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"We're Making Some Changes" - Because REGO's are now too expensive?

  • 9 May 2023
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I recently read a post from @S Hart bemoaning the receipt of an email from OVO concerning changes the company was making to achieve net zero.  I didn't agree with what Mr. Hart was saying or how he was saying it, mainly because he missed the main point.  

I’m surprised more OVO customers haven’t discussed this email on this forum as it seems quite an important change in the way OVO are going to interact with those of its customers who like to try and buy 100% renewable energy.  Indeed, it may be why a lot of customers  signed up to OVO in the first place - I know I did.

So the explanation that OVO gave in the “we’re making some changes” email and subsequent link giving a deeper explanation….

https://www.ovoenergy.com/blog/path-to-zero

….was interesting more for what it didn’t say about REGO’s than what it did.  Intrigued I went to Cornwall Insights.  Cornwall Insights had been commissioned by OVO to tell us that REGO’s aren’t helpful in achieving a path to net zero which supported why OVO was abandoning them in favour of alternative measures towards helping ourselves (and OVO Energy) get to net zero by 2035 .  What OVO didn’t say in their “Path to Zero” explanation was that as a consequence of a change in regulations relating to renewable energy certification in the UK, the European equivalent of REGOs (GoOs) would no longer be accepted as REGO equivalent from April 2023.  The impact of this is that UK REGO’s have shot up in price and clearly OVO no longer wish to pay the price demanded by the market to service their existing portfolio of “100% Renewable Energy Tariff” customers.  The following (also from a Cornwall Insights blog into REGOs) gives some explanation of this.

 

So come on OVO, if you are going to make significant changes to the the way you deliver your renewable energy offers at least tell customers that the high prices of REGOs going forward is one of the main reasons for doing so.  And, if your “Greener Energy” upgrade offering is simply a way of passing on the increasing costs of UK REGOs for those customers who want to support UK Renewable Energy production (as long as it doesn’t include REGO’s from Drax power station) - then say this too!  We’re all grown ups and can make informed choices, but only when all the information is there.

 

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Best answer by Tim_OVO 10 May 2023, 12:49

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Tim_OVO
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Hi @Corgimajor and thanks for posting. 

 

It’s super interesting to hear about the increase in prices for REGO’s. 

 

We’ve posted about a better way to do energy here:

 

 

This content links to our blog post, which does allude to how REGO’s are no longer an affective mechanism to incentive new renewal generation. Cornwall Insight found that there’s a gap between bill payer expectations of renewable tariffs, and the actual positive impact of REGOs. So an increase in the price of REGOs would mean even less value for money for bill payers…

 

I would welcome further discussion on this, on REGO’s on OVO’s Path To Zero and the best way we can get to net zero.

Carbon neutral - we need a community to get there! My green tech: Aclara SGM 1411-B smart meter, Chameleon IHD6
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Hi @Tim_OVO 

Thanks for sharing the link, going down the link rabbit hole I found the following page on the OVO website giving more details on how the OVO Greener Energy is going to work

https://www.ovoenergy.com/renewable-ppas

It identitifes in the footnotes (see image below) that the Power Purchase Agreements are backed by REGOs which is fundamental to the guarantee of renewably sourced energy under the UK obligation.  Inevitably then the small renewable producers will be reflecting on the increased value of the REGOs they are awarded by the regulatory scheme in their agreement to supply OVO as the market price for REGOs is determined by the REGO market and the producers will want a market price for these REGOs from OVO - otherwise they will sell them on the REGO market and with a 40% shortfall in renewable tickets (thanks to the removal of GoO’s from the UK market) they will get top dollar.

The other aspect of the Greener Energy deal is that the availability of renewables from source is capped by the current market capacity and so the amount of guaranteed renewable energy OVO could sell would have to be capped too, or OVO will have to revert to buying REGO’s to guarantee the overall renewable credentials of the the energy they were selling via this offer.  I haven’t seen anywhere in the sales blurb from OVO that this is a fixed capacity scheme sold on a “first come first served basis” i.e. until their purchased renewable energy pot/allocation from their suppliers is all used up.  

Do you know if this is the case?

We all want to see greater renewable capacity in the UK market and those who want to ensure they are buying renewable energy will be attracted to this scheme, but I still believe OVO should be a bit more open on why the change in rules on use of GoO’s in the UK market and the impact on prices of REGOs forced their hand to close down their 100% renewable energy tariff offer and introduce this new one.

Until the market value for renewable energy changes in the UK on to something more sustainable and meaningful (e.g. a Carbon Tax) then there is no point OVO blowing a raspberry at the effectiveness of REGOs to bring about change and then falling back onto a scheme that can only work by virtue of the presence of the REGO Scheme and the REGO market.

 

Tim_OVO
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Thanks for getting that info and sharing, @Corgimajor - very interesting to hear about the price mechanism for these PPEs. 

 

We have to start somewhere. If OVO’s demand for PPEs from renewable generators outstrips their supply, then we’ll be helping to create the confidence for new renewal generation to come on grid. In my mind that’s the idea and that’s a win. All that said I have to add a disclaimer that I am not aware of the technical specifics and am only speaking from my own knowledge. I’d love to hear from anyone else who sees this with some industry knowledge on how it works.

Carbon neutral - we need a community to get there! My green tech: Aclara SGM 1411-B smart meter, Chameleon IHD6

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