Certificates Aren't Carbon Cuts: Due Diligence for Green Power Purchases

Green electricity procurement has become a test of reading comprehension. A supplier can offer a tariff described as '100% renewable' while the underlying certificate market remains opaque to the average buyer. For UK organisations trying to balance decarbonisation commitments against tight budgets, the important question is not whether a tariff sounds green. It is what the buyer is actually paying for.

What a REGO tariff does — and does not — prove

Renewable Energy Guarantees of Origin, or REGOs, are the UK's main certificate mechanism for renewable electricity. A REGO is evidence that one megawatt-hour of renewable generation was produced and that its environmental attributes have been tracked. Suppliers use REGOs to back renewable claims under current disclosure rules. That makes REGO-backed tariffs legitimate accounting instruments.

But a certificate is not an electron. It does not necessarily mean that the buyer's money funded a new wind farm, solar array or biomass plant. In many cases, the supplier purchases certificates from the wider market and retires them on the customer's behalf. The renewable generation may have happened anyway. That does not make the tariff dishonest, but it does mean the buyer should understand the difference between matching consumption and causing additional renewable capacity.

If a supplier's evidence stops at a colourful fuel-mix graph, keep asking. A serious offer should include a clear statement of which certificates are being retired, their vintage, their source technology and the retirement process. Buyers should also ask whether the green premium is a fixed line item or an embedded cost.

The additionality question

Additionality is the idea that a purchase causes new renewable generation that would not otherwise have happened. It is the difference between buying a certificate from an existing asset and signing a contract that supports a new project. Corporate power purchase agreements, sleeved PPAs and direct investments in generation generally offer a clearer additionality story than a standard REGO-backed tariff.

Some suppliers now market 'additionality tariffs' or green funds. These can be useful, but they need evidence. Ask how projects are selected, whether funds are ring-fenced, what happens if a project is delayed, and whether an independent body assures the claims. A tariff brochure is not a substitute for a contractual commitment.

Cost-conscious buyers should also be proportionate. Not every organisation needs to fund new generation through its electricity contract. A business with a modest electricity spend may be better served by buying a competitively priced REGO tariff, disclosing the basis clearly, and directing capital towards energy efficiency or an on-site renewable project with a measurable return. The mistake is paying a large premium for a certificate that changes little beyond the paperwork.

Carbon reporting consequences

For UK organisations in scope of Streamlined Energy and Carbon Reporting, electricity emissions are usually reported using two approaches: location-based and market-based. The location-based figure reflects the average carbon intensity of the grid. The market-based figure reflects contractual instruments such as REGOs. A green tariff can therefore improve the market-based number while leaving the location-based number unchanged.

That distinction matters for annual reports, investor questionnaires and customer tenders. If a business claims '100% renewable electricity', it should be able to explain the basis of that claim and avoid implying that its physical supply differs from the grid mix. The GHG Protocol Scope 2 Guidance is the relevant reference point for many organisations. Finance teams should also check that any green tariff claim is consistent with the wording used in carbon disclosures and marketing materials.

A due-diligence checklist

Before signing a green tariff, ask the supplier for:

• The type of certificate used, such as REGO, and the countries of origin.
• Evidence of certificate retirement in the customer's name or on its behalf.
• The vintage of the certificates and the generation technologies involved.
• A clear statement on additionality, including whether any premium funds new projects.
• The size of the green premium and how it is calculated.
• Contract terms covering renewal, exit fees and changes to the certificate mix.
• Reporting support, including the figures needed for market-based Scope 2 reporting.
• Audit rights or third-party assurance over the supplier's renewable claims.
• A complaints or clarification route if the evidence does not match the marketing.

The strongest procurement position is not cynicism. It is clarity. A REGO tariff can be a sensible part of a wider energy strategy, provided the buyer knows what it is buying, what it is not buying, and what it is paying above the standard rate. In a market where green claims are increasingly scrutinised, that clarity is worth more than a logo on a bill.