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Question: What is Greenwashing ?


Date published

Answer: It is where companies use marketing to appear socially responsible

The Renewable Energy Guarantee of Origin scheme was intended as a simplification, but has become a loophole

In the words of the UK’s energy regulator Ofgem, the ‘Renewable Energy Guarantee of Origin’ (REGO) scheme is designed to “provide transparency to consumers about the proportion of electricity that suppliers source from renewable generation.”

It states that “the purpose of the certificate is to prove to the final customer that a given share of energy was produced from renewable sources.”

As originally designed, REGOs were an effective simplification; when a renewable generator produces one megawatt hour (MWh) of electricity (about a third of the electricity an average household will use over a year), Ofgem electronically produce one REGO to prove its source.

This means that instead of reviewing the provenance of their supply contracts to check their sources, all energy suppliers must do is count up how many REGOs they have to calculate how green their electricity supply is.

So far so good. But unfortunately, it is possible for a supplier to source REGOs without also purchasing the electricity they relate to.

This wasn’t a major issue in the early days of the scheme as there was only a small amount of trading in REGOs without their power. However, now this loophole is increasingly being taken advantage of at significant scale, with more suppliers claiming to offer ‘100% renewable’ tariffs, despite holding little or no contracts with renewable generators.

News in the industry has highlighted in late March 2019. Shell Energy is the new name for First Utility, who in the same breath now suddenly claim to supply their 700,000 customers with ‘100% renewable’ electricity. Making it seem awfully easy to switch a big customer base to renewable sourced power.

If we look at First Utility’s last published energy mix (right: source Good Energy’s blog) they sourced just 3.7% of their supply from renewables. But — as if by magic — post takeover from the oil and gas giant Shell they are now ‘100% renewable’. And all of this without a single article showing partnerships or contracts with a renewable provider.

Good Energy, the source of this data, trade with renewable generators every day and have stated that if any of this power were truly renewable, they would expect to have come up against Shell in contract discussions. But they have seen no sign of competition from Shell to sign up these assets in what is a highly liquid and competitive market which they are proud to have taken a major stake in creating.

The reason for this is that Shell do not have to contract or even contact any renewable generator to claim that the electricity they supply is ‘renewable’. All they have to do is buy surplus REGOs from suppliers who have already used this power to supply their customers.

It’s little more than an accounting trick and, hidden somewhere amongst the smoke and mirrors, is the reality that some customers aren’t getting what they think they’re paying for.

It’s a loophole, and an incredibly cheap one at that — the current price for a REGO is ~£0.35/MWh, or £1 per customer per year; to put this into context this is 0.1% of an annual bill.

Or, in order to ‘green’ all 700,000 of Shell Energy’s customers’ electricity bills, about 0.005% of Shell’s 2018 £16bn profits. You get what you pay for. Shell’s ‘100% renewable’ offering is just the same old brown[1] First Utility power plus some very cheap REGOs. A prime example of ‘if something sounds too good to be true, it probably is’.

Good Energy are saying they see the REGO loophole being exploited more and more. Instead of “providing transparency to customers” REGO trading is actually hiding the difference between fossil fuel based suppliers like Shell Energy and suppliers who go to the extra effort and expense to contract directly with renewable generators and buy real green power.

There is a simple solution: REGOs should be traded with the power they relate to.

It goes without saying that we are not privy to the contracts that Shell may have negotiated and that we dare say what they are doing is legal, but that doesn’t make it right.  At face value, it does seem to be a good example of greenwashing in that they are appearing to be more environmentally friendly than they really are.

Source: Good Energy |April 2019

[1] Brown energy is the term used for conventional fossil fuels such as oil or coal.