Energy News

REGOs Explained: Are They Enough for Your Green Energy Goals?

Posted on by khaled

REGOs Explained: Are They Enough for Your Green Energy Goals?

The promise of ‘100% renewable energy’ sounds ideal, but is it always what it seems? For businesses in the UK, understanding the Renewable Energy Guarantees of Origin (REGO) scheme is crucial – not just for compliance, but to navigate concerns about ‘greenwashing’ and achieve genuine environmental impact.

Public and industry sentiment towards the REGO scheme in the UK is complex and mixed. While REGOs were designed to provide transparency and support the growth of renewable energy, they face significant criticism, particularly regarding their effectiveness in driving new renewable generation and concerns about “greenwashing.”

Here’s a breakdown of the positives and negatives about the scheme:

Positives of the REGO Scheme:

  • Transparency and Disclosure: REGOs allow energy suppliers to demonstrate the proportion of renewable electricity in their fuel mix disclosure (FMD), which is a requirement for all licensed electricity suppliers. This gives consumers some insight into how “green” their chosen tariff is.
  • Support for Renewable Generators (Indirectly): Renewable energy generators receive one REGO certificate for every megawatt-hour (MWh) of eligible renewable electricity they produce. These certificates can be traded and sold, providing an additional, albeit small, revenue stream for generators.
  • Enables Green Tariffs and Corporate Sustainability: REGOs allow energy suppliers to offer “100% renewable” tariffs to consumers and businesses. Consumers can then use REGOs to support their sustainability goals and demonstrate commitment to corporate social responsibility (CSR).
  • Tracking Renewable Energy: The scheme helps in tracking the amount of renewable electricity generated and consumed within the UK, aiding in overall environmental reporting and progress towards climate goals against national targets.
  • Market Mechanism: The trading of REGOs creates a market mechanism that can reflect supply and demand for renewable attributes, though this has also led to price volatility.

Concerns of the REGO Scheme:

  • Greenwashing Concerns (Decoupling of REGOs and Power): This is the most significant criticism. REGO certificates can be bought and sold separately from the actual renewable electricity they represent (known as “unbundled” REGOs). This means a supplier can purchase REGOs from a renewable generator without actually buying the corresponding green electricity, instead sourcing cheaper, fossil-fuel-generated power and still claiming to offer a “100% renewable” tariff. This can mislead consumers who believe they are directly supporting new renewable energy generation.
  • Limited Impact on New Renewable Generation: Critics argue that REGOs do not significantly incentivise the building of new renewable capacity. The financial reward for generators from selling REGOs is often negligible compared to other subsidies. Therefore, purchasing REGOs often doesn’t lead to more renewable energy to be generated than would have been otherwise.
  • Low Cost and Lack of Incentive: The price of REGOs can be very low, meaning suppliers can “green” a large volume of their supply for a minimal cost, without making substantial investments in genuine renewable energy sourcing.
  • Consumer Misunderstanding: Many consumers mistakenly believe that a “100% renewable” tariff backed by REGOs means their property is directly receiving renewable electricity at all times. In reality, the electricity comes from the national grid, which is a mix of all available energy sources, and the REGOs only serve as a certificate of origin.
  • Retrospective annual matching: The current system allows for annual matching of consumption and generation, meaning a unit of consumption can be matched to any unit of renewable energy generated in the past 12 months. This is seen as a blunt instrument that doesn’t provide real-time transparency or encourage demand-side flexibility.
  • Brexit Impact: The UK’s exit from the EU has meant that UK REGOs are no longer interchangeable with EU Guarantees of Origin (GoOs), which has reduced supply of available certificates in the UK This has impacted prices and potentially making it harder for suppliers to source REGOs)

In summary, while the REGO scheme provides a mechanism for disclosure and allows businesses and individuals to outwardly demonstrate their commitment to sustainability, its fundamental flaw is the decoupling of the certificate from the physical energy. This can lead to “greenwashing” and a lack of direct impact on driving new renewable energy investment, leading to calls for reform to ensure genuine decarbonisation.

