How green energy plans work

To be considered a green energy plan, tariffs must source most of their electricity from renewable sources, with some offering green gas or carbon offsetting too.

However, the practice of buying Renewable Energy Guarantees of Origin (REGO) certificates can muddy the waters and make some tariffs seem greener than they are.

The UK's fuel mix included around 40% of electricity generated from renewables in 2021.

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What is green energy?

Green energy refers to energy generated from renewable sources such as solar and wind.

Other renewable sources also contribute to green energy production such as hydroelectric, tidal, geothermal and biomass generation. However, these only make up a fraction of green energy generation in the UK compared to solar panels and wind farms.

Most renewable electricity that is generated in the UK comes from offshore and onshore wind, with a far smaller amount attributed to other sources.

Renewable energy is becoming an increasingly crucial part of the UK's energy strategy in the push to reach net zero by 2050.

2019 was heralded as the greenest year ever, with those records beaten during 2020.

However, the amount of electricity generated from renewables fell back a little in 2021 as the conditions proved less favourable than in the previous year.

The major thing to remember about renewable electricity is that it is an integral part of the UK's plans to cut down on the fossil fuels we use to heat and power our homes.

What about green gas?

Producing green gas is more complex than green electricity and, while some suppliers do it to a greater or lesser extent, it is far from widespread.

Many companies prefer to offset the carbon emissions accumulating from their gas supply instead. This means suppliers are putting money into carbon reduction schemes such as reforestation to make their gas 'carbon neutral'.

That's the step Shell took when they announced two carbon offsetting tariffs in June 2020.

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How to understand green energy plans

Choosing a green energy plan doesn't change the electricity that is flowing into your home. That's why switching energy supplier doesn't disrupt our energy supply, for example, because all our power comes from the National Grid.

Instead, the amount of green electricity that is put into the National Grid by our energy supplier increases as more people take renewable tariffs.

Some suppliers promise 100% renewable electricity as standard, no matter which tariff you're on. Other suppliers including British Gas offer some greener tariffs at a higher price point.

However, it's more complicated than it seems due to the way energy suppliers can put green electricity into the Grid. There are essentially two methods:

1. Direct renewable electricity generation
2. Buying renewable energy on the open market

Let's look a little more closely at these options.

Directly generated electricity

The greenest tariffs are created when an energy supplier buys direct from UK-based renewable generators such as a wind or solar farm, buying green energy and its accompanying certificates at the same time.

Some of these suppliers such as Scottish Power have their own renewable generation while others have agreements in place with independent generators.

These tariffs are generally considered to the greenest because:

• It's clear where the green electricity is being generated
• The electricity and the certificate of origin are sold together

On this second point, Renewable Energy Guarantees of Origin (REGO) certificates are produced by renewable generators for every 1 MWh of renewable electricity they generate.

When the energy and the certificate are sold together at the same time, there's a clear link between that 1 MWh of energy and the certificate that proves it was generated from renewable sources.

However, issues can arise when the unit of energy is separated from the certificate.

Problems with REGOs

It's important to point out that Renewable Energy Guarantees of Origin (REGOs) are not inherently a bad thing.

As we've discussed above, they play a crucial role in proving that energy has been generated from renewable sources.

Yet energy suppliers who buy their REGOs on the open market are at risk of duplicating renewable electricity that has already been accounted for elsewhere.

This is because, when generators sell electricity, they don't necessarily sell the REGOs because some large foreign commercial customers don't care about proving their electricity is green.

So, that leaves plenty of REGOs on the market that suppliers can then buy without buying the accompanying green energy.

There are a couple of issues with this:

• The renewable electricity has already been used elsewhere so it isn't linked to a unit of green energy any more
• Buying certificates on the open market means suppliers aren't investing in renewable energy generation in the UK

Suppliers have been accused of using dirtier forms of energy and legally obscuring that fact by purchasing REGOs, although some dispute this.

It's also worth noting that some companies who do have renewable generation of their own will need to buy REGOs from the open market if they have more customers than they can supply green electricity to.

