Ethical Energy Suppliers

Energy supply in the UK is a very artificial and complicated market, with a lot of confusion about renewable energy and green tariffs.

In this guide we explore the ethical and environmental issues of energy, green tariffs, carbon offsetting, biogas and community energy, and see if there are any ethical energy providers.

Household electricity use accounts for about 5% of the UK's greenhouse gas emissions counted territorially, or 3% of our consumption emissions (including imports).

While the UK was previously making reasonable progress at decarbonising electricity, we’ve stalled over the last couple of years. We explore why, and what you can do to help put pressure on the government to move quicker on supporting renewable energy production.

Green and renewable energy suppliers 

Most of the suppliers that we’ve analysed for this guide offer some form of ‘green’ tariff.

About nine million British households (almost half) are on such tariffs, signalling a huge desire to support greener energy, and over half of all new electricity tariffs are labelled ‘100% renewable’ or ‘green’.

However, the complex, loophole-filled and outright bizarre structure of the UK energy market makes it difficult to know what ‘green’ means.

The important thing is not whether a company can legally claim to be providing 100% renewable energy, but whether it actually is making any meaningful contribution to renewable capacity building. 

There are two things that companies can do which we do consider makes a meaningful difference; building renewables themselves, or buying renewable electricity through ‘power purchase agreements’ (PPAs), which give generators security. They can also commit to not building any more fossil fuelled plants.

Understanding green energy tariffs 

Regardless of your electricity tariff or energy supplier, the electricity that you use in the UK will come directly from the National Grid, which is powered by a range of gas, renewable, nuclear and coal sources.

All tariffs burn fossil fuels at the same rate. It does not matter which company you buy from, the electricity itself still has the same carbon footprint.

The marketing of any tariff as ‘100% renewable’ may suggest that consumers can simply use as much electricity as they’d like with no environmental repercussions. 

If you are on a green tariff and you turn your kettle on, some renewable electricity will be taken (on paper) from the electricity account of someone on a standard tariff and transferred to yours.

Then a gas-fired power station will be turned up in order to replace it. In other words, your turning your kettle on causes a gas-fired power station to be turned up to supply it, just the same amount as when anyone else does it.

The electricity system is ultimately a shared thing. Most of the decisions about it are being made at the governmental level, and the cost of decarbonising it is being shared between everyone in the country.

Confusing 'renewable energy' claims

In theory, if you are on a 100% renewable tariff, your supplier will add sufficient renewable energy to the national grid to match what you are taking out.

Ideally, this is renewable energy that the supplier has generated itself or has been purchased directly from renewable generators. This is the case for our Best Buy companies. 

However, the websites of some major fossil fuel generators and producers, including Shell Energy, also claim that all of their tariffs are 100% renewable.

Small companies such as Outfox the Market make the same claim, despite owning no generation capacity nor purchasing any renewable power from generators.

These claims instead rely largely on a confusing and poorly designed system of tradable certificates known as REGOs (Renewable Energy Guarantees of Origin).
 

REGO Certificates

A REGO certificate is awarded to a renewable generator upon the production of a megawatt hour of energy, and generators can then sell their REGOs to energy companies separately from their actual power.

Legally, in order to call its electricity ‘100% renewable’, a company just has to buy an equivalent amount of REGOs. It doesn’t have to produce, or even buy, any renewable electricity itself.

REGOs were designed to provide an extra subsidy for renewable developers, but a relatively low demand for green tariffs alongside a relatively high proportion of renewable power on the grid has driven the price down, so they currently provide only a minimal one. We deem primarily REGO-based renewable tariffs to be misleading and mark those companies down.

Outfox the Market, OVO, So Energy and Shell Energy claim that all of their tariffs are 100% renewable, yet all cover the majority of their ‘renewable’ power through certificate purchases. 

Carbon offsetting - good thing or greenwashing?

Another sector-wide issue is energy companies’ reliance on carbon offsets, and sometimes poor quality ones.

British Gas, owned by Centrica, was found in September 2022 to be purchasing almost half its offsets from a scandal-prone gas producer in China, widely accused of selling ‘junk’ credits and now banned by the UN from issuing offsets.

Green MP Caroline Lucas told openDemocracy, who led the investigation:

“For British Gas to fork out on junk carbon credits doesn’t even succeed in its thinly veiled attempt at greenwashing. Not only is its offset portfolio seemingly fruitless in our race against time to tackle the climate emergency; it also appears to have links with corruption and bribery in parts of the Global South.”

