Pressure builds for green power accreditation system

There has been a long-running debate about whether tariffs which sell electricity from renewable sources - often at a premium price - actually make a difference. Critics argue that many tariffs merely repackage existing capacity, and fail to go beyond suppliers' targets under the statutory renewables obligation.

In an attempt to offer some assurance to domestic consumers, the Energy Saving Trust launched its Future Energy accreditation scheme in 1999 (ENDS Report 294, pp 27-28 ). But this supplier-funded label did little to tackle concerns over whether a tariff resulted in additional renewables capacity.

Ofgem issued guidelines for domestic tariffs in early 2002, in a bid to promote good practice and encourage additionality. However, the document lacked statutory force and the regulator had no powers of enforcement (ENDS Report 324, pp 28-29 ). Ofgem was reluctant to propose more formal regulation, as this would have swum against the tide of its drive to roll back regulation of the electricity supply market.

Shortly afterwards, however, the EST pulled the plug on its Future Energy scheme after two leading suppliers refused to comply fully with Ofgem's guidelines - leaving customers with nothing to help them judge the credibility of the tariffs on offer (ENDS Report 334, p 32 ).

Ofgem is now reconsidering its rules for green tariffs, and plans to issue beefed-up guidance within the next few months, environment director Virginia Graham told ENDS. Significantly, the new version is likely also to cover tariffs pitched at commercial and industrial customers - potentially a much bigger market than households.

However, Ofgem has not yet decided whether the guidance will cover claims made by buyers of green electricity, Ms Graham said. A string of local authorities and companies are making sweeping claims about the environmental benefits of their green electricity purchases.

For example, BT recently claimed major CO₂ reductions as a result of green electricity supplied by Npower - even though little or no additional renewables capacity is likely to be stimulated (ENDS Report 357, p 12 ). Despite this, BT won high-profile endorsement from Prime Minister Tony Blair.

Significantly, Ofgem is also pressing the Government for an independently funded accreditation scheme for green tariffs. "Without an accreditation scheme it is quite hard for consumers to assess the additionality of a particular scheme and this undermines the whole renewable energy agenda," Ms Graham says.

Ofgem's principal duty is to protect the interests of customers by promoting effective competition - and it could be argued that there is a strong case for the regulator stepping in if customers are concerned or confused about suppliers' claims.

But Ofgem maintains that the regulation of claims is the responsibility of consumer protection bodies like Trading Standards, the Office of Fair Trading and the Advertising Standards Authority.

Ms Graham also thinks it unlikely that Ofgem would administer an accreditation scheme given its desire to be a light-touch regulator. Other obvious candidates are the Carbon Trust and the Energy Saving Trust which cover the commercial and domestic markets, respectively. The concern is that this could require two parallel accreditation schemes - hardly an efficient solution.

One difference between the two markets is that large companies tend to negotiate individual contracts for their green electricity purchases. Such deals are much harder to accredit than off-the-shelf tariffs, Ms Graham notes, and Ofgem's guidance may recommend independent verification audits.

The need for an accreditation scheme was highlighted last year when the Advertising Standards Authority ignored additionality considerations in a ruling on Npower's Juice tariff.

The complainant challenged Npower's claim that Juice - a tariff endorsed by Greenpeace - can "really make a difference" in reducing CO₂ emissions. The ASA noted Npower's explanation that "more consumer demand for renewable energy resulted in reduced demand for non-renewable electricity" and ruled against the complaint.

Npower supplies Juice customers with 100% renewable electricity. However, the company is free to reduce the level of renewables in its conventional tariffs by a corresponding amount - a situation which results in no net increase beyond that required by the renewables obligation (ENDS Report 319, pp 31-32 ).

Ironically, the ASA upheld a complaint against Scottish and Southern Energy's RSPB Energy tariff - one of the few products praised by Friends of the Earth for "retiring" some of their renewables obligation certificates (ROCs) (ENDS Report 348, pp 29-30 ). Retiring ROCs makes the market short, raises prices and thereby gives renewables generators an increased incentive to build more plant.

But the ASA said that Scottish and Southern's ROC retirement scheme was "in its early stages". Although "in time" it was "likely" to lead to an indirect increase in renewable generation, Scottish and Southern "had not sent evidence to show that they were increasing the amount of renewable energy being produced in the UK at the present time". The ASA told the advertisers not to repeat the claim "unless they had evidence to prove it".