Green suppliers, the energy crisis and rising energy costs

The average UK household is now paying £2,500 for their energy a year – an increase of £500 in the last six months. Green suppliers are also affected. 

Why are energy bills increasing?

Household energy prices are increasing across the board. The high costs are caused by soaring gas costs: wholesale gas prices have increased fourfold in the last 12 months. 

Russia’s invasion of Ukraine has accelerated the crisis, as the world’s largest natural gas exporter. But gas costs were already on the rise before the invasion. 

Gas is traded around the world, imported from country to country. This means that prices are linked to global supply and demand, and vulnerable to volatile world events (such as Russia’s invasion). In the years before Russia’s invasion, demand for gas was already rising in Asia. At the same time, supply was falling as Europe’s gas fields emptied and Russia’s largest gas company cut the amount it sold. 

The UK government sets a maximum amount that suppliers can charge you for your tariff, known as the energy price cap. The cap partially protects us from volatile wholesale prices. But in April 2022, the government increased the cap by a massive 54% to better reflect the energy market. 

In October, the cap was again set to increase, but the government instead introduced an energy price freeze, announcing that average UK bills would be capped at an average of £2,500 annually for the next two years. It’s worth noting that this is an average, and not a fixed price for your total bill: if you use more energy than the average household, you will be charged more than this. 

The energy crisis has hit UK households worse than any other country in Western Europe. A huge 87% of UK homes still rely on gas. The UK also generates 40% of its electricity from gas, compared to only about 20% in the EU.

Underlying the crisis is our over-dependence on fossil fuels. Friends of the Earth says,

“For decades successive governments ... have missed opportunities to invest sufficiently in renewable energy. Had they prioritised clean energy and home insulation, the demand for gas to heat homes would be much lower and we’d be less exposed to current prices hikes.” 

How are green energy suppliers affected by the energy crisis?

Renewable energy tariffs have also been hit by rising prices. So why is a fossil fuel crisis impacting green suppliers?

Over their whole life time, wind and solar energy are now 50% cheaper to produce than energy from fossil fuel powered plants. Some renewable energy projects currently being built are expected to be nine-times cheaper than gas power plants. 

However, under the rules that govern the UK energy market, a single price is basically paid for all electricity, which means that the price is set by the unit with the highest running cost, which comes from gas. 

This means that you’ll likely pay the same for a 100% renewable tariff (or sometimes more) as for a conventional one. 

The UK government says that it’s working to break the link between renewable energy and gas prices. But for now, renewable tariffs are just as affected by the energy price crisis as fossil fuels.

The cost of renewable energy tariffs

The energy crisis is having a real impact on people’s day-to-day wallets, with the average UK household expected to lose 8.3% of its spending power from paying higher energy bills in 2022. Almost 7 million people are expected to experience fuel poverty this year. 

Finding an affordable green supplier is therefore important. So is it possible?

When you choose a renewable energy supplier, you are not actually changing the electricity that turns on your light. All energy is supplied to UK homes via the national grid. In the grid, all different kinds of energy supply are mixed up and combined: think of it as a pot for wind, nuclear and gas. 

When companies claim to be selling ‘renewable tariffs’ they can mean two different things. Either, they can mean that they buy certificates called REGOs that say their energy came from a renewable supply. This does next to nothing to actually increase the amount of renewable energy we have in the UK, so we consider them to be pretty meaningless. 

Or, they may actually invest in renewables, either by building things like solar farms and wind turbines themselves or by having contracts directly with renewable suppliers. 

We consider these to be slightly more meaningful green tariffs, although it is worth noting two things: firstly, when you use energy at home, the same amount will come from fossil fuels whatever tariff you’re on. And secondly, because subsidies and costs are also shared between all the companies, you may not be providing renewable energy with a huge amount more money. We do, however, think that if you can afford it, it is still worth supporting companies that are trying to build and invest in renewables, and that are not supporting fossil fuels. 

Such green tariffs have traditionally been more expensive than fossil fuel based ones. Ofgem gave a few companies an exemption from the energy price cap on the basis that they were making a meaningful difference to renewable development. (That doesn’t definitely mean that it thought that the others weren’t – you had to apply for the exemption.)

Given that they are simultaneously dependent on high fossil fuel prices, it also means their tariffs can cost more. Because of the way that the October price freeze is calculated, their rates may still be higher than the average set by the government. 

Of the three meaningful green energy suppliers in the UK, only one of them appeared to be accepting new customers and their per unit energy prices were considerably above the government’s October price freeze.

Should I switch to a green supplier?

In the past, switching tariffs has been one of the easiest ways to save money on your energy bill, but these days it’s no longer the case.

“As the energy price crisis continues,” says Energy Saving Trust, “it may be best to stick with your current supplier, as many suppliers are not currently taking on new customers and you may not actually save anything from switching to another supplier.”

