Efforts to curb energy tariffs 'greenwashing'

The government is launching a review into how energy retailers market green tariffs to consumers.

Nine million British households are now on energy products that are advertised as being "100% renewable" or "green".

However, some energy companies accuse others of "greenwashing" - using marketing spin to make "dirty" fossil fuel electricity seem clean.

"Transparency is key to bring consumers on the journey to net zero," said Uswitch.com's Richard Neudegg.

• Green energy tariffs often 'misleading'

• Power companies 'hindering' move to green energy

The Department for Business is investigating whether suppliers need to provide clearer information about the types of renewable energy used, where it was generated and when.

It is also looking to gather evidence on whether third party intermediaries in the energy market, such as price comparison websites and auto-switching services - which currently operate outside the retail market rules - should be regulated.

"Millions of UK households are choosing to make the green switch and more and more of our energy comes from renewables, but I want people to know that when they sign up to a green tariff, they are investing in companies that make a conscious choice to invest in renewable energy," said Climate and Energy Minister Anne-Marie Trevelyan.

"Part of that is ensuring companies are being as transparent as possible on where their power comes from. That way, every family in Britain can rest assured their choices are helping to contribute to our world-leading target of eliminating our contribution to climate change by 2050."

Mr Neudegg, Uswitch.com's head of regulation, said: "More and more people are purchasing green tariffs but it's been difficult for bill-payers to know exactly what's under the hood of these deals. We support any measures that aim to demystify green tariffs for households."

Offsetting fossil fuels

One key concern raised about green energy tariffs is that suppliers make the claim after paying to obtain certificates that "offset" fossil fuels.

When an renewable unit of electricity is generated - for example, by a wind turbine - energy regulator Ofgem issues a Renewable Energy Guarantee of Origin (REGO) to the firm owning the wind turbine, to prove that this energy is green.

That firm is then allowed to sell both the electricity and the certificate separately.

There is a marketplace where leftover REGOs are traded, and there are enough of them "going spare" to allow energy suppliers to cover the proportion of fossil fuels they sell to customers on each tariff.

Each certificate costs just £1 or £2 per customer per year, meaning an energy supplier can make electricity from the wholesale market, which includes fossil fuels, look entirely green, at an affordable price.

Analysis

By Vishala Sri-Pathma, business reporter

Marketing spin is how many energy campaigners describe this so-called "greenwashing" of energy tariffs. And some households will agree with them, with several feeling misled that their "green" energy provider does not in fact purchase its power from a green energy source.

There has been an increasing appetite for green tariffs in the UK: consumers are more aware of their carbon footprint and with home energy use accounting for 15% of the country's greenhouse emissions, the government is keen to encourage this, as it looks to hit its lofty target of zero-emissions by 2050.

Energy companies are seemingly eager to cater for this growing demand and what some of them offer can be rather compelling - the chance to make a simple change with a big impact. But in that rush to roll out new tariffs, many analysts feel some providers are neglecting the bigger picture of the desire to switch to green.

There are already calls for Ofgem to scrap the REGO certificates, so providers can only declare their tariffs to be green if they come from a renewable source. However, not all the industry agrees, as some companies claim that the certificates support the funding of renewable generators across the UK.

Dr Jeff Hardy is a senior research fellow at the Grantham Institute at Imperial College London. He is also a former head of sustainable energy futures at Ofgem.

"This is a case of consumer mis-selling and it needs to be addressed. Not all suppliers are offering the same product and we need to be able to tell the difference," he wrote in a policy paper in October, calling for urgent action to be taken by the regulator.

"Ofgem's commitment to reform the market is incredibly welcome, but the longer this takes, the more customers are deceived, and the longer the delay to the decarbonisation of the energy system."

He is calling for the REGO certificates to be retired, and for suppliers to be allowed to market their energy as "100% green" only if they have bought all of it from a renewable generator.

The BBC has approached several big energy providers for comment.

British Gas said its Green Futures tariff had been awarded a gold rating by Uswitch in its Green Accreditation programme.

"To achieve the Uswitch standard, British Gas matches 100% of the electricity you use with renewable sources, such as UK wind and solar power," a spokesperson said.

On top of that, the carbon footprint for 100% of the gas you use is balanced by CO2-cutting projects around the world. We also use renewable biogas from food and farm waste."

A spokesperson for EDF said: "Customers need to know that when they buy a product marketed as helping the environment, it genuinely does that, and we welcome steps to ensure the highest of standards across the industry."