What is Green Energy? A Guide to the UK Market and why all green energy tariffs aren't created equal

What is Green Energy? A Guide to the UK Market and why all green energy tariffs aren't created equal

Did you know that renewable sources now generate over 30% of the UK's energy needs?

With consumers showing more interest in where their energy comes from, more suppliers are offering green energy tariffs.

In the first part of this guide I breakdown what 'green energy' is and why not all green energy tariffs on the market are as they seem.

I then run through the leading firms in the industry and what makes them unique.

If you want to skip ahead to a particular section use the Quick Links table below.

What is Green Energy?

"Green" energy is generated by renewable sources, such as wind, solar and biomass. Producing power from renewable sources has a lower impact on the environment and creates a smaller carbon footprint, hence the use of the term "green" energy.

The opposite of "green" energy is "brown" energy, generated by dirty non-renewable sources like coal and natural gas.

What About Gas?

When we refer to "energy" in this guide we are talking about electricity.

The vast majority of gas we use today is a fossil fuel. "Green" gas does exist, but it is expensive and not widely available.

Joey from Friends shocked face

You will see many operators advertising "green" dual fuel tariffs. But how can they do this if green gas is so hard to get hold of?

If you look in the small print, most suppliers will explain that your gas supply is a mix of brown and green gas (with green gas accounting for 5-10% of the mix) and they carbon offset the emissions produced in your home.

Offsetting is generally limited to the emissions you, as a household, produce by burning the gas. Any emissions that occur as a result of getting the gas out of the ground, processed and transported to your house will normally not be offset.

Each supplier will have their own ratios of green gas to brown gas, plus different ways of offsetting. If you want more information its best to have a look on the individual suppliers website.

Where does Green Energy come from?

There are many different ways to generate green energy, including:

  • Solar- Panels of reactive material are energised when UV from sunlight hits them, generating energy.
  • Wind - Turbines placed on land and at sea harness the wind and convert it into power.
  • Hydroelectric - Large volumes of water, created by man-made dams, flow through a turbine, generating energy.
  • Biomass - Micro organisms break down biological material. One of the by-products of these organisms is combustible gas used to power turbines.
  • Wave and Tidal - The technology is still in its infancy, but the plan is to utilise the power of the waves and the cyclical nature of the tide to produce electricity.

How much of the UKs Energy is Green?

In 2018 33% of the UKs energy was produced by renewable sources. A massive improvement compared to two decades ago when this figure stood at only 2.6%.

Joey and Chandler from Friends clapping

As technology develops the share of green energy generation will naturally increase. For example, over the last 20 years solar panels have doubled in efficiency.

Government targets have also been set to make sure that there are incentives, and penalties, to encourage the industry to do more.

Also, YOU have the power to make a change. By switching to a supplier that only sells green energy you are voting with your wallet and signalling a need for more investment in renewable energy.

How does the National Grid work

Before we go any further we need to cover how electricity is delivered to your house.

Think of the National Grid as a giant bucket and electricity as water. Every house in the country is connected to the grid by way of electrical cabling, think of these cables as pipes connected to the bucket.

The water level in the bucket fluctuates throughout the day as supply and demand changes.

To maintain the water level in the bucket you have two options; add drinkable, but odd tasting river water or add fresh mountain spring water.

As soon as either type of water enters the bucket it naturally mixes together and, as you would expect, from this point on one drop of water can no longer be distinguished from another.

This is exactly what happens with electricity.

When you switch on your lights at home you have no control over what 'type' of electricity, green (the fresh mountain spring water in our example) or brown (the river water), is powering it. You are being supplied from a mixed pool of electricity.

Keep this in mind as we move onto the next section.

Why all Green Tariffs are not Created Equal

Green energy suppliers come in two distinctive flavours. Those that buy REGO's on the secondary market and those that use PPA's.

say what face

What the heck?!... Let's explain.

What are REGOs?

The Renewable Energy Guarantees Origin scheme, or REGO for short, is designed to provide consumers with transparency about the proportion of electricity that suppliers source from renewable generators.

Ofgem issue 1 REGO certificate for every 1,000 units (1 Megawatt) of energy produced by a renewable generator. This certificate is proof of origin, rubber stamping that the energy generated is from a renewable source.

Family Guy - Birth Certificate

When a supplier buys energy directly from a renewable generator they also buy the accompanying REGO certificates.

Once each year, suppliers must submit their REGO certificates to Ofgem to prove that the energy they have bought is from a renewable source. If the number of certificates covers the amount of energy sold, the supplier can say that their energy is 100% green energy.

What's the Problem with REGOs?

So far so good. However, REGO certificates can be traded on a secondary market, separate from the unit of electricity that generated them.

