Ethical Energy Suppliers

In this guide we explore the ethical and environmental issues of renewable energy, green tariffs, 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 this in more detail below, along with considering what you can do to help put pressure on the government to move quicker on supporting renewable energy production.

The state of the 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 narrative dichotomies 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. Liz Truss’s last-minute decision to extend 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.

What are green tariffs?

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

How do green tariffs work with the National Grid?

Regardless of your tariff, the electricity that you use when switching on a kettle 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.

This is not a trivial issue. 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: ‘all my energy is green after all’.

What's the difference between renewable energy and renewable energy certificates?

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 Buys, such as Ecotricity and Good Energy.

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).

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 thus 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 so were marked down.

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

Another confusing thing about the system is that, 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. This is not a normal market, it’s a very artificial, constructed one.

Thus, while we do think that our Best Buys are doing something to get us away from fossil fuels, what they do shouldn’t be overestimated. They were given an exemption from the price cap by Ofgem, and so they are more expensive, and you shouldn’t buy from them if you can’t afford it.

We have a more detailed explanation of green tariffs and eco-friendly energy companies you can read.

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.

Is carbon offsetting a good thing or greenwashing by the energy companies?

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.

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)
• GEUK
• Good Energy
• OVO
• So Energy
• Utilita

Best rating:

• Ecotricity
• Octopus Energy
• Outfox the Market

Are energy companies involved with 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.

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.

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.

Supporting community renewable energy

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.

We have a more detailed article about community energy you can read if you are interested in this.

Additional research for the guide by Sorcha Perris.