As gas prices skyrocket, rates labeled “green” are rising even FASTER!
Nine million households subscribe to green energy tariffs with the promise of fuel from clean, renewable energy. However, all are seeing their bills explode – sometimes even more than non-green tariffs – leaving many to wonder why they are just as exposed to the explosion of wholesale gas prices as those of standard energy tariffs.
A look under the hood of some green tariffs reveals that the households that removed them are right to feel a sense of outrage.
Critics accuse some providers of “greenwashing” – claiming their tariffs are renewable when they don’t generate a single megawatt of clean energy.
Off color: Critics accuse some providers of ‘greenwashing’ – claiming their tariffs are renewable when they don’t generate a single megawatt of clean power
Others are accused of ‘green shuffling’ – using accounting quirks to make certain tariffs appear renewable. And in some cases, companies claim they’re helping the environment by offering renewable tariffs – while simultaneously investing in fossil fuel generation. So are you having it? The Mail on Sunday is investigating…
Why are green tariffs increasing?
Wholesale gas prices are soaring around the world – due to a cold winter in Europe that is depleting supplies, increased demand from China and limited supply from Russia.
You might be wondering why these factors impact green energy like solar and wind power. But the truth is that, whether you are on the green or standard tariff, you receive at home exactly the same energy mix as your neighbour.
Regulator Ofgem compares the system to a giant smoothie. Energy from various sources – coal, gas, nuclear, wind and solar – is pumped into the national grid. Once there, they are mixed together so that what is poured into each household is a mixture of energy produced from many sources.
What one household receives is no different from another. So when you turn on your kettle to brew a cup of tea, it can run on coal mined in Russia or a wind turbine spinning in the North Sea.
In short, if you get your power from the national grid like most of us, you can’t specify that you only want green power.
So what makes a tariff green?
Energy companies have come up with a number of workarounds to offer green tariffs.
The first is to invest in renewable energy projects such as wind turbines and solar parks.
By feeding renewable energy equivalent to that consumed by green customers into the grid, suppliers can legitimately claim that they are having a tangible and positive impact on the UK’s energy mix. The second is to sign contracts with renewable energy producers, agreeing to buy the electricity they produce.
The third – and most common – method is even more tenuous. It is not about directly buying or investing in energy from renewable sources. Instead, suppliers buy certificates in recognition of renewable energy produced somewhere at any given time in the UK. It is this strategy that experts criticize the most.
Certificates, called Regos (Renewable Energy Guarantee of Origin), are issued each time a unit of renewable energy is produced. One Rego is worth one megawatt hour of energy. Producers can sell these certificates to anyone. Suppliers buy them to match the energy consumed by their customers at green tariffs.
This way they can say that even though their customers are using non-green energy, they are supporting renewable energy generation.
Suppliers with green tariffs supported only by Regos include Outfox the Market and Utility Warehouse.
One may wonder whether the purchase of Regos leads to additional production of renewable energy. Regos are cheap – around £2 each, or just a few pounds to cover a household’s energy consumption for a full year.
Oliver Archer, analyst at energy consultant Cornwall Insight, says: “While Rego prices have risen, they are still too cheap and volatile to have a huge impact on the business case.
“At their current prices, a decision whether or not to invest in a renewable energy project should not be won or lost based on the value of the sale of Regos.”
Which fares are the most expensive?
Since the actual energy you use at home comes from the same source whether or not the tariff is marked as “green”, you can assume that the gas price spike affects all customers equally.
But, contrary to all expectations, it is the green tariffs offered by suppliers investing directly in the production of renewable energies that can be the most expensive.
Ofgem, the energy regulator, has granted Good Energy, Green Energy UK and Ecotricity special dispensation to set prices above the energy price cap in recognition of their direct investment in renewable energy projects.
The regulator also argues that households chose these tariffs specifically because of their green credentials, so their tariff choice was likely not driven solely by price.
Green Energy UK says its variable tariff is at the ceiling, while Ecotricity and Good Energy both exceed it. This means that a household on dual tariff (gas and electricity) with Green Energy UK will pay an average of £1,277 per year. The equivalent figures for Ecotricity and Good Energy are £2,179 and £2,230 respectively.
Like all flat rates, green equivalents are alarmingly expensive. Of the 23 tariffs currently available, the comparison site Uswitch indicates that 14 are green. But the five most expensive fixed tariffs are badged in green.
At a glance: All suppliers are required to publish the fuel mix of their electricity supply, and how it compares to the UK average
The two most expensive are offered by Outfox The Market. Its two one-year green solutions are priced at £3,057 and £3,398 per year for an average household.
To put those numbers into perspective, you could take out a 12-month patch from SSE, which isn’t green, and would cost £2,100 a year.
Can I know if my rate is green?
The price comparison site Uswitch issues gold, silver and bronze accreditations for green tariffs.
When last updated in 2021, seven Good Energy tariffs and one British Gas tariff were awarded gold.
All suppliers are required to publish the energy mix of their electricity supply and compare it to the UK average. This will give you an idea of where your energy is coming from. However, take it with a grain of salt, for the reasons we’ve already explained.
And green gas?
It is almost impossible to be environmentally friendly and use gas. Therefore, in the long term, the best way to reduce the carbon footprint of our energy supply is to consume less and switch from gas to electricity – for example, by using heat pumps (too expensive for most at the moment) rather than traditional gas. boilers. Green gas can be created by breaking down organic matter such as food and agricultural waste in huge tanks or digesters.
However, capacity in the UK is currently insufficient to supply all of our homes.
Green Energy UK only supplies green gas. Other energy providers that offer green gas tariffs tend to invest in biogas sources and then offset the remaining proportion of energy that is not green by investing in renewable systems. For example, the supplier Ovo offers 100% carbon-neutral energy with its Beyond tariff.
The supply is based on around 15% green gas, with the rest compensated, for example, by paying for the preservation of rainforests in Guatemala and the planting of trees in Uganda. As with Regos, this is all rather abstract.
Only individual customers can decide if they just buy a carbon-neutral rate based on payment to encourage trees not to be cut down in South America.
But, for the moment, there is hardly any alternative.
Can a supplier be green and manufacture fossil fuels?
Shell offers 100% renewable tariffs, a claim it makes by backing its retail supply with Regos. However, no one will know that Shell is also one of the largest fossil fuel producers in the world.
Energy supplier Good Energy says some suppliers are guilty of “green shuffling” – making some tariffs greener simply by making others less green. Ian McKee of Good Energy explains: “Suppliers can make certain tariffs greener by keeping their total energy mix the same, but claiming that some tariffs have a higher proportion of renewable energy while others have dirtier and browner”.
Domestic customers may wonder if they are making a positive impact by switching to a supplier that offers a high proportion of renewable energy – but only because, due to some accounting quirk, their brown energy is being moved elsewhere.
Eon’s energy mix data reveals that renewable energy accounts for 81.9% of the energy supplied to its domestic and small business customers, more than double the UK average. However, its corporate clients only receive 27.7% renewables and a higher proportion of natural gas than the UK average.
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