The UK Government has published a consultation to design a new framework to ensure transparency of the carbon content of energy purchased. The Department for Business, Energy & Industrial Strategy (BEIS) has launched the consultation in response to concerns over the rise of ‘green’ tariffs and the use of Renewable Energy Guarantees of Origin (REGOs) with consumer expectation often not matching the reality. The consultation seeks input from a broad range of stakeholders including suppliers, generators, regulators, and consumers.
There are wide ranging questions asked predominantly focussed on customer expectations and how issues relating to ‘greenwashing’ can be addressed. Greenwashing involves misleading or providing a false impression about how environmentally friendly energy actually is.
As noted in the Consultation, the production of “green” electricity has seen a significant increase over the last two decades having increased by 500% since 2010. Today, renewable sourced energy accounts for over 40% of all electricity generated in the UK. The Consultation draws the distinction between those willing to “pay a premium for sustainable energy” and those who want to “do their bit” for the environment but are primarily driven by price.
Financial involvement from Government, has been a driving force in the rapid development of green technologies, which are funded by every energy user through charges on their bills. The income from the levies support investment in renewable generation infrastructure in the UK.
The consultation recognises the lack of transparency around the use of the REGO system. REGO certificates are assigned to the electricity supplied under a green tariff however these may originate from the output of a generating source at any time over the preceding year meaning that the purchase of REGO backed energy does not always mean additionality within the network.
The Consultation raises concern that the REGO scheme ‘may continue to foster confusion and distrust from consumers who are aware that renewable generation is not always available when their electricity consumption occurs’. The need to maintain integrity is vital to the continuing growth of customers commitment to ‘green’ contracts which can attract a premium.
In addition to the growth in green generation, the number and type of green tariffs offered by electricity suppliers has also dramatically increased. This can lead to confusion for consumers. The consultation notes that many customers are not interested in the detail regarding the source but want to rely on the reassurances that their aspirations are being met when committing to go green. The consultation therefore is seeking to increase transparency and understanding for the consumer.
The Competition and Markets Authority is developing principles to prevent misleading information being provided by suppliers and is including in the energy industry in this work. The guidance, which is expected to be released later this year, will focus on:
- how environmental claims are made;
- whether they are supported by evidence;
- whether they influence consumer behaviour; and
- whether consumers are misled by an absence of information about environmental impact.
Alongside other changes due to be announced following BEIS and Ofgem’s joint energy code governance reform, this consultation supports Government’s approach of increasing accessibility and transparency for energy system customers and users.
Whilst it is evident that consumers are not always focussed on receiving comprehensive data about their electricity tariffs, there needs to be a simple, transparent explanation of the origin of the energy purchased with clear understanding of the environmental impact. The Consultation clearly is focussed on customer interests, however, ensuring that future investment meets the demands and needs of the consumer and wider environmental impact will be critical outcomes.
We are formulating our response to the consultation and would welcome any thoughts you may have on the issues raised. The consultation closes on 6th December 2021. To have your say, please email the compliance team at compliance@carbonxgen.com or to discuss this further please call Melanie Kendall-Reid on 01252 87 87 22.