How are REGOS being used by energy companies without purchasing the renewable energy they relate to in the UK?

Question

The ‘Renewable Energy Guarantee of Origin’ (REGO) scheme is designed to “provide transparency to consumers about the proportion of electricity that suppliers source from renewable generation" (Ofgem).

But there are claims that "it is possible for a supplier to source REGOs without also purchasing the electricity they relate to." According to same source, this loophole is increasingly being taken advantage of at significant scale, with more suppliers claiming to offer ‘100% renewable’ tariffs, despite holding little or no contracts with renewable generators. Shell Energy is apparently one such supplier.

"Shell do not have to contract or even contact any renewable generator to claim that the electricity they supply is ‘renewable’. All they have to do is buy surplus REGOs from suppliers who have already used this power to supply their customers. It’s little more than an accounting trick and, hidden somewhere amongst the smoke and mirrors, is the reality that some customers aren’t getting what they think they’re paying for. It’s a loophole, and an incredibly cheap one at that — the current price for a REGO is ~£0.35/MWh, or £1 per customer per year; to put this into context this is 0.1% of an annual bill."

How does this loophole works? How are suppliers using the REGOs to make claims that their energy is 100% renewable when it isn't?

Answer 1

How do I guarantee the dollar I give to a charity is the dollar spent on the cause

A Red Cross collector turns up on my door. I give them a dollar. That dollar gets banked by the Red Cross.

The Red Cross spends some of its money on paying that collector (assuming they are not a volunteer), some on administration, some on advertising and some, let’s say 60% on humanitarian causes.

How can I be sure that 60 of my cents end up on humanitarian causes.

Its little more than an accounting trick!

Kilowatt-hours, like dollars, are fungible. There is no way of tracing them through the electricity grid just like there is no way of tracing dollars through the banking system.

If green energy is purchased in, say, Canada and sold in, say, England, there is literally no way that it’s the same energy because there is no connection between those electricity grids. However, it is felicitous to say that green energy was not bought and sold. This is how commodity markets work.