The use of REGOs is sometimes referred to as "greenwashing" because suppliers are using the certificates to suggest they are greener than they really are.

The Government launched a consultation in 2021 looking at greenwashing and other energy market policies. A response was expected in early 2022 but this has been delayed and there is no indication of when it will be published at the time of writing.

Generating your own electricity

Customers who have their own electricity generation installations at home such as solar panels or wind turbines can sell excess energy back to the Grid as part of the Smart Export Guarantee (SEG) scheme.

Every energy supplier with more than 150,000 customers must offer a SEG tariff although these tariffs are not all the same because companies can set their own rates.

There are a couple of things to bear in mind when looking at SEG tariffs:

• Customers don't have to have a domestic energy plan with a company to take a SEG tariff with them
• Some suppliers offer better rates to existing customers
• Some tariffs require specific installations

SEGs are far less valuable to customers than the previous feed-in tariff (FIT) that closed to new applicants in March 2019.

However, for customers who are looking at generating their own renewables as well as choosing a renewable tariff, it's important to shop around for the best SEG rate.

EV tariffs

Customers with electric vehicles may decide to sign up to one of the dedicated EV tariffs available from UK energy suppliers.

These often provide lower electricity rates overnight for EV charging and many of them promise 100% renewable electricity.

The same caveats apply to these renewable tariffs: customers should check whether suppliers generate their own, buy it from partners or buy REGOs on the open market to see how green an EV tariff really is.

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Are green energy plans more expensive?

The greenest energy plans can be significantly more expensive than standard tariffs that promise 100% renewable electricity.

Three UK energy suppliers have a derogation from the energy price cap set by Ofgem. This means they can charge higher rates for energy because they offer the greenest energy in the UK:

• GEUK
• Ecotricity
• Good Energy

So, customers signing up to deals from these energy suppliers can expect to pay more for their energy to compensate the companies for their green investments.

As we've mentioned, some suppliers will offer different fixed tariffs for customers looking to take plans with a higher mix of renewable energy - but remember to check where the renewable energy comes from.

Variable tariffs from all other energy suppliers are subject to the energy price cap. This limits the amount they can charge per unit of energy.

Some of these now promise 100% green electricity as standard. Again, it's important for customers to find out how the supplier gets hold of that electricity and if they rely solely on REGOs.

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What is the fuel mix of my energy supplier?

Every UK energy supplier is required to disclose the fuel mix of their electricity supply each year.

This gives customers the opportunity to make more informed choices around their energy supply. However, as we have seen above, simply saying a supplier offers renewable energy doesn't necessarily mean the energy is truly green.

The figures below, collated by Electricity Info, cover major energy suppliers in 2021:

From the table, we can see some clear differences between energy suppliers and the level of renewable energy they use alongside other sources:

• Bulb and Octopus offer 100% renewable energy
• EDF uses far more nuclear power in their energy mix thanks to their eight nuclear power stations, although they also own a portfolio of 36 wind farms
• British Gas have focused on renewables and nuclear for their energy mix while OVO and Scottish Power both rely on high levels of gas alongside renewables
• A couple of suppliers have a small amount of coal power in their fuel mix

Yet most large and medium suppliers have at least the UK average level of renewables in their fuel mix, with the exception of EDF and their nuclear focus.

Some smaller suppliers also boast 100% renewables in their fuel mix including:

• Ecotricity
• Good Energy
• GEUK
• Outfox the Market
• Shell Energy
• So Energy

Again, it's important to consider where the electricity comes from and whether these suppliers are reliant on REGOs or not.

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What are the different types of fuel?

The table above shows the major contributors to the National Grid: coal, gas, nuclear power and renewable power.

While we're probably already familiar with the basics of these fuels, it's worth taking a look at the impact these different fuels have on the environment.

Coal

Coal power stations have been closing down at an increasing rate in recent years as the UK shifts to cleaner energy sources. All coal-fired power stations are scheduled to close by 2024.

Coal releases more carbon dioxide into the atmosphere than oil or gas, but it also produces toxic by-products such as arsenic and mercury.