We have a more detailed analysis of carbon offsetting where you can read whether it's a good thing or not.

Is it worth buying from a green or renewable energy company?

Because of government regulations, we all pay for renewable development through our bills, whatever tariff we are on. Companies either have to build renewables themselves or they have to pay for someone else to. So effectively, even if you aren’t with Ecotricity, you are still giving money to Ecotricity.

We feel that to make a meaningful contribution to the UK’s environmental agenda, companies selling electricity tariffs as ‘green’ should have a commitment to not build any further fossil-fuelled plant, and be either building renewables or buying sufficient renewable electricity through purchasing PPAs to cover 100% of customers’ electricity use.

In our rankings, we awarded product sustainability marks to the companies that did this. Other companies lost half a mark under Climate Change for meaningless environmental claims.

Our Best Buy energy suppliers are doing something to get us away from fossil fuels, but what they do shouldn’t be overestimated. Also they are more expensive, and you shouldn’t buy from them if you can’t afford it.

While it is good to buy from one of the companies that is making more of an effort to help, the key things are to keep minimising your energy use, and to keep pushing for political action.

For a more detailed explanation of green tariffs see our feature on eco-friendly energy companies. 

Supporting community renewable energy

There are around 500 community energy projects in the UK. By offering communities the chance to define and control their own energy needs, these projects can not only help reduce carbon, but also address fuel poverty, increase local economic resilience and grow local engagement and awareness on energy and climate issues.

When companies buy energy directly from renewable generators using power purchase agreements (PPAs), they provide a guaranteed income and some security to those projects. In doing so, they enable them to expand and grow.

Community energy generation projects like Younity and Ripple provide an exciting alternative amidst the contemporary crisis. Ripple is an energy co-operative that allows consumers to buy shares in wind generation projects, and then receive savings based on the energy that they generate. The co-op is democratically owned and controlled.

Ripple announced, in December 2022, that it had arranged a new fixed savings rate, meaning that typical co-owners will each save £738 off their annual electricity bill. Ripple is an investment, however. As such, co-owners must ‘buy-in’ and, at the time of writing, a typical quote to cover 100% of an average household’s electricity included a single payment of £1695.

It is unfortunate that so many money-saving and environment-saving options, from solar power to house insulation, often require large up-front payments. The millions of families that are currently struggling to cover their energy bills will increasingly pay poverty premiums, whilst the affluent can future-proof their supplies and keep their bills low.

Also see our feature about community energy. 

Animal biomass and vegan energy suppliers

Vegan energy is essentially ‘animal free’. It excludes all sources of energy that have used animals.

Using animal products for producing energy is not uncommon in the UK. According to the UK government figures, animal biomass accounts for around 0.5% of UK energy supply. Anaerobic digestion accounts for about 2.5%, including animals and plant matter.

There are two key processes for generating electricity that are connected to animal exploitation: biomass generation and anaerobic digestion. These processes can use everything from dead animals and slaughterhouse waste to manure and slurry from animal farms.

Find out more in our feature on Vegan Energy. 

How ethical is biogas?

Plant-based biogas accounts for over 10% of the UK’s energy fuel mix, whilst around 1% is produced from animal waste, mostly manure. This is covered under ‘renewables’ in national fuel mix reporting.

The use of animal waste is understandably controversial, as purchasing waste from farmers directly subsidises animal farming. Yet, at the same time, it reduces the industry’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’s greenhouse gas emissions by 20%.

The politics of plant-based biogas are also complex. As George Monbiot has argued, dedicated crops are increasingly being grown for biogas production as the market expands.

Monbiot engaged in a public Twitter spat with Ecotricity’s founder and CEO Dale Vince back in June 2022 over Ecotricity’s plans to develop 6.4 million hectares of land into biomass feedstock. Monbiot's argument was that this land could be used more efficiently for growing food; or, alternatively, store more carbon and harbour more wildlife if it were rewilded.

Not everyone is as down on biomass as Monbiot. But most experts agree that because of this land issue, it should at least be saved for sectors which cannot use anything else. That is not heating.

Ecotricity’s biogas is, however, vegan, and they are the only energy company to be certified as such by the Vegan Society. Thus, 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.

Read our separate article about vegan energy if you are interested in avoiding supporting companies who use animal manure biogas. (Although as outlined above, everyone on the national grid in the UK receives the same electricity, so it's more about where your money goes than buying actual 'vegan' energy.)

Which energy companies score worst for carbon reporting?

