Utility Week

UTILITY WEEK | JUNE 2023 | 21 Electricity said the money spent on REGOs will provide "little to no benefit to renewable energy gen- eration and will instead soon become a drain on customer finances". One person who agrees is Ecotricity founder Dale Vince. He says his company also looked at ditching REGOs about a year ago: "I've never been a fan because I don't believe they bring about any new capacity. They seem to be just a windfall for exist- ing generation, especially when the price goes up." At the time, Vince was putting Ecotricity up for sale and ultimately decided against making any major policy changes. But, hav- ing shelved plans to sell the company in November, he says this issue is now "back on the agenda". "If you're involved in financing renew- able energy projects, you know you've got to make a projection of income over 10, maybe 15 years," he explains. "And with energy prices you can do that – there are forward curves – and you can have some confidence in it. "How do you predict the price of REGOs? I don't believe anybody builds them into their business plan or that they're fundamental to a go/no go decision to invest in a project." This was also the finding of Cornwall Insight, which said REGO revenues remain a negligible proportion of the forecast revenue stack for new renewable projects and are fac- tored into investment decisions at a "steep" discount because of uncertainty over future prices. Vince says they are "money for nothing", adding: "Every penny we spend on REGOs is wasted because it's not building new capacity." At the same time, Vince says he finds it "funny" that Ovo is the one making the argument that REGOs enable greenwashing, because it has been "one of the worst perpe- trators". He says that "for a long time" Ovo has been buying power from fossil fuel gen- erators and "slapping a REGO on it and call- ing it green". He says the supplier was happy to take advantage of REGOs to boost its green cre- dentials when they were "dirt cheap," but less so now they are "stupidly expensive". Vince says what is really needed is the direct participation of energy suppliers in building renewables: "That's what energy companies should be doing." Ecotricity has always emphasised its direct investments in renewable generation to customers and, alongside Good Energy, is one of the few suppliers to have obtained an exemption from the price cap on this basis. Vince acknowledges that Ovo has com- mitted to diverting the money it would have spent on REGOs to supporting new renewa- ble projects, but says this is a "big volte face" for the company, whose founder, Stephen Fitzpatrick, once "took a very public position against the ownership of generation, telling customers he preferred to focus on keeping their energy bills down". Steve Harris, vice president for energy at Ovo, says: "We're committed to support- ing new independent renewable genera- tion through our subsidy-free PPA [power purchase agreement] contracts, which could make the difference between renewable energy developments going ahead or not." Tom Bent, former director of operations and trading at SSE and now director of the consultancy PACE, shares Vince's scepticism towards Ovo's claimed motives for ditching REGOs. However, Bent believes the increased prices mean REGOs are now genuinely con- tributing to the proliferation of renewables: "As an instrument it's nothing like as bank- able as the CfD [Contract for Difference], which lasts for 15 years at a firm price, but I'm absolutely sure that renewable genera- tors in their financial decisions are allowing something for REGO income." "The price is firmly in the territory where it does make a difference," he adds. Bent concedes that a lot of REGOs will come from assets with CfDs anyway but says this income will lead developers to "nudge their offers lower" when bidding in auctions, offsetting some of the cost. "If you're talking about a community- continued overleaf

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