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Not All Green Tariffs Are Created Equal

Posted in: Energy

Posted on: 15.08.2017

Over the past year, we’ve seen a lot more suppliers starting to offer ‘green’ tariffs at a range of different prices compared to their other tariffs. We often get asked what the difference is between Good Energy’s electricity tariffs and some of these other (sometimes cheaper) ‘green’ tariffs.

You might be wondering why we say ‘green’ in quotation marks. We’d never refer to our own energy in such a way as ours is the real deal: 100% renewable electricity. However, there are ways in which other suppliers might offer you what looks and sounds like a green tariff – and at a great price! - but, behind the scenes, it’s a totally different story.

It’s called green-washing, and that’s what we’re here to talk about today. We’re going to have to get a bit technical, but bear with us – it will be worth it in the end as you’ll have the knowledge you need to find a truly green tariff.

The technical bit: REGOs – buying and selling ‘Greenness’

For every 1000 units of renewable electricity generated, the industry regulator OFGEM gives the generator one ‘green’ certificate. This is called a Renewable Energy Guarantee of Origin certificate (REGO) which certifies the energy as being green.

When a supplier buys this power from the renewable generator to sell to its customers, it also buys the REGO certificates at a cost of about 15p each.

At the end of each year, suppliers are required to send these green certificates to OFGEM to prove how much of the power they buy comes from renewables – so far, so good.

BUT (and it’s a big but!) there is a market for these certificates which is completely separate from the market for power.

This means that it’s possible for suppliers to buy as many of these green certificates (REGOs) as they like (at only about 15p per certificate) without buying any power from renewable generators.

Instead, they can buy their power from anywhere – even a coal-fired power station, or any other source equally as damaging to the environment – and then separately buy enough green certificates to match. 

This means that at the end of the year the supplier has enough green certificates to show OFGEM to legally claim that their power is 100% renewable, without ever actually having spoken to a single renewable generator! This is called ‘green-washing'.

So what does this all mean?

This means that a lot of the green tariffs you see advertised may not be genuinely green at all, but just these ‘green-wash’ tariffs.

All it will have cost the supplier to legally promote this as a ‘green’ tariff is about 47p per customer: the price of just over three green certificates[1]. Insignificant when compared to the average annual dual fuel energy bill of approximately £1150.

The take-home message from all this is basically that if a green tariff feels too good to be true in terms of being both cheap and green, then, unfortunately, it probably is!

The best way to make sure you are buying a genuine green product is to sign up to Good Energy. We go much further than just showing our green certificates to OFGEM, as we commit to buying a unit of electricity directly from a renewable generator for every unit of electricity our customers use. We guarantee that the generator is getting a fair price for their power, and we take pride in selling this power to customers who care that the power they buy is 100% renewable.

Here is another way that suppliers can manipulate their tariffs to appear 'green'.

[1] The average household uses 3100 units (kWh) of electricity a year, each green certificate covers 1000 units of electricity and costs about 15p. 15p per 1000 units gives you 47p for 3100 units.

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