Energy Guides

Green energy tariffs

Article updated: Thursday 21 June, 2012

By Martin Fagan

Want to go green but you're not sure how? Start helping the environment by getting your energy from renewable sources - most tariffs cost no more than what you’re already paying. You could even save money and enjoy extra benefits...

All energy suppliers are legally required to buy 8% of their electricity from green, renewable sources that don’t burn fossil fuels or create carbon emissions.

This means that, although you can't stop using gas and electricity at home, by signing up to an environmentally-friendly energy tariff you can do a little more to help save the planet.

Although the energy you use at home doesn’t come direct from a wind farm or solar panel, your provider will supply the National Grid with renewable energy, and the National Grid will then supply your home.

Who offers 'green' tariffs?

The short answer is most energy suppliers. Even the “big six” - British Gas, EDF Energy, E.ON, npower, SSE and Scottish Power - will offer an electricity tariff that is made up of a percentage of electricity from renewable sources such as solar and wind power.

The biggest players in the green energy market - and the most vocal about its benefits - are the smaller energy companies, such as Green Energy, Good Energy and Ovo Energy. For more information on these companies, see our guide.

However, depending on where you are in the UK means you might not be able to take advantage of a smaller green supplier and may have to sign up with a green tariff from one of the “big six”.

This isn’t a problem, it’s just that all of the major energy suppliers have a slightly different interpretation of “green” and what constitutes a green tariff. So to get the tariff that best reflects what you think of as “green”, you have to understand the jargon.

How green is my tariff?

Typically, green tariffs fall into three main categories - energy match, green fund and carbon offset.

The most popular category among the “big six” is energy match, where your energy supplier matches every unit of the normal electricity you use with a unit of energy from renewable sources, such as wind farms, solar panels and hydroelectric plants, which it then feeds back into the National Grid on your behalf.

When you sign up for a green tariff that participates in energy match, the thing to get your head around is the fact that the electricity powering your TV, fridge and other household appliances is probably “brown” electricity drawn from the National Grid.

This is because, although you’re buying green electricity from your supplier, the green energy is added to the Grid in the same way that clean water is added to a dirty pool, so you’re still doing your bit for the environment. The rationale is that the more clean water gets added to the pool, the less dirty the pool will be.

With a green fund, customers on a green tariff pay a small premium on their electricity bills and the energy supplier matches this contribution and uses it to help support renewable energy projects across England, Scotland and Wales. The Green Fund awards grants to organisations who apply for funds to help cover the cost of renewable energy technology that can be used to produce green energy from the sun, wind, water, wood and other renewable sources.

Carbon offsets are credits for reductions in greenhouse gas emissions made at another location, such as wind farms which create renewable energy and reduce the need for fossil-fuel energy. This could be, for example, a project to swap coal-fired power stations with solar panels or hydro power. Some schemes offset the CO2 emissions from generating the energy by planting trees.

Some green tariffs not only offer energy matching, but also offer to offset 100% of the emissions from your gas usage.

But the key to knowing for sure whether or not the tariff is truly "green" is to see if it is certified under the Green Energy Scheme. The scheme was launched by energy regulator Ofgem in February 2010. The regulator’s involvement was seen as a good way to reassure sceptical customers that a particular supplier/tariff claims to be green were indeed justified.

The requirements for the Scheme to award a certificate to a supplier/tariff are very stringent. The guidelines set out what green tariffs should encompass, how they should be marketed and the evidence required to back claims. To be eligible for certification, suppliers have to demonstrate to an independent panel of experts that their tariffs result in a reduction of a minimum threshold of carbon dioxide emissions.

If they comply and are awarded a certificate, the energy supplier - or the green tariff - can use the Scheme’s logo on any marketing material and also on your bill.

How much more will it cost me?

There is an assumption that a green electricity tariff will always cost more than a normal “brown” electricity tariff. Some green plans cost a little more, but in some cases they cost less. It all depends on the level of your household consumption, how you pay your bills - paperless, online billing is cheapest - and even where in the UK you live.

According to UK Green Power, a typical four-bedroom home, using around 4,996 kWh of electricity per year, is currently paying £732 annually on monthly direct debit. Looking at the green tariffs of energy providers, UK Green Power says that switching to a green tariff will save you an average of £67 a year.

But the more people choose green tariffs, the bigger these savings might become. According to the Energy Saving Trust (EST), in 2009, renewable or "green" electricity accounted for just 6.7% of total electricity production and the government wants at least 30% of our electricity to come from renewable sources by 2020.

As with most markets, if consumption increases, prices should fall slightly.

But last of all, first things first...

However green your tariff is, it’s no substitute for energy efficiency. You can sign up for the deepest green tariff on the market, but if your home is energy inefficient you’re still doing the environment more harm than good.

So you should always do whatever you reasonably can to reduce your current use of electricity and other fuels - draft excluding, loft-lagging etc - as this not only reduces your carbon footprint but also trims your energy bills.

Comparing and switching is quick and easy when you use the EnergyChoices.co.uk calculator.