This leads to the potential scenario where an energy supplier buys all their electricity from brown energy sources and purchases the REGO certificates they need to make their energy "100% green".

Shell did exactly this when they bought First Utility in March 2019.

Overnight, the fuel mix went from 3% renewable to 100% green energy. The business model hadn't changed, Shell had simply acquired the necessary REGO certificates.

A legitimate defence of the REGO scheme is that the renewable energy generator is paid a premium for the electricity they produce, because they have the opportunity to sell their REGO certificate on the secondary market.

There another problem though. The value of REGO certificates are tiny compared to the value of the electricity generated due to oversupply.

As of March 2019 the price of an REGO certificate was around £0.35/MWh. The average UK household consumes around 3.8 MWhs in a year. So an energy supplier only has to spend £1.30 to "green up" a single customers annual energy supply.

OK, let's go over PPA's.

What are PPA's?

PPA stands for Power Purchasing Agreement. These are established when an energy supplier agrees to buy electricity directly from an energy generator.

Token signing agreement - South Park

If you go back to our National Grid bucket analogy you may wonder what the point of having a direct relationship with a generator is if the electricity just ends up in a general 'pool'.

The key point is that the supplier has a direct relationship with the energy generator. Think of PPA's like cutting out the middleman in a supply chain. By doing so you are cutting out a layer of costs, with more money ending up in the renewable energy generators pocket.

So what should you do?

In reality, most energy suppliers that claim to supply 100% green energy will use a blended approach.

They will have PPA's with some suppliers, or even their own renewable energy generation capacity. Purchasing electricity from the wholesale market (a mix of brown and green energy) along with the necessary REGO certificates as demand fluctuates.

Getting data on the proportion of secondary REGOs (bought on the market) vs primary REGOs (bought from the energy generator) is difficult as suppliers are not obliged to give this information.

One thing we can say it is best to steer clear of energy suppliers that offer both green and mixed fuel tariffs.

Robbing Peter to pay Paul

Energy suppliers that operate their own renewable energy generation sites and that offer both green and 'mixed fuel' tariffs (a blend of green and brown energy) can take advantage of an accounting sleight of hand with the REGO certificates they generate.

Robbing Peter to Pay Paul

For example let's say Supplier A has a green tariff and a mixed fuel tariff. The mixed fuel tariff currently contains 10% renewable energy.

If the demand for Supplier A's green tariff increases, they don't need to go out and buy any more REGOs. All they need to do is free up some of their REGO's from the mixed fuel tariff by adding more brown energy to the mix.

Customers on Supplier A's mixed fuel tariff are unlikely to pay much attention to the increasing brownness of their tariff because their primary focus is getting the cheapest price.

This means that Supplier A has no need to make any additional investment in renewable energy even in response to increased customer demand.

They have just robbed 'mixed fuel' Peter to pay 'green energy' Paul.

Choosing a Green Energy Supplier

Our aim with this guide isn't to put you off green energy, suppliers are simply operating within the framework made for them by Ofgem.

Its purpose is to inform you about where your money is going and to show that all green energy tariffs aren't created equal.

I have also ignored all the other technical and social initiatives that many green energy providers are undertaking.

But now you have to knowledge to ask more in-depth questions of your energy supplier.

On a scale of BEST to WORST we would rank green energy tariffs this way.

  • Tariffs from renewable energy suppliers that only offer 100% green energy and invest in their own energy generation or have PPAs in place.
  • Tariffs from renewable energy suppliers that only offer 100% green energy and buy all their REGOs on the secondary market.
  • Green energy tariffs from energy suppliers that also offer mixed fuel tariffs.

Green Energy Supplier Breakdown

In this part of the guide we run through some of the biggest green energy suppliers in the UK, their key stats, terms and interesting titbits that we think makes them stand out.

If your main focus is price it's probably best to head to a price comparison site. All of these sites have their own dedicate green energy tariff filters:

Good Energy

Founded 2003
Trustpilot score 7.9 / 10
Customers 260,000 (2018)
Carbon offsetting for gas? Yes (6% is 'green' gas)
Pay exit fees? No
Charge exit fees? No
Sign up bonus? Yes, £50 credit for the referred and £50 credit for the referrer

Good Energy is about as close as you can get to a vertically integrated green energy supplier.

They own a number of wind and solar farms and source the rest of their energy through PPA's from over 1,000 independent renewable generators. Ranging from a small wind farm owned by an ice cream maker in Scotland to National Trust hydro turbines in the Welsh mountains.

This means that for every pound you spend with them, more of it ends up in the hands of those working to generate renewable energy.

Good Energy is listed on the UK AIM market so if you really want to get behind them you can become an investor. In addition, they have previously offered 2 corporate bonds and 80% of the money raised came from existing customers, showing just how much their customers back the company.