Businesses looking to genuinely embrace green energy need to go further than the REGO scheme. Here’s what they can do:

  1. Prioritise Energy Efficiency First:
  • Audit your energy consumption: Understand where and how your business uses energy most. This is the crucial first step.
  • Invest in energy-efficient equipment: Upgrade to LED lighting, energy-efficient HVAC systems, smart thermostats, and efficient machinery.
  • Optimise operations: Implement energy-saving practices, such as turning off lights and equipment when not in use, optimising heating and cooling schedules, and improving insulation. A unit of energy saved is often the greenest (and cheapest) unit of energy.
  1. Direct On-Site Renewable Generation:

This is the most impactful way to ensure you’re using green energy, as it involves generating it directly at your premises and there’s many options including;

  • Solar PV panels
  • Small-scale wind turbines
  • Ground/Air Source Heat Pumps
  • Hydroelectric power
  • Biomass boilers/Combined Heat and Power (CHP

Considerations for On-Site Generation:

  • Upfront costs and time taken to make a return on your investment
  • Space requirements
  • Planning permission
  • Accessing incentives and/or grants
  • Maintenance
  1. Strategic Green Energy Procurement:

If on-site generation isn’t feasible for your entire energy needs, these procurement options offer more genuine green energy sourcing;

  • Power Purchase Agreements (PPAs):
    • Direct/Physical PPAs: The most impactful. Your business signs a long-term contract directly with a specific renewable energy generator (e.g., a wind farm or solar park). The electricity is delivered directly to your premises. This provides “additionality” as your commitment helps finance the construction of new renewable projects.
    • Virtual PPAs (VPPAs): Your business doesn’t physically receive the electricity, but you sign a financial contract with a renewable generator. You agree on a fixed price for electricity, and the generator sells the power into the wholesale market. If the market price is higher than your fixed price, you receive the difference; if lower, you pay the difference. You receive the associated REGOs. While the electrons aren’t “yours,” your commitment still helps enable new renewable projects. VPPAs are more common for larger businesses.
  • “Green” Tariffs with Strong Guarantees (Beyond Basic REGOs):
    • Look for suppliers who also generate their own renewable energy: Some suppliers not only provide REGO-backed tariffs but also own and operate their own renewable generation assets or have direct, long-term contracts with specific generators. This ensures that the money you pay genuinely supports new renewable energy infrastructure.
    • Ask about “time-matching” or “half-hourly matching”: Some suppliers are beginning to offer tariffs where they aim to match your consumption with renewable generation on a much more granular basis (e.g., every half hour). This goes beyond annual REGO matching and provides more genuine real-time renewable energy use.
    • Supplier’s investment in new renewables: Choose suppliers who actively invest in building new renewable energy capacity, rather than just buying REGOs from existing projects.
  • Community Energy Schemes:
    • Explore opportunities to participate in local community renewable energy projects. This can involve direct investment or purchasing energy from a local renewable source.
  1. Engage in Demand-Side Response and Storage:
  • Demand-side response (DSR): Adjust your energy consumption patterns to align with periods of high renewable energy availability on the grid. This can be incentivised by flexible tariffs.
  • Battery storage: Install on-site battery storage to store excess renewable energy generated (e.g., from your solar panels).This increases self-consumption of your own green energy and reduces reliance on the grid at peak times when fossil fuels might be more prevalent.
  1. Transparency and Reporting:
  • Publicly report your energy sourcing: Be transparent about how you procure your energy, detailing the types of agreements you have (e.g., PPAs, on-site generation, specific green tariffs).
  • Avoid ambiguous “100% renewable” claims: If you are solely relying on unbundled REGOs, be clear about that and acknowledge the limitations. Focus on actual decarbonisation efforts.
  • Aim for “additionality”: Emphasise how your energy choices are leading to new renewable energy capacity being built, not just claiming existing generation.

The REGO scheme provides insight into renewable energy, but for businesses truly committed to sustainability, it’s merely the first step. Genuine green energy stems from proactive choices: reducing consumption, generating power on-site, and securing transparent, impactful procurement.

This isn’t solely about compliance; it’s about building a resilient, responsible, and future-proof business. As the global energy transition accelerates, your organisation’s dedication to authentic decarbonisation will distinguish it. Are you ready to move beyond basic certificates and make a real, lasting difference? Exploring your options with an energy expert such as My Energy Consultants can transform ambition into a clear, actionable strategy. Get in touch today to find out how we can help.