Ofgem sparks controversy with new rules on green tariffs

Energy regulator Ofgem today released new, stricter guidelines for green energy tariffs, to a mixed reaction from suppliers.

The changes will mean that suppliers offering green tariffs will be forced to demonstrate that they are making additional investments in renewables or carbon offsets over and above those investments already legally required under the government's existing Renewables Obligation scheme.

Currently, some suppliers simply re-package the renewable energy they are legally required to sell under the Renewables Obligation (RO) and efficiency measures they are required to deliver under the Carbon Emissions Reduction Target (CERT) as "green" tariffs.

Under the new guidelines, suppliers wishing to offer green tariffs will have to demonstrate that premium green tariffs help deliver additional environmental benefits on top of what they are already required to do – either through carbon offsetting schemes or extra renewables investment.

Green tariffs based on carbon offsetting will have to fund offsets equating to saving one tonne of CO2 per customer per year, about half the electricity-related emissions of a typical British household.

The level of renewables investment or investment in energy efficiency required as part of green tariffs have not yet been exactly stipulated as yet, but Ofgem said the targets would be "material".

Suppliers will also be required to provide customers with a detailed chart of where all their energy comes from.

The big six energy suppliers and green energy provider Good Energy have signed up to the guidelines.

Ofgem said in a statement that it welcomed their involvement, adding that it "has now asked them to start work immediately on setting up an accreditation scheme that will enable householders and small business customers to easily compare green offerings based on the carbon emissions they reduce".

But green energy provider Ecotricity said it would not sign up to the scheme as long as it continued to allow firms to incorporate offsets as part of their green tariffs – an approach the company argues will divert investment from increasing renewables capacity.

"In these guidelines Ofgem is accrediting everything you can imagine except the thing that really counts – green electricity," said managing director Dale Vince. "The UK currently gets less than five per cent of its electricity from renewable sources. We need to increase this ten-fold – 50 per cent in the next 20 years. Green tariffs and consumer choice of green tariffs – people power – could play a crucial role in helping us reach these targets.

An earlier draft of the guidelines put forward by Ofgem last year was rejected by Good Energy as well as Ecotricity because it focused too much on offsets rather than renewables investment.

But Juliet Davenport, chief executive of Good Energy, told BusinessGreen.com that the revised proposals were tipped enough in favour of encouraging domestic renewables investment for the company to get on board.

"We are satisfied with the balance and we think it is just as important to have a scheme with as many people on board as possible to provide customers with a single, completely transparent view of what is going on – otherwise we risk them rejecting the whole idea," she said.