Renewable Energy Guarantees of Origin (REGOs) prices have increased significantly in the second half of 2021. We’ve put together for you the key information and an analysis of REGO prices seen on the Renewable Exchange platform.
- The average price of REGOs has more than doubled over the last 6 months.
- The maximum value submitted for the REGO element of a PPA bid increased to an all-time-high in November and tripled between May and November.
What caused the increase in REGO prices in 2021?
The primary use of REGOs in Great Britain and Northern Ireland is for Fuel Mix Disclosures reported by electricity suppliers.
The push from the Government to reach net-zero targets and the increasing pressure from consumers had a positive effect on the value of REGOs over the last couple of years. The rising interest in green tariff options in both domestic and business electricity supply have been driving a steady rise in demand for REGOs.
However, the main contributor to the surge of REGO prices in the second half of 2021 was lack of renewable energy generation. REGO certificates are issued based on renewable generation volumes. Over the last 6 months, we’ve seen exceptionally low wind generation in the UK and Europe which meant fewer renewable certificates have been issued and so their value has increased. BEIS’ analysis of the summer months of July to September released last month states: “unfavourable weather conditions meant that renewable generation fell to 24.3 TWh, the lowest value in four years and down 17 per cent on the same quarter last year. […] Wind generation was particularly affected, down 30 per cent on the same period last year as wind speeds dropped to their lowest level this century.”
In Q4, the renewable generation picked up to 39% of total power generation in the UK and wind contirbuted 28.38% (compared to only 16.17% in Q3) (data according to Drax Electrics Insights). These changes in renewable generation over the course of the year were reflected in the development of price of REGO certificates.
The Renewable Exchange’s REGO Index provides statistical evidence of REGO values. All REGO prices were offered to generators tendering power purchase agreements (PPAs) on the Renewable Exchange platform. Bids were submitted from traders and licensed suppliers in the UK.
The change in average REGO price in the 2nd half of the year was reflective of the reduced renewable generation volumes. The maximum price of REGOs traded increased as well, and tripled between May and December.
The data analysed here consists of the REGO component of bids for PPAs on the Renewable Exchange platform for all technology types and contract lengths. The complete PPA bids would have been inclusive of commercial value for power, ROC’s where applicable and embedded benefits.
The analysis doesn’t include values obtained in REGO-only tenders. Some traders and suppliers bidding on the Renewable Exchange platform offer 100% rate for the REGO certificates – these bids were not included in the analysis. A small number of offtakers withheld paying any value for REGOs. In most instances, where no value is being offered for REGOs, it is possible to remove these from the PPA and optimise the sale of those certificates in their own regard. Renewable Exchange can assist in that part of the process, too.
The future of REGOs
In December, Ofgem published an analysis of UK supplier’s Fuel Mix Disclosures, reporting that 20 energy suppliers overstated the share of renewables in their statements. Following these findings, the Government is now looking to review the REGO trading practices. This may have a positive impact on REGO prices in the future. In the shorter term, the value of REGOs will heavily depend on the renewable generation volumes and relate to the more and more unpredictable weather. If renewable generation picks up again in Q1 of 2022, we will see the value of REGOs possibly falling further down again to levels seen at the beginning of 2021.
Read the latest update from Ofgem on their review of suppliers’ Fuel Mix Disclosure statements (16th December 2021).
Renewable Exchange discloses the REGO Index analysis to encourage transparency in the energy market and provide fair access to information for all participants.
For accurate, site-specific PPA price estimate, inclusive of subsidies, green certificates and embedded benefits, log in to the Renewable Exchange platform.