Greenwashing must be stopped to protect consumer investment in renewables
The energy crisis is revealing a loss of consumer confidence in green tariffs.
As April’s price cap increase approaches, energy customers are starting to see their bills hiked by excessive amounts and leaving people confused and angry1 as to why their ‘100% renewables’ tariff is so affected by the rising cost of fossil fuels.
While renewable electric is currently sold onto the grid at the same or a higher price to gas-generated electric to protect investments in renewables, there is clear confusion from consumers over renewables tariffs, which is being exacerbated by the extreme volatility in the price of gas.
By allowing the mis-selling of renewables tariffs to continue, the Government is failing to protect consumer confidence in the very tariffs that could provide a clear opt-in for people wanting to support the investment in renewables required for the UK to achieve net zero.
The net zero transformation report, published by the Lords’ Industry and Regulations Committee in March 2022, warns of a failure to meet net zero unless urgent action is taken. The report questions how a £50 billion annual funding target will be met, whilst highlighting the fact energy bills simply cannot shoulder any more costs.
While the Government has so far refuted the report, they did say, “The more clean, cheap and secure power we generate at home, the less exposed we will be to expensive gas prices set by global markets.”
Clearly then, ensuring consumers have transparent information on how they can positively choose energy tariffs that support investment in the growth of renewables generation is fundamental to achieving these goals.
The problem, however, is there are just a small handful of truly green energy providers who actively invest their customer’s payments to fund increasing renewables generation in the UK.
But many energy suppliers make use of a regulatory loophole that allows renewables certificates of origin (REGOs) to be purchased separately from the energy the certificate is endorsing, allowing them to sell ‘100% renewables’ tariffs with very little benefit going towards renewables generation.
The practice, known as ‘greenwashing’, can cost energy providers as little as £1.45 per year per customer to advertise their tariff as ‘100% renewable’, while the actual energy purchased could come from gas-generated electricity suppliers. In their 2019 review of the energy price cap, Ofgem said they “do not believe that a 100% REGO-backed tariff in itself offers substantial environmental benefits”.
So, greenwashing is an unethical practice that industry experts have criticised and have been calling on the Government to regulate against. As a result, it is now under review.
But the energy crisis is revealing quite how detrimental this practice is to consumer trust, and a failure to act now risks seriously undermining consumer confidence in green tariffs at a time when we need consumers to be positively engaged in opting-in to tariffs that fund investment in renewables.
Research carried out at Choose into the affordability of the energy market revealed among other things, that 34% of the population would opt-out of the Government’s energy loan scheme if they could choose to do so.
So, while the majority of the population is struggling with affordability and is highly focused on pricing above all else – there is a clear segment of customers who, even now, have the financial means to make positive choices around energy tariffs.
The price of fossil fuels is bringing renewables into the spotlight as the solution to the energy crisis. Protecting consumer confidence by ensuring transparency around green tariffs will help to ensure the positive choice of renewables investment the UK needs to achieve net zero is not compromised.
Ending the practice of greenwashing will also act to encourage the market to improve the green tariffs on offer, instead of leaving the responsibility to a handful of niche green providers, battling themselves against an unfair marketplace.
Finally, reviewing the energy market in this way would also create the opportunity to consider price caps on Government policies around renewables contracts. This would mean real green tariffs could start to benefit from competitive pricing when the cost of fossil fuels reaches the levels we’re now seeing, allowing consumer demand on price to also push forward renewables investment.
The Lords’ report summary finishes by stating that Ofgem’s regulation will continue to be crucial in, “Ensuring that confusion and a lack of knowledge on the part of consumers does not lead to exploitation.”
Yet, the consumer reaction we’re seeing right now clearly shows communication from providers on green tariffs has been ineffective as well as misleading. With the UK aiming to reach a carbon-free power system by 2035, now is the time to protect consumer confidence in green tariffs by banning greenwashing, so that positive choice can be part of the solution to help meet the UK’s climate ambitions.
1Tweets and replies from customers of multiple UK energy provider twitter accounts.
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