Utility Week

20 | JUNE 2023 | UTILITY WEEK Electricity Analysis The REGO windfall: Money for nothing? Does Ovo Energy's declaration that it will no longer buy Renewable Energy Guarantees of Origin certifi cates spell the beginning of the end of the regime? And should we care if it does? It has also sparked fresh calls to reform the scheme, with Rachel Fletcher, director of regulation and economics for Octopus Energy, telling Utility Week that consum- ers need to know truth about their energy use to unlock a "new competitive dynamic" between suppliers. Introduced in 2003 as the UK version of the EU's Guarantees of Origin, REGOs have faced persistent criticism from some quarters as inherently misleading due to the "unbun- dling" of the certiƒ cates from the power they represent. The reality is all consumers get their elec- tricity from the same power grid, which for the time being remains heavily reliant on fos- sil fuel . Yet by buying enough certiƒ cates to cover their consumption on an annual basis, sup- pliers are able to sell their tari† s as 100% renewable, regardless of where they actually source their power from. And for a long time, the certiƒ cates were so cheap – tens of pence per megawatt-hour – they could do this for just a pound or two per customer each year. However, driven by growing demand for green tari† s, REGO prices have shot up over the past several years. According to Cornwall Insight, which Ovo commissioned to investi- gate REGOs, spot prices for certiƒ cates, each equating to one megawatt-hour of genera- tion, rose to around £6.34 in its latest market survey in January. Although suppliers are probably paying less on average, Cornwall said meeting yearly demand for the certiƒ cates at this price point could cost around £1.4 billion. Summarising the ƒ ndings of the consultancy's report, Ovo G reenwashing is a luxury no-one can a† ord. By making this change we'll save consumers money and reinvest in true green energy, and we hope others will follow our˜lead." Those were the words of Ovo Energy chief executive Raman Bhatia as he announced in April that the company will stop buy- ing Renewable Energy Guarantees of Origin (REGO) certiƒ cates to market the environ- mental credentials of its tari† s to customers. The move has brought back to the surface a long-running and contentious debate over the extent to which REGOs are actually help- ing to move the needle on decarbonisation; in its latest form, whether a recent rise in prices has made the certiƒ cates a meaningful driver of new investment or just a windfall for existing generators. "

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