Green energy tariffs

Green energy tariffs explained

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Our helpful guide explains everything you need to know about green tariffs

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Many consumers these days are as interested in saving the planet as they are in saving money.

So it’s perhaps no surprise that green energy tariffs are rising in popularity. But what exactly is a green energy tariff, and do they cost more than standard energy deals?

What is ‘green’ energy?

A green energy tariff works by the supplier promising to match all or some of the electricity you use with renewable energy, which it then feeds back into the National Grid. So, the more people who sign up to a green energy tariff, the bigger the percentage of green energy in the national supply.

When you sign up to a green energy tariff, you still get your electricity from the National Grid in the same way as you would with a non-green tariff. In other words, your electricity is not 100% green.

At the moment, about 25% of the electricity in the National Grid comes from renewable green sources, such as wind, solar and the sea. The rest is generated in nuclear power plants or by burning fossil fuels.

Fuel mix

It’s worth checking out your green energy supplier’s fuel mix because there are different shades of green.

Energy companies are required by law to publish details of their fuel mix, so you can find out if the electricity you use is matched 100% with renewable energy.

Of course, even electricity generated from renewable sources has some impact on the environment – think of the manufacture, installation and operation of the equipment. Some companies therefore also give details of the overall carbon content of their electricity.

Consumers who opt for a green tariff can help the environment in other ways, too. Many firms, for example, invest in renewable energy projects such as wind farms, helping to clean up the energy supply in the UK.

Green gas?

You might be wondering whether you can buy green gas as well as green electricity – and at the moment the green gas market is only in its infancy.

It’s difficult and expensive to generate gas from renewable sources. However, several suppliers offer some sort of green gas. For example, 6% of Good Energy gas is green, made from bio-methane – decaying food, plants and animal waste.

Niche suppliers

There are several green energy tariffs on the market, and they are all available from smaller suppliers such as Good Energy, Ecotricity and Bulb. None of the big six utility firms currently offers a green energy deal.

So the big question: are green energy tariffs more expensive than standard packages?

The answer is, not always, but you may have to pay a premium to defend your eco-friendly principles.

Cost concerns

What is likely is that fixed rate green energy tariffs will still be cheaper than standard variable rate tariffs from conventional suppliers.

This is because the majority of fixed rate tariffs, green or otherwise, undercut standard variable rate deals. So while your fixed green tariff may not be the absolute cheapest fixed tariff on the market, it still offers the prospect of a price reduction if you are on a conventional standard tariff.

Fixed tariffs work by locking in the price you pay per unit of energy used for a specified period, usually for a year, although two and even three-year deals are available.

So the size of your bills will still fluctuate according to how much energy you use, but you have the security of knowing the cost of each unit will not increase during the period.

The flip side is that you will not benefit from any price reductions. And many fixed tariffs charge an exit fee (typically £30 per fuel) if you switch away before during the term. That said, you are free to switch within 42 days of your tariff coming to an end, giving you time to find another attractive offer without paying a penalty.

Around two-thirds of households remain on standard tariffs, so it is well worth exploring what is available in the fixed sector using MoneySuperMarket’s energy comparison service – especially if you are tempted by the prospect of doing your bit to save the planet.

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