Citizens Advice says, “You won’t find many good deals on energy tariffs at the moment - this is because of changes in the energy industry. If you don’t find a better tariff than the one you’re on it’s probably better to wait until deals are available again before switching suppliers.”

Basically, pretty much all energy companies are charging the top rates that the government allows. Comparison websites like MoneySupermarket and GoCompare have actually stopped offering their services for the energy market, because so many companies withdrew their deals from the websites. 

Citizens Advice does say, however, that you may want to consider switching between tariffs with your existing supplier: if you’re on a fixed tariff, a standard variable one may be lower. 

Which green energy suppliers have gone bust?

Several of the companies that were in our energy suppliers guide have gone out of business due to the crisis. People’s Energy, PFP Energy and Together Energy have all gone out of business, and their supply has been taken over by British Gas. 

Bulb – which was the 7th largest supplier and had 1.7million customers at the time, went into ‘special administration’ in November 2021. The company has been bailed out by the government at a predicted cost of £4 billion, which may be passed onto households. It is now to be bought by Octopus Energy.

Luckily, the three energy suppliers that we consider to be doing something somewhat meaningful have all survived. 

If your energy supplier does go bust, you’ll automatically be switched to another supplier. Ofgem recommends that you sit tight until this has happened. 

Once you’ve been moved over, you’ll want to carefully check the new contract you’ve been put on: it may be more expensive than the contract you had before. Make sure to speak with your new supplier and ask for their cheapest tariff and / or shop around for better options. 

Can renewable energy help the energy crisis?

Transitioning UK energy supply to renewables is crucial, from the perspective of both fuel and the climate crisis. 

The UN Global Crisis Response Group says, “In the medium-to-long-term, the world needs to double down on renewables to meet net-zero goals, tackle energy poverty, and boost and diversify the global energy mix.”

But the UK government has indicated that it will do the opposite – that it will give over 100 new licences to companies hoping to extract North Sea oil and gas. 

This decision will drive us towards climate breakdown and increase our dependency on the volatile fossil fuel market. Global Witness says,

“It could not be clearer that this is a government on the side of the likes of UK oil and gas giants BP and Shell.”

These fossil fuel corporations have already reaped enormous profits from rising prices – with the largest oil and gas producers making close to $100bn in the first quarter of 2022 alone.

What can consumers do?

While it may not be the moment to switch to a renewable tariff, there are lots of other steps that consumers can take to tackle the energy crisis and climate change. 

1. Join the energy bill strike. 

Don’t Pay UK has called for a consumer strike: the mass refusal to pay energy bills until “the government and energy companies reverse the energy price hikes, end all enforcement of prepayment meters and make sure no one goes cold this winter”. The grassroots organisation will strike once 1 million people sign up, and is demanding a reduction in energy bills to an affordable level. As of October 2022, it had over 200,000 people signed up.

For more information visit https://dontpay.uk/ 

2. Join a campaign.

Just Stop Oil demands that the government end “all new licenses and consents for the exploration, development and production of fossil fuels in the UK”. It is a coalition of groups using non-violent civil disobedience to demand change. So far it has mainly targeted the UK’s oil and gas infrastructure, but future tactics may also include strikes, boycotts and mass protests, although the group raised some eyebrows for throwing tomato soup at Van Goch’s (glass covered) Sunflowers in October. 

For more information visit https://juststopoil.org

Warm This Winter is a campaign supported by anti-poverty and environmental groups including Friends of the Earth, Greenpeace, Oxfam, Save the Children, WWF UK and the End Fuel Poverty Coalition. It demands that the UK government acts now to tackle rising energy bills whilst ensuring energy is affordable for everyone in the future. It is calling for:

• emergency support for people this winter to ensure everyone can afford to stay warm
• a new, properly funded programme of home upgrades and insulation across the UK
• an end to new oil and gas drilling
• a rapid expansion of low-cost renewable energy

Sign the Warm This Winter petition. 

3. Consider joining #DonateTheRebate.

For those who can afford it, Crowdfunder has launched a campaign that asks those who own second homes and those who can afford it, to donate all or part of their energy rebate to charities supporting those who need help the most. “There will be £198,000,000 in rebates to 495,000 second home owners,” Crowdfunder says. “At the same time, there are 14.5 million people living in poverty in the UK.”

For more information and to donate visit the#DonatetheRebeate Crowdfunder page. 

4. Consider home generation. 

Generating electricity at home won’t be an immediate step to addressing the energy crisis: it’s a big investment, and takes time to pay off. However, for those who can afford it, it’s a great way to make your own energy transition. 

Heat pumps are crucial to decarbonising the UK. They essentially use heat from the air or ground outside your home in order to warm it. Our guide on heat pumps includes steps to consider to help you find an ethical company. 

Or you may have a community energy scheme which you could join.