What is greenwashing?
Greenwashing – claiming something is greener than it really is – has become widespread in the energy market. The regulator OFGEM is considering taking steps to control it, and we hope they do.
A number of energy companies claim green credentials for themselves or for some of their tariffs, but are their claims genuine? There are three levels of activity that energy companies engage in, from the superficial to the impactful.
Trading green certificates
Some companies trade green Renewable Energy Guarantee of Origin certificates (REGOs), which authenticate green energy itself. For each unit of green energy made a REGO is issued, like a birth certificate.
However, REGOs can be detached from the green energy itself and sold separately. This becomes a problem if trading green certificates is all the supplier does. About 50p spent on certificates will cover a typical household’s energy for a whole year, but the energy actually supplied to the house could come from any source.
Trading green energy
Other companies buy green energy along with REGO certificates from generators and supply it to their customers. This is better.
However, as with trading certificates, the energy is typically from a source that’s already been built. It exists and is part of the national supply. When one company buys it, another one loses it – it’s a transfer of existing green energy. The same transfer happens between customers.
For example, Scottish Power recently announced the creation of a '100% green tariff’, but what they actually did was transfer their existing green energy from all of their customers to just some making some 100% green and the rest 0%.
This happens at the national level too, when green energy from existing sources gets traded.
Trading green energy and certificates has a role to play, though. Creating demand increases the value of green energy and incentivises building more sources of it. In theory.
Building new sources of green energy
This is the only activity that makes a difference, that moves the dial.
Britain has about 30% green energy in the national supply mix right now. We need to get to 100% and we can only do that by building more. Trading certificates won’t get us there.
If you want a green outcome from your energy bills you need to be with a supplier like Ecotricity that builds new sources of green energy using renewable resources like the wind and the sun.
Building new sources of green energy is often done in combination with levels one and two.
The question is: how much of your energy bill will be spent on building new sources of green energy? The more the better. If the answer is none, you’ve been greenwashed and nothing’s changing.