60 second guide to... Green electricity tariffs
Switching to a green tariff is one of the easiest ways to cut your carbon emissions, but what do you really get for your money?
Signing up for green electricity seems to a be simple way to cut your carbon footprint. Most major power providers offer a green tariff and there are also specialist companies which offer nothing else.
How does it work?
The idea is simple: for each unit of electricity you use, your supplier promises to feed a unit from renewable sources into the National Grid. Green tariffs typically cost slightly more than regular tariffs, though this isn’t always the case and the differences aren’t huge.
What happens when I switch?
In terms of your energy supply, probably not very much. If you're connected to the National Grid, you'll still receive your energy from your local power station.
The big difference is that for every unit of electricity you use, your new "green" energy supplier will nowprovide the national grid with the same amount but from a renewablesource.
Don't energy companies have to buy green power anyway?
Yes, and that's one of the drawbacks of some green tariffs. The problem relates to a law called the Renewables Obligation, which forces every electricity company to supply aproportion of the power it sells (currently 6.7 per cent and rising each year) from renewable sources, such as wind farms.
Powercompanies can count electricity sold via special green tariffs towards this legal minimum. Unfortunately, the number of people signed up for green tariffs is currently only around 4 per cent, so in most cases no extrademand is being created. In other words, the supplier was going to have to buy the same amount of green electricity regardless.
So what are the benefits of green tariffs?
The environmental benefits of green electricity tariffs would increase if more than 6.7 per cent of electricity consumers signed up. Then, every new customer would be directly driving demand for renewables and reducing demand for power created from fossil fuels.
Until then, signing up for a green energy tariff is a vote for green power generation and a way of supporting a company which is likely to promote awareness – and may be committed to building new sources – of renewable energy.
Between ROCs and a hard place
Renewable Obligation Certificates (ROCs) are the "currency" of green energy supply. Every time a company buys a unit of renewable energy it receives a ROC.
The aim is to meet the 6.7 per cent minimum obligation, but if a company is off target, it can buy ROCs from other suppliers which have exceeded their limit.
This is a complex and thorny issue. Critics argue that greener companies' efforts are pointless if they simply sell their excess to other suppliers who are failing on renewables.
To ensure this doesn't happen, some green energy companies choose to retain – or "retire" – the ROCs so that no one else can use them.
But this is not foolproof. First, many smaller green energy providers rely on the money they get from selling ROCs to stay competitive with the major suppliers. Retiring all their ROCs would be commercially unviable.
Following the laws of supply and demand, removing ROCs from the overall market would also only force up the price. The knock-on effect would probably see green tariffs become prohibitively expensive for customers.
Supply and demand
Many mainstream energy suppliers now have an eco-tariff. But there is a growing number of specialist energy providers that only offer "green" products. These can be broadly split into two camps – both of which have advantages:
Demand-led
UK energy suppliers typically produce a "fuel mix" comprised of four main kinds of energy: nuclear, renewable, and electricity from coal or gas power stations.
But some green companies, such as Good Energy, only sell renewable energy. This "100 per cent green" approach aims to increase consumer demand for renewables. Good Energy also retire 10 per cent of their ROCs so they aren't just sold to companies with a "lesser" fuel mix.
You can compare the "fuel mix" of the UK's energy suppliers here.
Supply-led
Another test of a "green" energy company lies in its commitment to building new sources of renewable power. After all, only this will actually increase the amount of green energy available to buy in the UK.
The website Which Green aims to do this. Owned by green energy supplier ecotricity, which, perhaps unsurprisingly, ranks best in field, it shows you how much money each company spends on green power per customer.
Companies such as ecotricity do not generate 100 per cent renewable energy, nor do they retire ROCs. Their approach is instead to use the money from ROC sales to invest in extra renewable capacity.
Fund tariffs
There is another kind of green tariff. Instead of promising to match the consumer’s electricity use with power from renewable sources, some companies simply promise to contribute to a green-focused fund or scheme. This might be anything from tree planting to funding new wind farms.
Some of these green fund tariffs are offered at no extra cost. In other cases, the company charges a premium but promises to match it with its own donation to that fund or project. Whether or not you consider this to be a truly green tariff depends on your opinion of carbon offsetting.
Whatever tariff you choose, unless you are generating all of your energy through renewable sources, it would be wrong to believe that your power is essentially carbon neutral. This may act as a disincentive to minimising waste (like remembering to switch off the lights when you’re not using them).
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