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How much will ‘going green’ cost me?

Our expert says...

In recent months, four of the ‘big six’ energy companies - Scottish Power, British Gas, Scottish and Southern Energy (SSE) and E.ON - have all hiked electricity and gas prices and, as you say, it likely won’t be long before the other two (npower and EDF Energy) follow suit.

There are around 20 different gas and electricity suppliers in Britain, but these “big six” utterly dominate the market and can confuse customers with a plethora of different tariffs that make it difficult to chose which is the best deal.

However, a growing number of households are seeking out alternative suppliers for their energy, which generate electricity from renewable sources, such as solar power, hydropower, biogases and wind farms.

Green electricity

Let’s look at electricity first. Most electricity in the UK is generated by power stations fuelled by gas, which is why when wholesale gas costs rise, so do electricity prices.

Taking your electricity from a “green” supplier that generates energy from renewable sources insulates you from exposure to the fluctuating price of wholesale gas.

A number of green electricity suppliers - Green Energy, Good Energy and Ecotricity all say on their websites that “green” electricity shouldn’t necessarily cost more than “brown” electricity generated by burning fossil fuels.

Ecotricity claims it will “price match” the standard tariffs of the “big six” energy suppliers so, in that instance, going green won’t cost you any more than “staying brown”.

Another benefit of taking electricity from a green supplier is that any price rises won’t be connected to the rising price of wholesale gas. For example, Good Energy says its electricity prices have not risen since August 2008 and will be held unchanged until at least 2012, a period during which all the “big six” suppliers hiked their electricity prices on several occasions.

Green gas

Gas is a slightly different proposition and “green gas” is a slightly harder concept to get your head around. There is no direct substitute for natural gas; it’s a fossil fuel and, since 2006, the UK is no longer self-sufficient from supplies in the North Sea and now imports more gas than it produces.

However, several “green” energy companies have been investigating using the gas generated from food waste and sewage to provide homes with “green” supplies.

Food waste goes to a Green Gasmill - a place that makes green gas by a process known as Anaerobic Digestion - where organisms such as bacteria feed on the food waste (or other organic material), breaking down the organic matter and, in the process, producing gases like methane.

The problem is that the UK currently only produces about 18 million tonnes of green gas each year and that, says Ecotricity, is only enough to supply 700,000 of the 25 million homes in the UK. So the gas generated in Green Gasmills is fed into the grid with the “brown” gas, though it does go some way to offset this.

But you can still buy “brown” gas from “green” energy companies. Both Ecotricity and Good Energy offer this service. In fact, Good Energy has been supplying gas alongside renewable electricity since November 2008 and has just announced that its first gas price increase will come into effect from 6 September 2011. Like four of the “big six”, it blamed the rise in wholesale gas prices but, while they raised gas prices by an average of 18.25%, Good Energy raised its gas prices by just 9.4%.

Green energy from the ‘big six’

The “big six” energy providers also offer the option of “green” tariffs, but beware. With some power suppliers, rather than supplying you with electricity generated by renewable sources, you get bog-standard “brown” electricity generated by power stations burning fossil fuels with a promise that this will be “offset” in various ways.

This means, for example, that the energy company will match every unit of the normal electricity you use with a unit of energy from renewable sources such as wind farms and hydroelectric plants, which it then feeds back into the National Grid on your behalf.

With gas consumption, the big power companies offset 100% of the carbon emissions from your gas usage but Scottish and Southern Energy also plants five trees every year on your behalf to help offset your gas consumption’s carbon emissions - but this doesn’t actually reduce the amount used.

Protecting yourself against price hikes

So opting for a green energy supplier could be one way you can protect yourself against double digit hikes for both gas and electricity. Renewable energy suppliers often don't come top in the best buy tables but, as they only offer one or two types of tariff, their products are a lot easier to understand and so the pricing structure will be more transparent.

If you do investigate switching to a “green” energy supplier, remember that it’s possible you might see a small saving in the price you pay for your electricity or you could conceivably pay a little more, but you will decouple your electricity consumption from the wholesale gas price and so, when everybody else’s electricity bill is rising, yours should remain static.

And, of course, there are the environmental benefits of going green. According to the Carboncalculator website, the average Brit creates 10 tonnes of CO2 per year, which is equivalent to filling 24 million party balloons with carbon. Any reduction in your carbon footprint, however small, does make a difference.

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