Spotlight on: Green energy tariffs for businesses
6th April 2021
In our first ‘Spotlight on’ article as part of the Climate Action Programme, Simon Roberts, Chief Executive of the Centre for Sustainable Energy and Ceilidh Jackson – Baker from Bristol Green Capital Partnership explain the complexities around green energy tariffs and outline key questions for businesses to consider.
You will no doubt have already done some thinking about how you can reduce your energy consumption as a business, both to save money and reduce carbon emissions. Reducing your energy use makes business sense. But have you considered where the energy you are using is coming from? Changing to a green energy tariff is an important step for businesses to take in reducing their carbon footprint.
There are now many green energy tariffs on the market but selecting a green energy tariff is a bit more complex than it initially appears.
What even is green energy?
Ofgem, the government regulator for gas and electricity markets, issues a certificate to provide a guarantee that an energy source is renewable, called the Renewable Energy Guarantees of Origin (REGOs). These REGOs are passed onto the supplier when they buy green energy, and energy suppliers use REGOs to show customers the renewable content of electricity they’ve supplied.
However, the REGOs can be sold separately from the actual renewable energy, and because of the way generators trade their electricity, these can be cheap at times of ‘excess’ production (like when it’s really windy and sunny but electricity demand is relatively low).
Why go green?
In the UK, over a quarter of our electricity is generated by wind, solar or hydro, and 2020 was the greenest year on record for the National Grid. And that proportion is growing fast. So, you might be wondering, why bother switching because whatever tariff you’re on, it is likely to include at least some renewable energy.
Opting for a green tariff sends a message. Demand and supply are intrinsically linked. By switching to a green tariff, you are letting your supplier, the energy industry, and the government, know that your business wants to support renewable energy generation and avoid using fossil fuels.
However, if your business wants to help reduce the amount of carbon used in the UK, you need to look more closely at your choice of tariff.
Clean green or greenwash? How to choose your tariff
Most energy suppliers offer a ‘green’ energy tariff which states that some, or all, of your energy will be supplied from renewable sources, but a lot of green energy tariffs are not actually that green.
Truly green tariffs will lead to an increase in renewables, directly supporting the financing of new projects. However, because of the way the market is allowed to work, suppliers can claim they’re selling renewable energy when actually they are just selling the renewable energy certificates (REGOs) or diverting their green energy supply to their green tariffs whilst their standard tariff uses more energy from fossil fuels.
Check your energy supplier’s small print for answers to these three questions:
1. Does your energy company buy REGOs and renewable energy together? If your supplier is simply buying REGOs and claiming to supply renewable energy, they are doing nothing to contribute to the growth of renewable energy generation.
2. Check the percentage of renewable energy on your ‘green’ tariff. Does your supplier offer a mixture of green tariffs and ‘standard’ ones i.e., energy generated from fossil fuels, also called brown energy? In this situation, more customers choosing their ‘green’ energy tariff may mean they simply divert more renewable energy (i.e. REGOs) to their green tariff and away from their standard tariff. So there is no increase in renewable energy generation. However, do check their statements on their business strategy to see if they are committed to expanding on renewable energy generation and moving away from fossil fuels. Depending on the size of your business, and therefore your value as a customer, you may be able to influence them.
3. Does your supplier buy renewable energy and the REGOs directly from the companies that generate it? Check if your supplier clearly states the sources of their energy. If they are transparent about the wind and solar farms that they purchase their energy from, they are directly supporting the UK renewable energy industry and their tariffs can truly be called green. According to information from Ofgem and research by Which? and the Energy Saving Trust, the greenest tariffs are available from Good Energy, GEUK (Previously Green Energy UK) and Ecotricity.
Supporting renewable energy beyond your tariff
Already have a truly green energy tariff? You can support the renewable energy industry further by:
- Supporting community energy projects either with financial help or business expertise.
- Contributing to a green fund with your energy supplier, essentially making a donation to support new renewable energy developments.
- Ensuring your pension scheme and bank are not investing in fossil fuels.
- Energy procurement and green tariffs. A guide for SMEs from the Carbon Trust.
- The Carbon Trust Green Business Fund; support for SMEs to improve energy efficiency.
- The Centre for Sustainable Energy have loads of resources on understanding your energy usage and making savings.
Look out for more articles in our ‘spotlight on’ series.