Green electricity tariffs
Almost every electricity supplier has a green electricity tariff aimed at customers who want to buy renewable energy.
What is a green electricity tariff?
These tariffs are labelled as green if some or all of the units of electricity are ‘matched’ by units generated from a verified renewable energy source. For example, a wind farm, solar array or hydroelectric power station.
But how green are they? The answer is they vary. Some are genuinely all-renewable, others are something of a half-way house, and others aren’t really green at all.
Green energy tariffs explained
To appreciate the difference, you have to understand two things about renewable energy and how it’s sold.
Firstly, over a quarter (26.5%) of Britain’s electricity is generated by wind, solar or hydro. Therefore, regardless of which tariff you’re on, at least some renewable energy is part of the mix.
Secondly, for every mega-watt hour (MWh) of renewable electricity generated, a Renewable Energy Guarantee of Origin certificate, known as a REGO, is assigned to it.
But crucially, the certificate and the electricity don’t have to be sold together. This allows some electricity retailers to claim they’re selling renewable energy, when really they’re doing nothing of the kind.
This happens because some energy companies are not interested in buying green energy per se. They are interested in buying the cheapest units of electricity and selling it on.
At certain times for example, midday when it’s very windy, renewable energy can be the cheapest on the market.
So companies may buy the electricity, but decline to purchase the REGOs that come with it. That’s because the REGO certificates each carry an additional small cost.
It means these REGOs are now available to be sold separately to other energy suppliers. These suppliers then ‘match’ them to units of energy sold to the public.
Through this, suppliers can claim to have a ‘100% renewable’ tariff. But in fact, it’s no different from the general energy mix supplied by the grid. And it costs very little; a supplier can buy REGOs equivalent to a year’s supply to a typical house for just a few pounds.
Critics refer to this practise as ‘greenwash’. The customer believes they’re supporting renewable energy generation. But in reality their supplier has merely bought up unwanted REGO certificates. And then, using a market mechanism to undercut genuinely green suppliers and without investing in any new renewable capacity.
Some of the larger electricity suppliers are also electricity generators. They own and manage wind and solar farms but also gas or coal-powered power stations.
Their standard tariff will provide customers with electricity from this mix of sources. Meanwhile, their green tariff will be backed up by the REGOs from their renewable electricity generation.
Unless this company has a business plan committing to expanding renewable generation and winding down non-renewables, their green tariffs are unlikely to stimulate the development of new renewables.
That’s because if more of their customers sign up to their green tariff, instead of buying or generating more renewable energy, the company can simply divert more of their existing green energy supply to the green tariff and make their standard tariffs ‘dirtier’, in carbon accounting terms. The mix of fossil fuels and renewables hasn’t changed, merely assigned to different customers.
Green energy tariffs UK
The greenest tariffs come from suppliers that buy renewable electricity and its accompanying REGO certificates directly from renewable generators.
The most significant of these are Good Energy, GEUK and Ecotricity. These three companies provide significantly greater support for the development of the renewables industry than the others. So if supporting renewable energy is important to you, they are a good place to start. (See also the Energy Saving Trust and Which?).
Of course, green electricity comes with a price, and for some households a cheaper non-green tariff may be more appropriate.
The reason that green electricity is more expensive is that green energy suppliers carry higher operating costs than greenwashed or mixed-tariff providers. For example, they invest in detailed forecasting and demand-management processes to ensure that renewable energy generation matches actual customer demand as closely as possible.
These additional costs are recognised by Ofgem, who therefore exempt Good Energy, GEUK and Ecotricity from the energy price cap.