O.K. let’s start by getting to grips with the basics of the Fuel Mix Disclosure (FMD).
Essentially, the FMD is supposed to provide evidence of the mix of fuels used to generate electricity. It is shared with suppliers’ existing customers during a compliance period which runs for a year starting on the 1st April.
And it’s how you (as the customer) are supposed to know what the makeup of the power you are buying actually is.
In 2005, the Electricity (Fuel Mix Disclosure) Regulations introduced a requirement on all licensed electricity suppliers to disclose the mix of fuels they use to generate the electricity supplied, annually.
Without fail, suppliers must disclose this information by 1 October, every year.
Helpfully, energy suppliers in Great Britain receive a letter from Ofgem which sets out the actions required and reminds them of the deadline for submission.
Note: The regulation was embedded into electricity suppliers’ standard license conditions (SLC) and is now known as SLC.
Why should you care about FMD?
As a responsible business that’s concerned about its environmental impact, it’s likely you’ve chosen an energy supplier based on its ‘green’ credentials.
And that’s a wise decision to make.
After all, powering your business with genuinely clean energy is one of the key tactics to meeting net zero.
So, I put this question to you:
What would you think if you found out that your chosen energy supplier – the one that claims to help reduce your impact on the planet – is actually providing you with energy from ‘dirty’, polluting sources?
Or, worse still, your supplier is masking dirty fossil fuel generated energy as clean?
You’ll pardon me for putting words in your mouth, but I’d expect that you’d feel pretty cheated, disappointed and confused?
Well, I hate to be the bearer of bad news, but I’m here to tell you that it’s happening.
And unfortunately, it appears to be happening industry wide.
A scheme that was intended to provide transparency.
I think it would be helpful to start with some context around renewable energy certification.
For every unit of renewable electricity generated, Ofgem issues a Renewable Energy Guarantee of Origin (REGO).
In short, a REGO is a certificate of proof issued to the organisation that generates the renewable energy – like a wind farm or solar park - to show that the energy produced is, indeed, renewable.
Ultimately, the REGO scheme was put into place to provide transparency to consumers and businesses about the proportion of electricity that suppliers source from renewable generation.
There is a loophole in the system that lends itself to malpractice.
Buying REGOs can mask fossil fuel energy as green.
Generators have the option to unbundle the energy produced from the REGO.
And is entirely permitted to sell each one separately.
Essentially, this means that an energy supplier can buy a REGO without needing to buy the renewable energy itself.
For example: a supplier can purchase fossil-fuel generated power, like coal or gas, combine it with a REGO, and claim that it is renewable.
And what this ultimately means is that an energy supplier can ‘act’ like it is supplying clean energy, when in fact, it is simply buying the right to say it is.
Now, I wish I could tell you that this has all been a terrible mix up.
But sadly, it is all true.
And what’s perhaps most concerning is that this has become the norm amongst many of the UK’s leading energy suppliers.
In fact, Cornwall Insight’s ‘Green certificate survey’ found the demand from big corporate power buyers pushed the prices of REGO certificates up significantly toward the end of 2021.
It found average reported prices of £1.35/REGO for Fuel Mix FMD 2021-22 and £1.41/REGO for FMD 2022-23. This is 228% and 214% higher, respectively than reported prices in the April 2021 survey.