO as proof of a green tariff; and the same unit again to a business customer using the LEC as proof.
Businesses pay a high price for the LECs as this exempts them from the Climate Change Levy. Both customers think they are getting a green tariff and suppliers make hefty profits deceiving the market.
Under the proposals in the new guidelines the only measure of ‘green-ness’ will be the REGO. Suppliers will be obliged to hold on to the LECs rather than allowed to sell them.
Neither will ROCs be eligible as a measure of green supply. They will return to being a financial support mechanism so selling them on will not allow others to claim green tariffs.
This should close the market in double counting in one foul swoop.
Great for the consumer, not so great for suppliers trying to double sell their electricity.
The new guidelines will form the basis for an independent accreditation scheme for green tariffs.
Under the accreditation scheme a tariff will only be regarded as green if it brings benefits beyond the suppliers’ existing legal obligations.
This will have to be transparent to the public. First, each supplier signed up to the guidelines will have to provide customers with a fuel-mix disclosure chart displaying the percentage of each energy source used by the supplier to give an idea of their environmental credentials.
This is important as customers are often unaware that even some of the ‘eco’ suppliers provide only a small amount of renewable energy in their mix, the rest being sourced from coal, gas or nuclear sources.
Independent information on each supplier’s fuel mix is currently available at www.electricityinfo.org/suppliers.php
Secondly, suppliers will have to give a description of the extra measures they are taking beyond their legal obligations. This could be through things like supporting community-based renewable projects or installing energy efficiency measures.
Finally, they will have to carry a quality mark that certifies that the extra environmental activity will abate a minimum level of carbon dioxide equivalent emissions.
The idea behind this is to provide reassurance to the public and encourage greater uptake of green tariffs in order for greater amounts of renewable energy to be developed in the UK. The more there is, the cheaper it will become and the greater the impact on greenhouse gas emissions.
Customers will be able to see exactly where their fuel comes from with each supplier and make choices accordingly.
As each green tariff will have to show evidence of renewable generation beyond legal obligations, we hope it will encourage greater independent generation from individuals, households, landowners and small-scale developers.
At Good Energy we already source our electricity from over 500 independent generators throughout the country and even buy-back some of the energy produced in the homes of our customers.
While we do own our own wind-farm in Cornwall – the first commercial wind-farm in the UK – we prefer to buy our energy from a diverse range of sources.
It provides energy, and financial, security on a diverse and distributed basis to a variety of entrepreneurial individuals and communities who should be actively supported, particularly during harsh economic times.
The new guidelines will only be voluntary and only apply to designated green tariffs.
However, it is worth asking those who oppose them what the fuel mix is in their tariff or how many times they are selling their electricity certificates.
While they may not be perfect, we feel the guidelines could shine a welcome light into some murky waters.
After all, we won’t reduce emissions if we’re simply kept in the dark.
Juliet Davenport, CEO and founder Good Energy
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