A few weeks ago, E.ON announced that they would, with immediate effect, provide all of their domestic consumers with renewable electricity as standard, at no extra charge. Good news, but not unprecedented since Shell Energy did exactly the same thing last year.
How is it possible to go green overnight? Well, E.ON has a decent portfolio of their own renewable generation assets and they buy green energy from generators of all sizes. However, you can’t scale up overnight. The news was announced through this article, where they’ve said that the energy that doesn’t come from renewable sources is backed by Renewable Certificates and that’s how Shell Energy did it too.
What do Renewables Certificates mean?
Most likely this means Renewable Energy Guarantees of Origin (REGOs) that are issued by Ofgem to generators. As a generator, you’ll earn one certificate for every megawatt-hour of green electricity you generate. Then when you sell electricity to the grid, the buyer will require that you transfer the REGOs associated with that energy to them as evidence of the origin of the electricity. REGOs associated with energy used on-site is yours to keep, or perhaps not to keep...
Until recently, most Power Purchase Agreements (PPAs) required the transfer of REGOs without placing a value on them specifically. Then when Shell Energy bought rather a lot of them, the increase in demand increased the value of certificates. E.ON’s recent announcement could further encourage the development of the market for generators’ retained REGOs.
We’re still not talking about a lot of money, perhaps 5% of a generator’s export income at the time of writing, but worth having. Also, with the PPA market so competitive, a good offer for REGOs from a supplier could certainly tip the balance in a contract negotiation.
We’re far from REGOs genuinely incentivising renewable generation. However, if you’ve already made your investment, we’d recommend keeping an eye on the REGO market and bare it in mind when negotiating your next export agreement.
Better still, let us do it for you by giving the team a call on 024 7669 6512.