Green Energy Explained

If you are in the process of comparing energy prices and are interested in doing your bit for the environment, then you may want to swtich to a green energy tariff.

Why is green energy even a topic?

Green Energy in the UK has had a difficult history and is likely to remain a thorny topic for years to come. The core issue is that using more electricity from renewable sources is something we all want. But making that happen is a different story. For starters, green electricity is very expensive to produce compared to electricity derived from fossil sources like oil, coal or gas. Next is scale and efficiency: A conventional power station is compact, relatively easy to operate, and its generation output is predictable. A wind farm or solar power plant will need more space to generate less power, and on top of it will rely on the fickleness of the British weather to produce anything at all. If it wasn't for the twin facts that fossil fuels will eventually run out and that global warming is real, one would have to admit that investing in green electricity is a bit of madness.

The decision to invest in green energy is therefore fundamentally a political decision, which is why green energy in this country seems to develop in fits and starts, depending on which party is in power and how much money is in the Treasury's coffers.

What is the UK's policy with respect to renewable energy?

The UK has bet its energy future on a hybrid generation model, with which it hopes to achieve some concrete targets. The 2009 Renewable Energy Directive commits the UK to producing 15% of its electricity from renewable sources like wind, water and solar. Because this is not enough to phase out coal and gas - the two dominant fossil fuels used to make electricity - the UK has committed itself to fill this generation gap with additional new nuclear power stations. The decision to invest in nuclear capacity was made by a previous Labour government, and has been confirmed as the foundation of the current administrations' energy policy as well. The Fukushima accident, however, has cast a shadow over this decision. Two German companies that had committed to building these power stations in the UK pulled out of these deals when their government ordered them to shut down their own reactors in Germany.

The government also launched an ambitious 'Feed In Tariffs' (FIT) scheme, which is an attempt to bring consumers directly into the energy market as producers of electricity. Any homeowner willing to put up a certified renewable energy installation is able to export electricity into the grid and get paid for this. The FIT tariffs are heavily subsidised over an average 20 year period to incentivise consumers to make the necessary investment in micro-generation.

Here again, the high cost of maintaining the FIT scheme is creating headwinds. Opponents of the scheme argue that such generous subsidies for an inherently inefficient scheme to produce energy at a microscopic level are an unsustainable burden on the economy as a whole.

What is a 'Green' tariff?

It is not a surprise that the political confusion over green energy found its way into the consumer arena. Most suppliers have been marketing 'Green' tariffs for many years. The general idea behind these energy tariffs is that a tangible environmental benefit comes with these products, and that this green benefit sets them off against their traditional 'brown' electricity tariff cousins.

A typical measure of 'greenness' is the source and amount of renewable energy contained in the tariff and the general philosophy of the company that sells it. Green energy pioneers like Cotswolds-based Good Energy, for example, advance their product as 'truly' green, because they invest in their own windmill generation and because all the electricity they sell is from renewable sources. The argument is that bigger suppliers, like EDF, npower, E.ON, British Gas, SSE and ScottishPower, predominantly produce brown energy, and that consumers who buy the green tariffs of those suppliers are effectively subsidising a system whose lifeblood is based on fossil fuels.

Needless to say, the big supplier lobby resists this argument and for many years no consumer kitemark scheme existed to tell consumers which tariff they can trust. Paralysis was the result, and the UK for years lagged behind in the market adoption of renewable energy tariff types.

To stick with the colour analogy: In the beginning, green tariffs had the same issue that you might face when you are choosing a red wine at the supermarket - all bottles are red, only a few are fine, and price is not always an accurate indicator of quality!

Supplier Tariff Name Average Bill
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What makes a tariff green?

