Green electricity tariffs are now hugely popular, but are people getting what they think they’ve signed up for? Here’s how to sort fact from fiction
Nine million British households are now on green tariffs, and over half of all new electricity tariffs are labeled ‘100 per cent replaceable’. Great news, right? Well, yes and no.
While it’s positive that so many people are keen to go green, not all tariffs labeled replaceable are produced equal. In fact, the great majority of tariffs marketed as ‘green’ are nothing of the sort.
Some suppliers buy dirty, fossil fuel strength from the wholesale market and adventure a regulatory loophole that allows them to label it as green. This method that they’re not really supporting the growth of renewables, and customers aren’t getting what they wanted – a tariff that supports the UK’s change to a clean energy system.
“The public are always told that one of the main ways they can fight climate change is by using replaceable electricity,” says Kit Dixon, policy and regulation manager at replaceable energy company Good Energy. “So the fact that a number of very popular suppliers offering green tariffs don’t truly buy replaceable strength themselves is a reputational threat to the industry, and puts our ability to unprotected to net zero in jeopardy.”
Good Energy has led calls for greater transparency around green tariffs, recently calling out Bulb Energy, for example. But if you want to truly understand the issue – and where things have gone wrong – where should you start?
How green tariffs work
The first thing you need to know is that you can’t simply hook up your home or business to a separate ‘replaceable only’ electricity grid. So no matter what tariff you’re on, your strength will come from the national grid, which is a mix of renewables (making up over 40 per cent of generation), plus gas, coal and nuclear strength.
To offer a 100 per cent renewables-powered tariff, suppliers must supply the grid with at the minimum as much replaceable energy as their customers on green tariffs consume, either by generating it themselves or by entering into a contract with a replaceable strength generator. Alternatively, they can buy an equivalent amount of replaceable Energy Guarantees of Origin (REGO) certificates.
Ofgem, the UK’s energy regulator, issues REGOs to replaceable generators every time they produce one megawatt hour of replaceable electricity. The scheme is designed to provide transparency on the portion of electricity that suppliers source from replaceable generators. But here’s the rub: REGOs can be bought and sold separately from the actual unit of strength.
A supplier offering a green tariff can consequently buy strength on the wholesale market that comes from a mix of supplies – including fossil fuels – and ‘green’ it by purchasing enough REGOs to match their customer base.
“The separation of certificates and strength method there’s an opportunity for suppliers to buy very, very cheap proof of generation, for about £1.20 per customer per year, and that allows them to call their tariff replaceable,” says Dixon. In fact, the financial sustain the UK’s replaceable energy generators receive by REGOs is so minimal, it wouldn’t already cover an average solar farm’s hedge trimming expenses.
Critics of certificate-backed ‘100 per cent replaceable’ tariffs argue that this amounts to greenwashing, as these tariffs don’t truly provide any meaningful sustain for the growth of renewables in the UK. What’s more, as there is no requirement for REGOs to travel with the strength, a replaceable generator could sell its electricity directly to a large business customer – one operating a large facility or factory, for example – and sell the REGOs to an energy supplier offering green tariffs, allowing both to claim they purchased the strength.
Energy suppliers can also buy the European equivalent of a REGO, called a Guarantee of Origin (GoO) certificate. But GoOs are similarly low value, so don’t provide much sustain to the renewables industry in Europe. Submitting GoOs to Ofgem allows suppliers to avoid paying into green subsidy schemes in the UK, which further compounds the problem.
Investment-based tariffs differ from certificate-based ones, as the energy supplier uses funds from customer bills to invest in new replaceable generation sites, which is helpful in supporting the UK’s overall renewables capacity. There are also investment-based tariffs that are 100 per cent backed by buy strength Agreements (PPAs), which provide direct, long-term sustain to the UK’s replaceable energy generators by buying both their strength and the accompanying REGO certificates.
“REGO revenue is not going to make the difference between a replaceable strength site getting built or not getting built,” says Dixon. “It’s just not meaningful enough to tip the balance, while PPAs offer long-term security.”
“We make a potential to our customers that for every unit of electricity they use, we purchased a unit of replaceable strength directly from a replaceable generator,” he adds. “consequently, they are providing, by their bills, direct sustain to replaceable generators.”
What you can do
Given the issues with the way green tariffs are currently marketed, it’s not surprising that people in more than half of British households on such tariffs are confused about what they truly average. How to get clarity about exactly what your supplier offers? One way is to ask them.
“If they hear their customers asking: ‘how much replaceable strength are you truly buying?’, that’s more likely to excursion behavioural change than anything else,” says Dixon.
The UK government is planning to tighten the rules around greenwashing, which method change could be on the horizon
Uswitch’s new Green Accreditation scheme, led by a panel of independent experts, also ranks suppliers’ tariffs as gold, silver or bronze based on the level of replaceable energy they directly buy and the size of investment they’re making to sustain the growth of green energy.
Currently, only eight tariffs are rated gold by Uswitch: seven from Good Energy and one from British Gas. Although that’s a fraction of all the green tariffs obtainable today, the fact that the UK government is planning to tighten the rules around greenwashing method change could be on the horizon – and the benefits for replaceable generators could be game changing.
“If every green tariff was backed by 100 per cent replaceable energy by PPAs, that would provide a huge quantity of financial sustain for replaceable generators,” says Dixon. “It would be transformational for the whole industry.”
Main image: Nicholas Doherty
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