Electricity suppliers have long been criticised for offering green tariffs that overstate their environmental benefits. The issue came to a head in January when the National Consumer Council said consumers were "being misled" and that electricity suppliers were simply repackaging their responsibilities under the Renewables Obligation (ENDS Report 384, p 11 ).
Ofgem’s proposal appears in a consultation on revising its green electricity supply guidelines (ENDS Report 324, pp 28-29 ). The guidelines need revising to ensure any renewable electricity supplied is additional to the Renewables Obligation.
The Energy Saving Trust ran an accreditation scheme for green tariffs, but this folded in 2002 because electricity suppliers could not agree on how to define additionality. Ofgem consulted on revised guidelines in 2005 but these were short on detail (ENDS Report 363, p 34 ).
The rating system is the main proposal in the consultation, which applies to both domestic and commercial tariffs. Ofgem says an "at-a-glance" system showing the environmental benefits of tariffs is "feasible and desirable" and would increase their use.
The accreditation scheme would be voluntary, and paid for by suppliers. Tariffs would be given 1-5 stars based on environmental performance. Up to three stars could be awarded for "carbon impact" - the carbon emissions a tariff saves relative to a normal supply. Another could be awarded for tariffs with an efficient main source of electricity generation and the fifth would be available to those that scored well on other environmental impacts.
There are three main types of green tariff: those that supply electricity from renewables, those that supply it from "low-carbon" sources like combined heat and power plants, and those that offset a customer’s emissions. All would qualify for a rating, but suppliers will have to reveal the type of "primary fuel" used.
Where a tariff is based on renewables, suppliers would have to demonstrate that it achieves "an additional carbon benefit that goes beyond their legal obligations". If they fail to do so, they would only get one star for carbon impact.
Ofgem calls for views on how this additionality could be proven, but suggests retiring a percentage of Renewables Obligation Certificates (ROCs) so they cannot be sold to other suppliers, buying a percentage of ROCs above the legal requirement, or offsetting emissions. It also puts forward additionality criteria for green tariffs based on carbon offsets or those that pay into "green funds". The additionality criteria form part of the revised green supply guidelines.
Ofgem is proposing that all sources of electricity except coal and oil would qualify as "low carbon". This would include ‘clean’ coal, gas and nuclear. Ofgem commented that a sensible "carbon impact" rating for nuclear would be two stars. For gas it would be half a star.
Cassie Higgs of the National Consumer Council welcomed the rating system but said Ofgem needs to conduct consumer research "to look at what the public considers ‘green’ before adopting such a wide definition of low carbon."
Charlie Kronick of Greenpeace was more damning: "If you just look at the emissions, you can see why nuclear would be considered a low-carbon source, but given its wider environmental impact there’s no way you could describe it as that or have it qualify as a ‘green’ electricity." Gas should only qualify if it was used in combined heat and power plants, he added.
The fact that only the main source of electricity has to be revealed alongside the star rating could also allow suppliers to hide controversial sources of electricity, he said. "I think anybody can see that when a rating system isn’t totally transparent it’s not going to achieve what it sets out to."
The Energy Saving Trust is likely to administer the scheme, and it has issued a parallel consultation.2 In contrast to Ofgem, it favours a kite mark system because a star rating would "be meaningless in the absence of supporting information".
The EST also wants electricity suppliers to be required to present all of their green tariffs for accreditation. If any tariffs failed to meet Ofgem’s green electricity supply guidelines, none would be eligible for the kite mark. "This approach would offer greater clarity for consumers," the EST says, "because the full spectrum of products offered by a company would need to be accredited - therefore offering protection against potential greenwashing of a supplier’s unaccredited… offerings."
The EST also goes into more detail than Ofgem about additionality standards for green tariffs based on carbon offsets or green funds. For example, all carbon offsets used would have to meet the government’s proposed code of practice (ENDS Report 384, p 5 ).
In spite of the prominence of the star rating system, the majority of Ofgem’s consultation looks at revisions to the green electricity supply guidelines.
Ofgem wants them expanded to take business tariffs into account and puts forward a range of proposals to improve tariffs’ transparency. The fuel mix of a tariff should be included on consumer bills or the supplier’s website. Other information that could be displayed includes:
- An indication of the percentage of a consumer’s bill that funds green generation
- The percentage of carbon being saved compared to the supplier’s normal fuel mix
- For offset tariffs, the percentage of a consumer’s carbon emissions that are being offset
However, Ofgem says "there is clearly a balance to be struck in providing increased clarity to consumers… and giving too much information that could serve to over-complicate customer bills."
Both consultations run until 16 July. Ofgem hopes to introduce the new guidelines in September, but has not set a date for the introduction of the accreditation scheme.