Most renewable electricity tariffs are greenwashing and will fail to help Britain meet its net-zero goal, the country’s third largest energy supplier said.
Ovo Energy said it would ditch the certificates behind most green tariffs from May. The company cited a report it commissioned from the energy analyst Cornwall Insight, which found they did little to encourage new wind and solar farms to be built.
Instead, Ovo said it would use the money saved to offer its four million customers visits from energy-saving advisers, which would cost the company £150 each but be offered at £25. It also promised half-price smart thermostats to spur people to use less energy.
“Greenwashing is a luxury no one can afford. It’s incumbent on us to offer a better way,” Raman Bhatia, the chief executive of Ovo, said.
The most recent data shows that 65 per cent of green electricity tariffs are underpinned by Renewable Energy Guarantees of Origin (Regos). These certificates are awarded to wind and solar farm owners when a megawatt hour of energy is generated. Energy suppliers can source electricity from wherever they like, including gas power stations, then buy enough Regos to match the amount used by a household, before presenting it as a “green tariff”.
In Ovo’s case, it sources 30 per cent of its electricity from renewable sources. The other 70 per cent comes from gas power stations. Yet Ovo says 55 per cent of its customers are on green tariffs because it purchases the certificates.
Historically they have been cheap, leading critics to say they provide little financial incentive for companies raising capital for new turbines or solar installations. Ovo estimates that not buying the certificates will mean a saving of about £18.40 per customer a year.
Asked why the company had relied on the certificates for years, Bhatia said: “We have taken some time to come up with an alternative.”
While smaller energy suppliers have long argued that the certificate-based system is flawed, Ovo is by far the largest one to break ranks. The move was backed by some environmental groups, including Friends of the Earth. One industry figure said Regos were “imperfect” but a “necessary evil” for now. However Julia Davenport, an energy expert, said the move was “cynical” and amounted to a cost-saving exercise.
Talking about the announcement, Nigel Pocklington, CEO, Good Energy: “We have been saying it for years and now OVO agree – energy suppliers have got to stop the greenwash. By ditching its purely REGO backed product OVO has indicated where green tariffs are going.
“Tariffs which are certified green without the suppliers buying renewable power are largely meaningless, but they have become standard. Big suppliers can have more impact through demand shifting, efficiency and innovative tariffs. So if they want to help decarbonising energy that is where they should focus.
“Good Energy is committed to truly renewable power sourced from independent generators, a model that helps grow renewables. We also do time-based matching, which is where the whole market is going. Big suppliers are unlikely to be able to claim even close to ‘100% renewable’ using time-based matching so they may as well ditch the claim and be honest now, like OVO have done.”