The UK government has launched an investigation into renewable electricity deals amid growing concern over the extent of “greenwashing” by large energy firms claiming to offer environmental benefits to customers.
In a crackdown as increasing numbers of people switch to a renewable energy deal, the government said it would review how the sector markets its green electricity tariffs to consumers.
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Warning that it planned to tighten the rules to stop firms from exaggerating the environmental benefits of their green electricity tariffs – a marketing tactic known as greenwashing – the business department said the investigation would focus on whether labels such as “100% renewable” or “green” remained fit for purpose.
As many as nine million British households are on green tariffs, with more than half of all new deals launched by energy providers now claimed to come with environmental benefits.
However, firms are currently able to advertise their tariffs as “green” even if some of the energy they supply comes from fossil fuels, which industry figures have warned risks misleading consumers.
Suppliers can use several ways to achieve green status under the current rules, including through committing to use 100% of the income from their customers to invest in developing renewable energy or by striking a deal with an existing windfarm or solar array to buy the electricity they produce.
Under a government scheme, energy firms buy certificates known as Renewable Energy Guarantees of Origin, which are designed to show consumers how much of the electricity they sell has been acquired from clean sources.
When a supplier claims that its 100% renewable energy tariff is backed in this way, it means it will match each megawatt hour of electricity its customers use with certificates representing the same amount of renewable energy.
However, experts have warned the system is open loopholes that risk “double counting” the UK’s renewable energy supply use or even claiming foreign renewables as its own.
The government said it was considering whether to reform the Rego system to make it “smarter”. Energy suppliers could also be forced to provide clearer information to consumers about their green tariffs, including the type of renewable energy used, such as wind or solar, and where and when the renewable power was generated.
Anne-Marie Trevelyan, the energy minister, said there were concerns that some energy companies were overstating how environmentally friendly their products were.
“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. Part of that is ensuring companies are being as transparent as possible on where their power comes from,” she said.
The business department said polling by YouGov showed that almost two-thirds (62%) of UK energy consumers said their purchasing decisions were influenced by how eco-friendly an energy tariff was. However, 75% believed suppliers should be open and transparent about their tariffs, including how much of their renewable energy they buy from other companies.
The company Good Energy is one of those that has been a vocal critic of greenwash tariffs. In April this year it said energy suppliers had for some time been able to “mislead” customers who were trying to do the right thing in choosing green.
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The government is also publishing a separate call for evidence on “third-party intermediaries” in the retail energy market, such as price comparison websites, auto-switching services and other brokers. At the moment, these operate outside the retail market rules, and ministers will ask for views on whether a regulatory framework is needed.
Consumer protection advocates and price comparison services have also called for greater transparency around suppliers who market their tariffs as green.
Richard Neudegg, the head of regulation at Uswitch.com, the comparison service, 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.”
This article was amended on 20 August 2021 to indicate megawatt hour (rather than megawatt) as the correct unit to denote the amount of electricity consumed.