Plus, there are significant emissions and issues with mining coal. In the US in 2018, for example, methane emissions from coal mines accounted for around 11% of the country's total methane emissions.

Methane itself is a greenhouse gas, absorbing heat from the sun and warning the atmosphere. So, coal causes problems with two major greenhouse gases - carbon dioxide and methane.

Natural gas

It's true natural gas is better for the environment than coal or oil, emitting up to 60%, but that doesn't mean it's a long-term solution for our energy needs.

While releasing less carbon dioxide into the atmosphere, it releases more methane. As methane is believed to have a more damaging effect on the atmosphere, releasing more methane isn't a great alternative to coal.

As the table above shows, however, gas currently supplies a major share of UK electricity and, as we'd expect, the lion's share of the UK's gas supply too.

Nuclear

Nuclear reactors don't directly produce carbon dioxide, although the mining and refining of uranium ore do use significant amounts of energy.

The major concern with nuclear power, though, is the hazardous waste it leaves behind. Although the figures in the table above are low, radioactive waste must be stored somewhere, and this involves a complex process of preparation, treatment, packaging, storage and disposal.

For example, Low Level Waste (LLW) in the UK is disposed of at several repositories where metal containers are stacked in concrete-lined vaults that will eventually be capped over with more concrete to prevent it seeping into the ground.

So, while nuclear power doesn't directly contribute to climate change, it is problematic in different ways.

Wind

Wind power is a renewable fuel that doesn't emit any noxious gases into the air.

It's the primary source of renewable electricity in the UK. Government figures for Q1 2022 show that:

• 14.9% of total electricity generation was from offshore wind
• 13.9% of total electricity generation was from onshore wind

So, a total of 28.8% of UK electricity came from wind power in that quarter.

However, there are some carbon emissions during the manufacture, transportation, installation and maintenance processes, so wind power isn't completely emission-free. Yet it's estimated emissions from wind power is up to 98.8% less than coal or gas power plants.

Solar

Solar PV provides 2.4% of the UK's renewable electricity (as of Q1 2022), and there are the same benefits and pitfalls to solar power as there are with wind power.

Plus, large scale solar projects can take up a lot of land and permanently occupy those large swathes of land, potentially impacting on wildlife and biodiversity.

Even so, carbon emissions over the lifetime of a solar is a fraction of those produced by coal and gas.

Other renewable fuels

Although wind makes up the bulk of renewable electricity generation in the UK, there are others that also add to the National Grid:

• Biomass
• Hydroelectric
• Geothermal
• Tidal

These don't play a huge part in UK energy production, but they all have some environmental costs, even if the majority of this is in the manufacture and installation of the technology itself.

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Summary: Different levels of green

Green energy tariffs are becoming integrated into mainstream tariffs, at least as far as electricity is concerned.

We're seeing fewer dedicated green electricity tariffs and more commitments to deliver 100% renewable electricity as part of suppliers' standard dual fuel tariffs.

As we've discussed, the problem with this is that it doesn't necessarily mean a supplier is improving the level of renewables used in the UK, and there are plenty of claims and counterclaims about greenwashing to wade through to get to the truth

Essentially, there are three levels of green energy:

1. Greenest - Supplier provides 100% renewable electricity purchased directly or generated themselves. They may provide green gas or carbon offsetting too for the ultimate green tariff.
2. Moderately green - Supplier purchases some of their electricity directly or generates it themselves but make up a shortfall with REGOs.
3. Possibly green - Supplier covers their entire renewable electricity tariff by using REGOs purchased on the open market.

It's not always easy to find out this information, though the greenest suppliers are often the most forthcoming about their practices.

Ultimately, the greenest energy plans are never going to be among the cheapest energy plans in the UK but price isn't always the top consideration for some customers and finding the right energy deal for you could cover more factors than cost alone.

There may be action on the advertising of green energy plans in the future to help customers understand them more easily but, for now, we generally need to read the small print of a supplier's commitments when signing up to a fixed energy plan or variable tariff.

Learn more about what makes up an energy bill or how much gas and electricity costs.