All You Need To Know About Green Energy Tariffs

The renewable energy could come from wind farms, solar farms, and hydroelectric power stations (which capture the energy of falling water to …

As concerns around climate change pollution and diminishing fossil fuel reserves continue to grow, ‘green’ or renewable energy tariffs have become increasingly popular with consumers.

On the back of this rise in demand, many more energy suppliers now offer green tariffs. In fact, research by consumer group Which? shows that more than half of the 355 tariffs on sale in June 2019 claimed renewable electricity credentials. This compares to only 9% three years previously.

Renewable sources and coronavirus lockdown

An increasing amount of the UK’s electricity is coming from low carbon and renewable sources all the time. According to the Energy Saving Trust, between January and May 2019, Britain generated more power from clean energy than from fossil fuels for the first time since the Industrial Revolution.

The 2020 coronavirus pandemic and the UK lockdown has taken this a step further. With many people working from home, power demand from the commercial sector has slumped, while wind and solar energy has increased to record levels.

National Grid ESO recently reported that Britain’s power output had been coal-free for a record 18 days.

How do green energy tariffs work?

There are several myths surrounding green energy tariffs and how they work.

According to Which?, a third of customers believe if an energy tariff is green or renewable, they will have 100% renewable electricity supplied to their home.

Another 11% believe a supplier generates some of the renewable electricity it sells, and 8% believe it generates all of it.

In reality, if you choose a green energy tariff, you still get your electricity from the National Grid in the same way as a customer on a standard non-green tariff. Electricity is generated from a range of sources – some of which is renewable – and this is mixed together in the National Grid and then supplied to people’s homes.

However, there are still benefits to choosing a green tariff as the supplier will match some or all of the electricity you use with the amount they buy from renewable energy generators.

The renewable energy could come from wind farms, solar farms, and hydroelectric power stations (which capture the energy of falling water to generate electricity). This is then fed back into the National Grid.

This means the greater the number of households that sign up to green energy tariffs, the more renewable energy is fed into the National Grid.

How ‘green’ is your supplier?

Several suppliers offer green energy tariffs, but some suppliers are ‘greener’ than others when it comes to how much they support renewable energy.

Choosing a green tariff doesn’t automatically mean you are choosing a supplier that owns solar and wind farms, for example. But it may have deals to buy power from renewable generators.

Energy firms are required by law to publish details of their ‘fuel mix’ – in other words, what percentage of the electricity they generate comes from renewable sources and what percentage comes from other sources such as coal, gas and nuclear power. This must be updated at least once a year.

You should be able to find this information on the supplier’s website or on your energy bill.

Some suppliers also make donations to green community projects or support initiatives such as tree planting or carbon offsetting.

Which energy suppliers are the greenest?

The Energy Saving Trust has highlighted Good Energy, Green Energy UK and Ecotricity as being three of the greenest energy suppliers.

Good Energy gets its electricity from certified renewable sources, including solar, wind, hydro and biofuel. The company says it buys 100% renewable energy from over 1,400 independent generators, including local farms who generate their own power and sell the excess to Good Energy. The supplier also has its own wind and solar farms across the south and south west of England.

Green Energy UK sources its electricity from hydro-electric schemes in Scotland, Dorset and Cornwall, as well as solar cells, wind farms, biomass and ‘anaerobic digestion’ – where organic material is broken down to produce a methane and carbon dioxide-rich gas which is burnt to produce energy.

Ecotricity, meanwhile, aims to become a zero carbon organisation by 2025. All of the electricity it produces comes from wind or solar power and the company says it makes around a fifth of its electricity itself from its ‘fleet of windmills and sunmills’. The rest is bought from other green generators. The money made through customers’ bills is also used to finance new sources of green energy.

Are green energy tariffs expensive?

When green energy tariffs were first launched, they were much pricier than standard, non-green tariffs. However, these days, costs have come down considerably and the price difference between green and non-green tariffs is much smaller.

British Gas, for example, says customers will pay £3 more each month for its Green Future tariffs.

Investment in infrastructure, along with concerns around climate change and fossil fuels, has helped to lower the cost of green energy tariffs. But the rising number of so-called ‘challenger’ brands, such as Pure Planet, Ecotricity, Good Energy and Octopus, has also helped to increase competition in the market.

Many of these smaller suppliers have launched cheaper green tariffs, forcing the bigger suppliers to up their game.

Many fixed rate green energy tariffs are also cheaper than the standard variable tariffs offered by suppliers. Standard variable tariffs are typically the most expensive type of tariff and switching to a fixed rate tariff (including a green one) could save households hundreds of pounds each year.

Green energy jargon buster

If you’re researching green energy, there are several terms you may come across. We have listed a few of them below, along with their definitions.

Power Purchase Agreements: Long-term contracts between generators and energy suppliers that agree on a set amount of power.

REGO certificates: For every 1 MWh (megawatt hour) of renewable energy generated, the energy regulator Ofgem issues the generator with a certificate called a Renewable Energy Guarantee of Origin certificate (REGO). This certifies the energy as being green. Generators can sell the REGO certificates to energy suppliers alongside the renewable electricity, or separately. Suppliers then submit the certificates to Ofgem to show how much of the electricity they buy from renewable sources.

Green washing: In some cases, energy suppliers claim to provide 100% renewable energy, but are in fact purchasing unused REGO certificates without buying any renewable energy. Early in 2020, Ofgem said it was aware of the issue and was looking into the matter. It said: “We expect suppliers to be transparent about what constitutes a ‘green tariff’ and we will undertake work to ensure that customers are not misled.”

Green funds: This involves you paying a premium for a tariff to contribute to a fund which supports renewable energy projects.

Brown electricity: Another word for non-renewable electricity.