Green and other renewable energy retail offers form a small part of the electricity retail market. While consumers are expressing a choice to buy these products, the market can prove to be difficult for consumers to understand. This document sets out Ofgem’s proposals for improving consumer protection in this market by supporting better information provision.
Our aim is for a future in which consumers will be better able to make informed choices about the green and other renewable energy offers they are buying. Our proposals will help to make the market ‘simpler, clearer and fairer’ for consumers, in line with the objectives of our Retail Market Review. This will engender greater consumer confidence as the potential of this market develops.
Our proposals have been informed by early stakeholder consultation, market developments and consumer research.
In 2009 we introduced the “Green Supply Guidelines” into the market. This helped provide certainty to consumers that the product they were buying was truly ‘green’. The guidelines were implemented by the formation of the “Green Energy Supply Certification Scheme” (the GESCS).
Over the past three years the green tariffs market has diverged into an accredited and non-accredited market, as not all suppliers have joined the GESCS. In addition, we have recently seen growth in the number of tariffs that offer to supply consumers with renewable energy, without providing additional environmental benefits driven by the consumer’s purchase of the tariff. The existence of these different tariffs in the market can be confusing for consumers.
We propose that green and other renewable energy offers are marketed more clearly so that consumers are better informed. In achieving this objective, we are also aiming to build upon the environmental benefits of the existing market and green supply guidelines and create a framework that supports tariff innovation and competition between suppliers in this market.
Proposals for green tariffs
We propose that our Green Supply Guidelines should apply across the whole green tariffs market. They will cover all electricity tariffs that offer an environmental benefit in addition to the supply of renewable energy.
We propose to keep and update the principles of transparency, evidence of supply and additionality, building upon our experience since 2009.
Our main area of consultation for green tariffs is around how the guidelines should be implemented across the market, to achieve greater transparency. We set out different implementation routes in this consultation, and we welcome stakeholder views in this area.
We are also consulting on the future scope of our Green Supply Guidelines as follows:
- We propose these should apply to all electricity tariffs that offer an environmental benefit in addition to the supply of renewable energy, not just those explicitly marketed as ‘green’
- We are consulting on whether the principles should be extended to cover larger non-domestic consumers.
Increasing transparency in the renewable energy market
We also set out proposals for tariffs that offer to sell renewable energy without additional tariff-level environmental benefits.
We have differentiated these tariffs from green tariffs due to their lack of additionality. These tariffs give consumers the option to express a choice for renewable energy, but we believe that they should not be sold as green products. This is because the renewable electricity they offer already exists in the system, or has been driven primarily by Government support, rather than by the consumer’s decision to purchase of the tariff.
Our research shows it is difficult for consumers to differentiate between these tariffs and green tariffs. So, our proposal for these tariffs is that they should follow the updated transparency principle for green tariffs and include a clear message at the point of sale to differentiate them from green tariffs. This message should make it clear that the consumer’s decision to purchase the tariff will not directly drive additional environmental benefits.
These tariffs should also follow the evidence of supply principle, to prevent any ‘double selling’ of renewable energy.
We are consulting on how best to implement this proposal.
This consultation and other stakeholder views will help us ensure that we make the right decisions for consumers. We welcome comments from all stakeholders and interested parties on the questions set out in this consultation by 14 February 2014. After fully considering responses we will implement any changes as soon as possible.
Following our consultation, we have held a stakeholder meeting on 09 April 2014. Please see minutes and slides of the meeting below.