What is an energy tariff?
An energy tariff is how an energy provider charges a customer for their gas and electricity use. Various energy tariffs exist to serve people based on their different lifestyle needs and habits. For example, Time-of-use tariffs, Export Tariffs, Dual Tariffs and Green Energy Tariffs.
This article will explore the world of green energy tariffs; what are they and what makes them green?
What is Green Energy?
Green energy is any type of energy that is generated from natural and renewable resources with little or zero carbon emissions. For electricity production, renewable sources we could use include:
- Solar – sunlight is absorbed through solar photovoltaic panels and converted into electricity.
- Wind – air flows into the blades of a turbine around a rotor which creates electricity.
- Hydroelectric – the energy of flowing water through a wheel/turbine is captured to generate electricity.
- Wave – the energy of ocean waves, rivers or lakes is captured to generate electricity.
- Geothermal – heat created within the earth is harnessed to produce electricity.
- Biomass – organic material made from plants or animals which is burnt, releasing the chemical energy in biomass as heat.
What is a Green Energy Tariff?
Why do Green Energy Tariffs matter?
A green energy tariff allows for a positive life cycle and supply of energy. Therefore, the more people who sign up for a green energy tariff, the bigger the percentage of green energy in the national supply. This means that:
- The proportion of green energy in general usage will increase.
- More and more people will reduce the number of carbon emissions they produce each year.
- Fewer fossil fuels are required for extraction and consumption.
What makes a Tariff "Green"?
To make a tariff ‘green’, the units of energy consumed must match the number of units generated through renewable energy.
- On the whole, green energy deals are no more or less expensive than standard energy deals.
- A suitable tariff from a wholly renewable firm could save you money compared with an unsuitable tariff from a legacy supplier with a fossil-fuel-heavy mix.
- Like other energy tariffs, a green tariff can be fixed in price or variable.
The rise of green energy tariffs:
Public demand for green energy has soared in recent years, as has the amount of electricity in the UK produced from renewables. Increasing capacity has driven the growth in renewable generation.
In 2019, more electricity was generated from renewable sources than fossil fuels for the very first time. A record high of 54.2 per cent of the UK’s electricity was generated via renewables – a 6.9 per cent increase from 2018. Renewables involved in this 2019 statistic include:
- 20% from Wind Energy.
- 12% from Biomass.
- 6% from Solar Energy.
A closer look at the UK’s energy trends:
- Since 2004, renewable energy in the UK has grown ten-fold with figures for the UK’s energy share from renewables consistently sitting above 40 per cent.
- Furthermore, Offshore and onshore wind accounted for 24.2% of the 2021 renewables share in the UK.
- Over a third of UK households (34%) are presently on a green-energy tariff.
- Finally, the most highly rated green energy supplier in the UK currently is Green Energy UK, which provides 100% green electricity and gas.
Are Green Energy Tariffs really green?
While green energy tariffs sound perfectly reasonable, especially for those looking to make their lifestyle a little greener, it is important to note that there are different levels of ‘green’ that exist amongst the green energy tariff, ranging from the greenest, moderately green and greenwashed…
While some suppliers claim their energy is 100 per cent renewable, it may not be sourced sustainably at all. Suppliers can offer ‘green tariffs’ to their customers under the pretence of REGO (Renewable Energy Guarantee of Origin) certificates. REGO certificates prove electricity has come from a renewable source and can be sold to suppliers for a small fee without sourcing power from renewable energy generators.
This issue of energy suppliers duping their customers into believing they are supporting eco-friendly energy production is termed ‘green washing’. According to the Energy Saving Trust, greenwashed tariffs do not promote the growth of renewable energy usage in the UK, or elsewhere, due to the use of more harmful/dirty forms of energy.
Moderately green electricity tariffs are typically offered by larger energy suppliers who offer standard non-green tariffs alongside green ones. The green energy from these suppliers is usually supported by REGOs.
The greenest kind of energy tariff is created when an energy supplier buys directly from UK-based renewable generators such as wind or solar farms. Ensuring the legitimacy of this green tariff, green energy and its accompanying certificates are bought at the same time.
What is the role of Ofgem REGO certificates?
To help put a stop to some energy suppliers selling brown energy to what their consumers believe is green energy, energy regulator Ofgem stepped into action in 2010 and created the Green Energy Scheme:
- This is an independent organisation whose role is to evaluate and certify just how green a tariff is.
- Tariffs that match the multiple criteria set by Ofgem can be marketed by the suppliers as a green energy tariff with a ‘Certified’ kite mark.
- The scheme allows electricity suppliers in the UK to continue to use REGOs and to comply with their fuel-mix disclosure obligations.
To reinstate, the purpose of an Ofgem REGO certificate is to prove to the final customer that a given share of energy was produced from renewable sources.