Ofgem should give energy tariffs “Olympic medal-style” ratings of gold, silver and bronze to prevent “greenwashing” by energy suppliers, a thinktank has urged in a new report.
The Social Market Foundation (SMF) said the current arrangements for certifying the green credentials of energy tariffs are outdated and confusing to customers, leaving them unsure over suppliers’ claims.
The thinktank said Ofgem’s Renewable Energy Guarantees of Origin (REGO) accreditation scheme allows suppliers to claim the power they are selling is 100 per cent renewable, even if it has really been generated using fossil fuels. They are able to do so by buying REGO certificates separately from the corresponding electricity.
The report, sponsored by Scottish Power, said the scheme does not recognise or reward suppliers that are actually investing in renewable generation. “Instead, it applies a blanket badge to certificate-holding suppliers, which can be misleading for consumers looking to contribute to a cleaner energy system.”
SMF said the presence of greenwashing in the energy retail market may slow investment in low-carbon generation and, where consumers believe they have been misled, undermine trust in the wider decarbonisation agenda and create a “political backlash”.
A survey of more than 2,000 consumers commissioned from Opinium and conducted in March 2020 found two fifths of respondents (39 per cent) did not think they knew enough to understand what is meant by a green energy tariff, with the proportion rising to almost half (47 per cent) for those on lower incomes.
The same proportion of respondents said they wanted to know more about the sources of green energy, with less than a quarter (22 per cent) agreeing that the current arrangements provide sufficient transparency.
Amy Norman, senior researcher at the SMF, said: “Consumers want to know whether their energy bill is doing more harm than good for the environment, and they shouldn’t have to navigate a bewildering system to understand that fact.
“The current accreditation system for green energy tariffs is outdated, confusing and risks consumers facing misleading claims from energy suppliers, who can legally market ‘100% renewable’ energy tariffs which aren’t what they seem.
She continued: “If the government wants to help people understand more about their personal contribution to tackling climate change, it should work with Ofgem to introduce a badging system for energy tariffs which is crystal clear for consumers.”
Scottish Power chief executive Keith Anderson said: “Across the country more and more people are looking for ways to tackle climate change in their everyday lives. For many, this means signing up to a green electricity tariff. But at the moment, frustratingly, just because a tariff says its green it doesn’t always mean it actually is.
“We need to take action to combat greenwashing, providing a simple way for customers to understand more about the electricity they are paying for,” he added.
“With COP26 just over two months away, we have an opportunity for the UK to demonstrate it is leading the way with its green practices. Having a green electricity tariff should mean you know that electricity you’re paying for is being generated by renewable energy and is helping support the much-needed growth in renewables over the next decade.”
The report additionally called for more scrutiny of price comparison websites, some of which operate their own badging schemes for energy tariffs. SMF said although they can help consumers to make informed decisions, they can also add to the confusion.
The government committed to tackle the greenwashing of energy tariffs in its strategy for the energy retail market over the next decade and recently proposed to make the REGO scheme more transparent as part of a call for evidence on the issue.
The Competition and Markets Authority announced plans in November last year to investigate potential greenwashing a number of sectors, including textiles, transport and travel. Juliet Davenport, chief executive of Good Energy at the time, told Utility Week the investigation should include the energy retail market.