Electricity and Gas Revisited

We return to the electricity and gas market to address recent changes and issues raised by customers and companies.

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 last guide 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%.

Vegan energy?

Ecotricity has recently had its electricity and gas certified by the Vegan Society. It says that while less than 1% of the energy used in the UK is from animal waste, many companies do use some, including British Gas, Npower, EDF, SSE, Good Energy, Green Energy UK, Solarplicity, Octopus, Bulb and So Energy.

We have been contacted by a number of people asking for our take on this.

Unfortunately, the issue isn’t simple.

While a small amount of animal waste is just burned directly in power stations, most of what we are talking about is manure being turned into biogas, using a process called ‘anaerobic digestion’.

Because the animal industry gets paid for the waste, most energy consumption will inevitably be supporting it. However, the issue is complicated by the fact that anaerobic digestion has quite a lot of benefits.

Manure and methane

An average UK dairy cow produces about 52 kg of manure each day, the equivalent of a teenage boy in weight, and there are almost two million of them in the UK. And that is just dairy cows.

Disposing of all of this is difficult. It can cause pollution if it gets into waterways, and so there are legal regulations on what is done with it. As a result, the majority of farmers recycle it to use as fertiliser, either on their own fields or by selling it to other farmers. In the last national survey, 63% of UK farmers said that they used some on their fields.

Anaerobic digestion is a way of producing fuel from this manure, and also, by capturing and burning the methane it gives off, reducing livestock’s greenhouse gas emissions. One study of dairy cows found that anaerobic digestion reduced methane emissions from manure storage by 71%, which reduced the whole farm greenhouse gas emissions by 20%.

After the biogas is removed, the nutrients are retained in the ‘digestate’ left behind, so they can still be used as fertiliser.

Making biogas from dedicated crops as Ecotricity does, has come under a lot of fire due to concerns about the amount of land that it takes up. It was thus on environmental grounds that the government has actively promoted the use of waste.

It is never easy to know when to let the best be the enemy of the good. If you want to be sure that no animal products went into producing your electricity or gas, you should go with Ecotricity.

However, you may also decide that, while the animal industry exists, it is better that the waste be dealt with well rather than badly.

All tariffs burn fossil fuels at the same rate 

Do not be misled into thinking that it doesn’t matter how much electricity you use if you have a green tariff.

It is important to understand that whatever tariff you are on, every kWh of electricity you use will result in fossil fuels being burned at basically the same rate as everyone else.

If you are on a green tariff and you turn your kettle on, some renewable electricity will be taken from the electricity account of someone on a standard tariff and transferred to yours. That electricity will then need to be replaced, and so a gas fired power station will be turned up to replace it. In other words, while there may be another official step in the process, at the end of the day, there is a direct causal relationship between you turning your kettle on and more fossil fuels being burned.

Conclusion

We have not updated any companies as part of this review, but nothing has come up which suggests that we ought to make any dramatic changes to our last recommendations.

Our Best Buys for green tariffs were Ecotricity and Good Energy, and for socially ethical companies were EBICO and Robin Hood Energy. These companies are still Best Buys.

Other companies worth mentioning are Green Energy UK, if you want to support biogas (although the ethical issues there are complex – see our website for more on that), and Co-op Energy. Co-op Energy buys some renewable energy and having the Fair Tax Mark. It is also part of both the Energy Company Obligation, which helps with home efficiency, and the Warm Home Discount scheme, which gives elderly or low-income customers money off bills.

Out of the big six, SSE invests far more in renewables than the others, and also has the Fair Tax mark.

It is also worth mentioning that there is another council-owned supplier which came on the scene recently – Bristol Energy.

However, it is important to bear in mind that although some companies are worth supporting, the real-world effect is going to be small. The most important thing is always to keep minimising your energy use.

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