After a bleak 2 years, the energy market is beginning to show signs of recovery that could help us save on our energy bills.
Suppliers are starting to offer fixed-rate gas and electricity deals again, although it’s expected that household energy prices are likely to remain significantly above historical levels for a while yet. It comes as the Ofgem price cap fell by an average of 7% from 1 October.
More deals mean you’re likely to face more choice when it comes to choosing a tariff. See the Look After My Bills guide to energy tariffs for more information. Among the various options are ‘green’ or ‘renewable energy’ tariffs, which claim to offer environmentally friendly power – sometimes at a cheaper cost.
There are several ways to reduce your emissions and save money by cutting your energy use. But does a green power tariff mean your household will be more environmentally friendly – and will it affect your bills? Here’s everything you need to know.
What is renewable energy?
Also known as ‘green’ or ‘clean’ energy, renewable power is generated from sources that can be reused or replenished. So, unlike fossil fuels, they can be used again and again – in some cases, forever.
Reusable renewable energy includes wind and solar power – two infinite sources of energy that can be used to generate electricity. Replenishable renewable energy sources include wood and biomass, which can’t be reused but can be regrown.
One key thing to note is that all renewable energy has at least some impact on the environment, while some forms of it create greenhouse gas emissions. For example, carbon dioxide is released when trees are chopped down and then burned to generate power. Likewise, the artificial forests needed for the wood can be damaging to biodiversity.
So, if you want to be more green, check that the energy tariff you’re being offered is generating energy from sustainable sources – i.e. in a way that has the lowest possible impact on the environment.
What are the most common types of renewable energy?
Here’s a list of the most common types of renewable energy that contribute power to the UK’s energy mix:
- Wind energy – usually harnessed through wind turbines, wind power is the biggest source of renewable electricity in the UK. The National Grid says it was responsible for 28.6% of all the energy produced in the UK in 2022 (it’s worth noting that not all the energy produced in the UK is used here). Offshore and onshore wind farms convert the kinetic energy of the wind into mechanical power, which is then turned into electricity by a generator.
- Biomass energy – the National Grid says biomass is the second biggest contributor to the country’s ‘green’ energy mix, accounting for 5.2% of generation. Energy is produced by burning organic material from plants and animals. The resulting heat is then converted into electricity. A slightly different process produces biogas – instead of being burnt, the organic material is broken down by microorganisms in an anaerobic digester, with the resulting gas then fed into the gas mains system. There’s an active debate around whether bio-energy can be deemed to be green given it does produce greenhouse gas emissions.
- Solar energy – the third largest source of green energy is solar, which contributed 4.4% of the UK’s renewable energy last year. Radiant light and heat from the sun is harnessed using panels, which convert them into electricity.
- Hydropower – it contributed 1.8% of all the renewable energy produced in 2022, the National Grid says. Falling or fast-flowing water rapidly spins a turbine, which then powers up a generator to produce electricity. The most common form of water power plant is a dam, but scientists are currently exploring whether we can also use the power of tides to produce electricity.
How do green energy tariffs work?
First things first, a green energy tariff does not necessarily mean you will be getting green energy in your home.
According to the Department for Energy Security and Net Zero, in 2022 78.4% of the energy consumed in the UK came from fossil fuels. Renewables and nuclear – so-called ‘low-carbon’ energy sources – made up 20.7% of the mix, with the remaining 0.9% coming from ‘other’ sources.
Unless you live off-grid, the National Grid will be providing your home with electricity from all of these energy sources. So, the energy that powers your light bulbs and TV will be coming from a mix of fossil fuels and renewables. How much of that energy is renewable is likely to change from day-to-day depending on the weather conditions.
If you are on a green tariff from a supplier that generates all of its energy through sustainable renewables, you will be supporting their investment in greener energy. They may pledge to match some or all of your energy usage with their green power. So, through these tariffs, you will be helping to reduce the need for fossil fuels.
Should I be worried about greenwashing?
As with all things that claim to be green, you should keep an eye out for greenwashing. It can sometimes be the case that a supplier which claims to provide low-carbon or renewable energy is not actually doing so.
The way to identify a genuine green tariff from a dubious one often involves delving into the supplier’s small print. It will tell you whether they are actually generating green power, or whether they are offsetting the emissions produced when they burn fossil fuels to create energy.
Offsetting can be part of a genuine attempt to cancel out greenhouse gas emissions, but the practice is also highly controversial. It may take the form of green investment (where the provider will fund renewable energy infrastructure or projects, like tree planting), or a certification scheme.
Certification is seen as being particularly problematic. Ofgem runs a system that issues Renewable Energy Guarantees of Origin (REGO) certificates whenever a certain amount of renewable energy is produced by a generator. A supplier will get the certificate if they produce the energy themselves or they’ll directly pay a green energy generator (eg a solar farm operator) for one. In effect, they pay for the green energy they then sell onto you.
However, REGOs are also bought from suppliers and sold by traders on a secondary market. When a supplier buys them from these middlemen, they are not providing any direct funding for green energy. But they can still claim they are ‘green’ in communications with consumers, even if their tariff has little or no relationship with green energy. The government is currently in the process of reviewing this controversial practice.
Are green energy tariffs cheaper?
While green energy tariffs may be better for the environment, they tend not to be any cheaper or more expensive than fossil fuel tariffs. Given fossil fuels still contribute the bulk of the UK’s power, they dictate the price of energy on wholesale markets. It means they heavily influence the price of green power.
Some tariffs that encourage ‘greener’ energy use can work out as cheaper if they match up well with your lifestyle. For example, time of use or EV tariffs – which encourage you to move the bulk of your energy consumption to off-peak times of the day through discounted unit rates – can save you money, whilst also cutting the UK’s need for fossil fuels.
But, a big note of caution: there are some forms of ‘ultra-green’ tariff that are exempt from the Ofgem energy price cap. It means you may end up paying a premium for being more environmentally friendly.
The energy regulator allowed three suppliers to be exempt in 2019 before the energy crisis began. Standard variable tariffs from Ecotricity, Good Energy and Green Energy UK (now called 100Green), are independent of the cap because Ofgem deemed that the costs of producing entirely green energy were significantly greater than the rates it set.
If you’re on a standard variable tariff set by these providers, you have to choose to be on it for the Ofgem cap to not apply. You will also still be able to switch away to another supplier offering the price cap. If you’re unsure about whether or not you’re covered by the cap, it’s best to check with your supplier.