Good Energy has recently made a large investment in Zap Map. An app that helps Electric Vehicle (EV) drivers plan routes, identify charge points and check their availability.

Find out more about Good Energy


Founded 2015
Trustpilot score 9.6 / 10
Customers 870,000 (Dec 2018)
Carbon offsetting for gas? Yes (10% is 'green' gas)
Pay exit fees? Yes, upto £60 credit for each fuel type
Charge exit fees? No
Sign up bonus? Yes, £50 credit for the referred and £50 credit for the referrer

Bulb was founded by Hayden and Amit, two friends who used to work in the 'old' energy industry as they put it. They saw the same problems with all the big provides, expensive tariffs, poor service and dirty energy. They then had the "bright" idea to setup Bulb.

Bulb promises to make things simpler, cheaper and greener.

  • Simpler - Bulb have one variable tariff and switching can be done in 2 minutes.
  • Cheaper - Bulb have invested heavily in technology and aim to make modest profits, passing the savings onto customers.
  • Greener - Bulb only offer electricity from renewable sources and all gas is carbon offset.

Bulb has its own dedicated R&D division called Bulb Labs. They are working on lots of cool projects like:

  • Carbon Bot - A dynamically generated Twitter account which tells you the best time to use appliances to minimise your carbon footprint, and;
  • Export Payments - their own version of the Feed-in-Tariff scheme (FIT) which the government ended in March 2019. Paying people for the energy they generate in their own home.

Find out more about Bulb

Octopus Energy

Founded 2015
Trustpilot score 9.6 / 10
Customers 600,000 (Mar 2019)
Number of tariffs 6
Carbon offsetting for gas? Yes, for some tariffs
Pay exit fees? No
Charge exit fees? No
Sign up bonus? Yes, £50 credit for the referred and £50 credit for the referrer

Octopus Energy has 6 tariff in total. 3 are pretty bog standard and include a variable, fixed rate and a 'Super Green' tariff where they carbon offset any gas you use.

But Octopus also offers some really innovative tariffs. They make full use of smart meters and big data to transform you into an energy ninja.

Agile Octopus - Wholesale energy prices across the UK rise and fall, between 4pm and 7pm demand is at its highest and so are prices. Outside of this, the cost of energy tends to fluctuate, sometimes even going negative!

YES, that means you would be paid to use electricity and withdraw it from the grid!

Octopus calls this a Price Plunge and you can be notified by SMS whenever it happens so you can rush to turn the toaster on, what a thought!

Each day Octopus publishes prices by 30 minute blocks for the next 24 hours. Using this data you can plan when to use your most energy intensive appliances. Meaning you can make big savings by using your washing machine and heating your hot water when prices are low.

It gets even more awesome though. Agile connects to the If This Then That (IFTTT) service so you can make your smart home even smarter. Tell your Roomba to clean the house when prices are low and tell your hot water immersion heater to turn off when prices are high. So cool.

They even give you access to their API so you can create your own automations. OK this is getting a bit geeky now, but thanks for indulging me.

Octopus Tracker - As mentioned, the wholesale price of electricity changes all the time. With a normal tariff a supplier will take on the risk of the moving price and charge you a fixed price per unit of energy you consume. Sometimes this works in their favour and sometimes in the customers.

With this tariff, Octopus charge you based on the wholesale price, plus their margin, which they break down each day. Every 24 hours the price is updated and that is the price you pay for the day.

Depending on how the price moves over the course of the year you could end up saving.... or losing alot of money. It's really that simple.

Octopus Go - A specialist tariff for those with an electric vehicle. It offers a super cheap electricity rate in the early hours of the morning so you won't break the bank when you charge your vehicle.

Find out more about Octopus Energy

So Energy

Founded 2015
Trustpilot score 9.3 / 10
Customers ?
Number of tariffs 1
Carbon offsetting for gas? No
Pay exit fees? No
Charge exit fees? Yes, £5 per fuel type
Sign up bonus? No

So Energy only has 1 tariff, which is fixed for 12 months. They promise to always be within the top 10% of cheapest tariffs on the market.

To build on their commitment to low prices, So Energy charge the same amount regardless of whether you come to them directly or through a price comparison website.

So Energy gives their customers a vote as to where they should source their electricity from. Customer can choose from either wind, solar, biomass, tidal or hydro. In accordance with the share of the vote, So Energy will arrange to a matching energy mix.

Find out more about So Energy

NOTE: This article has been written from the perspective of an informed consumer using publicly available information. I'd love to hear from others that are more informed about this industry, my email address is andy@reco.shop.

Andy Smith
Andy Smith

Founder of Reco, a marketplace and community dedicated to find shift from a single-use mindset to a multi-use one. #SingleUseSucks

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