The energy regulator Ofgem finally acted by creating the Green Energy Scheme in 2010. The Green Energy Scheme is an independent organisation whose task it is to evaluate and certify Green Tariffs for eligibility. Tariffs that match the criteria can be marketed by the supplier with a 'Certified' kite mark. The criteria of eligibility are:

  • All the electricity used by customers signed up to the tariff must be matched by renewable energy bought or generated by the supplier. This is an important rule because some energy suppliers were marketing 'green' tariffs which were not made up of 100% renewable energy prior to this.
  • The supplier must contribute a minimum level of additional environmental benefits for each customer. For example, this can be done by buying Carbon Offset Credits or spending money on renewable energy investments or energy efficiency programmes.
  • The supplier must agree to transparency rules and an annual audit. The supplier must also disclose in a so-called fuel mix statement how it generates its electricity.

(It is important to note that all licensed suppliers in the UK are currently required to obtain some of their energy from renewable sources under the so-called Renewables Obligation. So even if you are on a normal 'brown' tariff, some of the electricity you use will be coming from renewable sources.)

Ofgem's plan is that the Green Energy kite mark will help consumers choose a green tariff with a degree of confidence and lead to more widespread adoption and growth in demand for renewables-based tariffs.

Will only green energy be coming out of my electricity sockets if I switch to a Green Tariff?

By switching your energy supplier to a green tariff, energy consumers ensure that their supplier will be increasing the proportion of green energy in their generation portfolio and in the grid as a whole. But it is not possible to earmark electricity for use by a specific consumer. If you switch to a green tariff, the electricity you actually use will still be made up of the same proportion of coal, gas, nuclear and renewable sources as is in the grid as a whole. In other words - by switching to a green energy tariff, you are replacing your own consumption of mostly brown electricity with energy from renewable sources.

This leaves somewhat of a paradox: customers on green tariffs may think that they can increase their energy consumption without having a detrimental impact on the environment, yet doing so will still increase harmful carbon emissions until all electricity is generated from renewable sources. And we are an impossibly long way away from that.

What issues are there with the green certification scheme?

Critics of Green Certified tariffs have claimed that it is very hard for customers to obtain proof that the energy they use is actually being matched by the supplier with green energy going back into the grid. Green tariffs are also often more expensive than a standard tariff, because suppliers pass on the cost of generating clean fuel to the customer.

From a purely economic point of view, signing up to a green tariff can be like giving away extra money without getting anything real back in return. This is not something we typically do. Why do it then?

The actual value of signing up to a green tariff is to send a political message: Customers who switch to a green tariff are making a statement to government and suppliers that they care about the environment and that it is worth spending extra money to protect it.

Where does our renewable energy come from?

One of the biggest sources of renewable energy in the UK comes from the wind. Love them or hate them, wind turbines are on the rise. In October 2011, there were 295 wind farms across the UK, which made us the world's 8th largest producer of wind power.

Another well-known source of energy is the sun. Although we don't think we get much of it here in the UK, it is still enough to make solar power a viable energy source. Photovoltaic panels (another word for solar) harness the sun's energy even on a cloudy day so they are an energy source that is useable all year round. And because solar panels can be fitted on roofs with relative ease, they have become the preferred source for homeowners participating in the FIT scheme.

Less well known is hydro-electric (water-based) power generation. While it may not be something that people are familiar with, the UK currently gets 1.3% of its total energy from hydroelectric power. Other sources such as biomass, geothermal and tidal power are also being used to create renewable energy right here in the UK.

What is carbon offsetting?

Carbon offsetting can be done through projects such as tree planting, methane collection and destruction of industrial pollutants. The Kyoto protocol (part of an international environmental treaty with the aim of fighting global warming) has established the Clean Development Mechanism (CDM) which validates and sanctions projects that will produce genuine and additional benefits to the environment. There are debates surrounding the validity of carbon offsetting, with some critics claiming that our energy consumption behaviour should be changed rather than merely offsetting the negative results of that behaviour.

Can I switch to a green tariff?

You can use our website to complete your energy price comparison for green gas and electricity, just activate the "Green Tariffs" filters on the left-hand side of the page after making a comparison. Just follow this link to compare gas and electricity prices and switch!

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