Businesses and consumers paying a premium for green electricity may be increasing supply company profits rather than renewable generating capacity, the UK government has admitted.

Under the Renewables Obligation, suppliers have to produce a percentage of their electricity from renewable sources anyway. Some of them have been selling it on the more expensive green tariff, which is supposed to help fund more renewable generation, not that already required by law.

BSj first reported this anomaly two years ago (04/06).

In an announcement last month, Environment Secretary Hilary Benn said it was “increasingly difficult to demonstrate that buying a renewable electricity tariff is offering additional carbon reductions compared with what suppliers are required to source to meet the Renewables Obligation”.

It was now clear that businesses signed up to green tariffs have been producing “only limited additional renewable generation capacity”, he said.

Last month Benn asked energy regulator Ofgem to develop a system to assess the potential of different tariffs, in a bid to ensure green electricity rates deliver more than just the supplier’s existing obligation on renewables.

Reporting guidelines will also be amended to provide coherent carbon accounting from 2008-9.

Benn said: “I want to be sure that people and businesses who buy green tariffs have clear information about what environmental benefits they are getting linked to renewable electricity and whether this is in addition to that which energy suppliers must provide anyway.”

Carbon Trust chief executive Tom Delay said: “We strongly support the move, as the green tariffs market currently lacks transparency, delivers minimal additional carbon savings and suffers from significant double counting problems”.

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