Utility Week

22 | JUNE 2023 | UTILITY WEEK Electricity scale generator – potentially not in a posi- tion to participate in the CfD scheme, either because they're the wrong scale or it's too complicated – then REGOs are actually a fairly meaningful revenue stream for you," says another industry source, now working for a major renewable generator. "If you're a larger-scale generator who is participating in the CfD scheme, then the REGO price does at least allow you to reduce your CfD bid. It's not just extra money". They say Ovo has purported to sup- port renewables for a long time and "now the REGO is ‚ nally worth something it's exactly the moment they're bailing out of it, which ultimately harms development of renewables. "That's not to say the other stuƒ they're doing isn't helpful and bene‚ cial – working on „ exibility and that sort of stuƒ is abso- lutely what we need – but I'm not clear why it's a binary choice." In its report for Ovo, Cornwall said its discussions with developers planning to participate in future CfD auctions suggest it is factoring REGO revenues into its bids, but the reduction amounts to only around £1/MWh – signi‚ cantly less than expected REGO prices over the coming years. Furthermore, the consultancy noted that, to the extent that procurement is limited not by auction budgets but by capacity caps, this reduction may not make a diƒ erence to the volume of renewables deployed. As a large supplier with a substantial number of customers on tariƒ s marketed as green, Bent says Ovo's decision will likely make millions more REGOs available to Analysis other buyers and therefore be bearish for the market. He says prices don't seem to have dropped yet but there "may just be a lagged eƒ ect that sellers are not immediately crashing the mar- ket because they're waiting to see a bit more evidence before they panic". Even with Ovo dropping out of the mar- ket, Bent says he nevertheless expects REGO prices to remain at historically high levels over the next few years at least. Cornwall likewise said market sentiment among trad- ers appears to be that REGO prices will stay at around their current level for the foresee- able future. Up until April, Guarantees of Origin certif- icates from the EU were usable in Britain and vice versa for REGOs. However, following the failure of the government to reach a reciproc- ity agreement with the EU, as of last month their import is banned. Cornwall said the REGO market is there- fore expected to be "very tight" for the remainder of this decade. Looking further ahead, Bent says the cur- rent "tension" in the REGO market, which has driven up prices, will eventually dis- sipate as the growing supply of certi‚ cates surpasses demand for green power from environmentally conscious customers, although when that point will come is not obvious. Fletcher says that while REGOs can be confusing for customers, this issue has been "exaggerated by suppliers who want to charge an upli" to customers for renewable PPA-backed tariƒ s". She says a miniscule proportion of customer enquiries to Octopus are related to the issue. She says preventing the unbundling of REGOs from the power they represent, as Dale Vince suggested to Utility Week, would not address the real source of confusion for customers: "What creates confusion is that customers on green tariƒ s are still supplied fossil fuel-generated power at some parts of the year and that happens even when the retailer has entered into a PPA for renewa- bles as well as when they've bought an unbundled REGO." She says the REGO scheme is now "very old" and needs to be updated for the new world we inhabit in which many renewables are now cheaper than fossil fuel generation on a per megawatt-hour basis: "Everybody is paying for renewable power through the environmental levies on their bills… The thing that is missing is the matching of renewable power with the demand pro- ‚ le and that's what any sort of certi‚ cation should be trying to encourage." She continues: "What would be helpful is to move away from a binary green/not green de‚ nition and instead for companies to be required to tell their customers on a time- matched basis what percentage of the time they were being served with green power based on the output of the green power they're purchasing, either directly through PPAs or by purchasing unbundled REGOs." Fletcher says it would be too expensive at the moment for any supplier to attempt to oƒ er customers 100% green power on this basis, but this information would unlock a "new competitive dynamic" between sup- pliers and enable them to pitch oƒ ers to customers to improve their percentage, for example, through participation in demand „ exibility services. Several years ago, Toby Ferenczi, a vice president at Ovo, founded a global initiative called EnergyTag to create an international framework for time-stamped half-hourly generation certi‚ cates, and early last year, he le" the retailer to start the company Granular Energy to develop a platform for managing and trading these certi‚ cates. In an interview with Utility Week, Ferenczi said the EnergyTag initiative could pave the way for the evolution of REGOs. The government explored the issue in a call for evidence, which was launched in August 2021 and closed to responses the following December. The document said it planned to provide an update in early 2022 but it has yet to report back. Perhaps the rejection of REGOs by one of Britain's largest energy suppliers will be a spur to action. Tom Grimwood, insights editor continued from previous page "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 existing generation, especially when the price goesup." Dale Vince, founder, Ecotricity "We're committed to supporting new independent renewable generation through our subsidy-free PPA [power purchase agreement] contracts, which could make the diff erence between renewable energy developments going ahead or not." Steve Harris, vice president for energy, Ovo Energy "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 existing generation, especially when the price goesup." Dale Vince "We're committed to supporting new independent renewable generation through our subsidy-free PPA [power purchase agreement] contracts, which could make the diff erence between renewable energy developments going ahead or not." , vice president for energy, Ovo Energy

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