Our thinking

Shades of green

5 May, 2023

Switching to a renewable electricity tariff is one of the more straightforward – and impactful – steps that we can take to reduce our carbon emissions.

In principle, a renewable electricity tariff is simple: the energy you consume is produced by the wind, sun and water, rather than the mix of energy sources including fossil energy. But in practice, all electricity is just electricity once it is fed into the national grid – there’s no way to tell where it has come from or how it is produced. The electrons that power your office plugs and lighting systems could have come from any number of sources, even if your energy bill tells you they are “green”. To deal with this, energy companies can use certificates called REGOs that demonstrate how much electricity that an energy company has sourced is from renewable sources. The more REGOs, the lower carbon that particular energy tariff is at the point of generation.

But since companies can buy these certificates rather than generating the energy themselves or buying it directly from renewable energy sources, questions have been raised – including by the consumer champion Which? and by the UK Government – about whether these certificates are helping the green energy transition or actually contributing to greenwashing and confusion. Ovo Energy set out to address these questions with research it commissioned and the short answer is no: REGOs are not increasing the amount of renewable generation capacity which will be added to the electricity system, and they risk misleading customers into thinking they are supporting incremental renewable energy generation rather than simply acting as a form of offsetting. As a result, Ovo has taken the decision to stop purchasing REGOs and will instead put this money towards wind and solar projects that it knows will generate the renewables it needs, as well as investments in smart meters and home insulation.

So what does this mean for the many companies that rely on REGOs to hit their emissions targets? In terms of pure emissions accounting, nothing has changed: these renewable tariffs still qualify as zero-carbon under the market-based accounting method. So for now, if you currently rely on REGO tariffs to reduce your scope 2 emissions as a business, you can continue to do so.

But the idea of more specific requirements about the purchase of renewable electricity is a topic that has come up in the Greenhouse Gas Protocol’s recent consultation on its scope 3 guidance. We will be keeping a keen eye on how the conversation develops, and how the updated guidance deals with this conundrum when it comes out in a couple of years.

By Patrick Bapty