There is currently quite a lot of chaos in the electricity market, with ten suppliers having gone bust since the start of 2018.
The main reason was rising fuel prices, although the bill price cap came into force in January and is presumably now exacerbating things.
None of the ten were specifically ‘green’ or ‘socially responsible’ companies, and none were covered in our last guide, but their demise does raise some ethical issues since six of them went bust without paying their renewables subsidy bill to Ofgem.
That led to a shortfall of tens of millions, which other electricity companies are going to be required to make up. This does not enhance the reputation of small companies selling dirt cheap electricity.
Which suppliers build renewables?
As we talked about in our last guide, it is very difficult to tell what ‘green tariffs’ do, because they operate on so many levels of detachment from physical reality.
Not only does everyone get the same physical electricity from the same grid, but we all pay very similar renewable subsidies through our bills, whatever tariff we are on, which makes it hard to trace a causal line between buying a green tariff and more money going to building renewables.
In our ethical shopping guide for gas and electricity we recommended that consumers support companies who build some renewables themselves, as that provides a physical link with renewable development. The small companies who build are Ecotricity, Good Energy and Octopus Energy, with Ecotricity being the most prolific.
Buying electricity and REGOs
Companies have since contacted us to argue that buying renewable electricity directly from generators can also be beneficial. Ian Mckee from Good Energy says that it provides its renewable generators with support, and pays them a higher rate than the big six. It promises to buy a unit of electricity directly from a renewable generator for every unit of electricity its customers use, and has power purchase agreements with 14,000 small and home renewable suppliers. It is unique in this. Indeed, many ‘100% renewable’ suppliers do not actually buy any renewable electricity at all.
The system works like this: each bit of renewable electricity created generates a certificate called a REGO, which can then be sold separately from it. In order to call its electricity ‘100% renewable’, a company just has to show sufficient REGOs to Ofgem at the end of the year. But, as the big six all stopped doing green tariffs several years ago, demand for REGOs is poor, the price is low and the support they provide to renewable generators is pretty paltry. The cost of sufficient REGOs to cover a customer’s annual electricity usage could be as little as 47p.
Other companies also buy some renewable electricity directly:
Co-op Energy says that it aims to support community energy projects, and it currently has power purchase agreements in place with 75 of them, although it also buys some REGOs on their own.
Ecotricity, Green Energy UK, Octopus Energy and Solarplicity all also buy some actual renewable electricity as well as REGOs, although how much and on what terms are hard to determine.
We know of no evidence that any of the other ‘100% renewable suppliers’ do more than buy REGOs.
Ofgem’s take on it all
Ofgem has recently issued three companies with a temporary exemption to the price cap, on the basis that “by consumers being on the tariff, support is given to renewables to an extent that is materially greater than that which is brought about as result of subsidies, obligations or other mandatory mechanisms.”
These companies are Ecotricity, Good Energy, and Green Energy UK.
Each of these specialises in a different niche: Ecotricity in building renewables, Good Energy in buying from renewable generators, and Green Energy UK in biogas – its gas is 100% biogas.
Many companies offer a portion of their gas as biogas, although no others come close to 100%. Co-op Energy’s is 25%, Ecotricity’s is 14%, Bulb’s is 10%, Good Energy’s is 6%. And Ovo does one tariff that is 50%.