Wednesday 17 July 2019

Guest Blog: Haydn Young – Are REGOs fit for purpose?

Guest Blog: Haydn Young – Are REGOs fit for purpose?

Buying renewable power is unquestionably the right thing to do and can only help the UK to meet its carbon goals and mitigate climate change. Whether end users are driven by internal carbon targets to buy a proportion of renewables or committing to 100%, the outcome from this extra demand should be a boost to the UK's generation.

However, is the Renewable Energy Guarantees of Origin (REGO) achieving it?

What is REGO?

REGO is a certification scheme to verify the origins of renewable electricity sold in the UK. The objective of the scheme is “to provide transparency to consumers about the proportion of electricity that suppliers source from renewable generation".

Essentially, it works by issuing certificates every eligible megawatt-hour (MWh) of renewable electricity generated, which can be transferred on to other Ofgem-approved companies at a premium market rate.

When a generator produces 1MWh of electricity, Ofgem produces one REGO to prove the source. As a result, renewable energy providers can sell their energy and certificates in the open market.

More interestingly, energy and certificates can be sold separately, meaning energy suppliers can continue to generate carbon intensive energy but be able to sell 100% renewable energy though buying certificates.

Potential challenges

Whilst Ofgem ensures the certificates match generation, the REGO process creates two challenges:

  1. Renewable supply

REGOs were set up to provide transparency in the fuel mix of the energy suppliers and not proof of how suppliers generate power. Suppliers can legitimately sell 100% renewables by simply buying the certificates and not investing in renewable generation. Therefore, those who do good are getting paid more and those who don’t can pay to look good.

Greenwash? Well yes. To avoid this scenario, energy suppliers need to be clearer about the purchase source of their energy and not just their renewable mix for sale.

  1. Increasing UK generation

REGOs do not directly fund renewable growth but they will provide greater revenue for generators. The expectation is that demand will push generators to develop more. However, if demand is high and prices rise, this could be an incentive to build slowly, thus maintaining the higher energy price.

The better alternative is via Power Purchase Agreements (PPAs) as they boost renewable generation but require greater long-term commitment from the suppliers.

Be transparent, please

UK companies are increasingly committing - and some paying more - to doing the right thing. REGOs are welcome and very much part of the mix but the link between certificate and generation growth needs greater clarity. In addition, we need transparency concerning how the sold REGOs are driving renewable investments.

After all, a bad outcome would be greater renewable energy demand, choking availability rather than boosting domestic generation.

Haydn Young is an independent energy management expert and founder of The Energy Club.

If you are an energy end user, you can register to attend a club for free.

Written by

Bruna Pinhoni

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