Companies fall short on Carbon Reporting across the board with no brands receiving a best rating. So Energy, Outfox the Market, British Gas, Scottish Power, and Utility Warehouse all scored our worst rating.

Whilst some providers, like Utilita and Octopus, do more to help customers use less energy, the structure of the industry currently puts limits on what companies can do towards decarbonisation.

Some companies had discussed transitioning to renewable energy and the reduction of their on-site emissions. However, we found in general that the industry was lacking in detailed discussions of how to cut the emissions of the gas and electricity it supplies.

How do energy companies rate for excessive pay of directors?

One might have thought that last year’s combination of spiralling consumer energy bills and widespread company bankruptcies might have led energy suppliers to rein back slightly on their director remuneration.

This has not happened.

The 2021/22 financial year saw some truly staggering pay levels, with the highest paid directors of Shell, E.ON and Iberdrola (Scottish Power’s parent company) all taking home over £5 million in total remuneration. Shell’s highest paid director received almost €12 million in 2022, an increase of over 40% from the previous year.

Companies lost a full mark if they paid their highest paid director more than £1 million in total annual remuneration, or a half mark if they paid over £250,000.

Worst rating:

• EDF
• E.ON
• Sainsbury’s Energy
• Scottish Power
• Shell Energy
• Utility Warehouse

Middle rating:

• British Gas (Centrica)
• Co-op Energy (Midcounties Co-op)
• 100Green (previously GEUK)
• Good Energy
• OVO
• So Energy
• Utilita

Best rating:

• Ecotricity
• Octopus Energy
• Outfox the Market

Energy companies and political lobbying

2022 revealed how reactive the UK’s energy market is to international politics, yet the politics/energy relationship is certainly not a one way one. Lobbying appears to be endemic amongst major energy companies, which exert undue influence on governments across the globe.

In the UK, E.ON lobbied heavily for lower taxes and against further regulation in 2022. An October 2022 investigation by openDemocracy revealed that E.ON complained that the energy price cap made the UK an “unattractive place to be an energy supplier”.

It’s worth noting that whilst this lobbying was taking place, projections were showing energy bills topping £4,000 in 2023, and E.ON had just paid their director over £5 million in 2021.

Shell PLC, meanwhile, spent $7.3 million on political lobbying in the US in 2021. It was also revealed by the Guardian to be providing ‘administrative and public relations support’ to UK MPs through trade associations like the UK Petroleum Industry Association, alongside other oil and gas producers including BP and ExxonMobil.

The UK energy market in 2023

It is fair to say that 2022 was a tumultuous year for energy in the UK. 2021 saw natural gas prices spiral due to a confluence of factors, including sudden demand increases throughout Asia, a series of power generation breakdowns in the UK, and the escalating tensions and subsequent war in Ukraine. These translated into the collapse of multiple energy companies including the household giant Bulb.

Dangerous arguments emerged in domestic politics, such as the false choice between energy independence and decarbonisation, whilst the Conservatives’ long-standing failure to invest in renewable infrastructure and energy efficiency became increasingly glaring.

Collective calls for energy reform became increasingly vocal throughout 2022, and Don’t Pay UK’s ‘energy strike’ campaign dominated headlines as an impending winter crisis loomed. The energy price cap took the wind out of the campaign’s sails, yet we shouldn’t let remedial action from the government distract from the fact that the UK’s energy market is fundamentally broken.

Monetary arguments for a privatised energy system fall apart if the government is willing to protect consumers from rising wholesale energy prices and bail out failing companies. Social arguments for a privatised system fall apart amidst system-wide failures to protect vulnerable people or regulate effectively. Despite all of this, there remains no clear path back to common ownership.

The current UK energy fuel mix

The UK remains committed to reaching net zero by 2050, yet the percentage of renewable energy in the national grid has remained fairly static over the last couple of years, having increased to 38.7% from 37% when we previously published the energy guide (March 2021).

The UK’s overall fuel mix is currently:

• renewables 38.7%
• natural gas 38.5%
• nuclear 16.1%
• coal 3.8%
• other 2.9%

We have marked companies down under Climate Change if their mix uses higher levels of coal or lower levels of renewables than the national average.

We also penalised companies for Irresponsible Marketing if they reported their energy mix as 100% renewable but were not contributing meaningfully to renewable development through generation or direct investment.

Where does the UK's natural gas come from?

The severity of the UK’s energy crisis and resultant demands for ‘energy independence’ might have suggested that the country was directly dependent on gas and oil from Russia, yet this is not the case.

The UK is certainly overly dependent on natural gas, which is responsible for around 40% of all the electricity generated in the UK, and nearly all of our heating. However, around 50% of this gas is already produced in the UK, while the rest is largely imported from Norway, Qatar, The Netherlands and the USA. Only 3% of the UK’s gas was imported from Russia in 2021.

The reason that prices are affected by what Russia does is that prices are tied together in a global market. The notion that increased gas production in the UK would relieve prices is therefore highly misleading. UK-produced gas will not stay in the UK if gas producers can secure a higher price elsewhere. Energy independence is a symbolic, not a pragmatic, political goal.

How green is nuclear energy?

Nuclear energy does not emit greenhouse gases during power generation. Yet, it remains controversial. Nuclear power relies on uranium, a non-renewable fuel source obtained from mining. It produces radioactive waste, which must be stored carefully underground.

There are already 5,600 canisters of radioactive waste stored in the UK. It is unclear what the environmental impacts of storing radioactive waste will be in the future.

Andrew Blowers, author of The Legacy of Nuclear Power and a former member of the Committee on Radioactive Waste Management, set up to advise the British government on how and where to store nuclear waste, said:

“There is no reliable method to warn future generations about the existence of nuclear waste dumps. The nuclear legacy stretches into the far future; it poses a risk to environments and human health for periods which extend well beyond our comprehension.”

There are also worries about the connection to nuclear weapons. If lots more countries are going to get nuclear technology in order to decarbonise, might that lead to nuclear weapons proliferation?

In recent years, support for nuclear power has declined significantly around the world. The lower cost of renewables, and a better understanding of how abundant renewables supply is, has meant that the downsides to nuclear are now more easily avoided.

Fuel poverty and the cost-of-living crisis

Whilst energy companies such as Iberdrola (owner of Scottish Power), EDF and E.ON make profits in the billions, an increasing number of people are being left unable to heat their homes.

Someone is considered to be in fuel poverty if “when they spend the required amount to heat their home, they are left with a residual income below the official poverty line”.

Ethnic minorities, women, and disabled people are more likely to be in fuel poverty. Since 2009, white households have always been less likely to experience fuel poverty than households from all other ethnic minorities combined. And disabled people are more than twice as likely to live in a cold house.

Switching Tariffs

If you want to switch to a more ethical energy supplier, Citizens Advice has this step-by-step guide to switching energy suppliers. Although currently many suppliers are still not taking customers / not recommending switching. 

What are energy companies doing to support vulnerable customers?

It is not currently possible to do a proper price comparison between energy companies. Even some of the leading comparison sites are not now providing them due to market uncertainty, the fact that tariffs from the same provider vary according to location, and the lack of available savings data. Energy providers themselves are advising customers that switching will not save them money.

It therefore seemed more relevant to consider what companies were doing to support their most vulnerable customers.

Octopus was the most vocal. It told us that it had an ‘Octo Assist Fund’ of £15 million, to which customers can apply for support. Octopus sent almost 40,000 free electric blankets to customers who needed them most in 2022, and it also loaned out thermal imaging cameras so customers could better identify draughts in their houses. Its 'Energy Helpers' scheme in 2022 aimed to visit 500,000 customers and provide tailored energy saving advice. It was also the first company to launch a ‘Savings Sessions’ scheme, which allows customers to earn money if they reduce usage at peak times. In December 2022 it paid out £1.7 million to customers involved in the scheme.

OVO has also been proactive, announcing a £50 million customer support package in September 2022 that includes increased emergency credit, payment holidays for debt repayment and free boiler services and electric blanket giveaways.

So Energy announced a partnership with the charity Groundwork in Manchester. Groundwork provides a variety of free support measures, from energy debt advice to the free installation of energy-saving measures including radiator foils and draught proofing.

Others, including Good Energy and Ecotricity, simply encourage struggling customers to contact their respective helplines, although it is not that clear what specific support they are able to offer. Ecotricity did tell us that it partners with an organisation that supports customers with their finances. And, like most energy companies, it offers tips on ways to save energy.

Outfox the Market did not appear to have much to say when it came to supporting vulnerable customers. And in a November 2022 article released by Ofgem it was named, alongside Good Energy, So Energy, and Utilita, as having “severe weaknesses” in how it handled vulnerable customers.

Many of the schemes commonly signposted on energy suppliers websites, like the Warm Home Discount Scheme, are actually managed by the government.

Additional research for the guide by Sorcha Perris.