Why More Energy Suppliers Invest in Renewable Energy
Read more to know how energy tariffs charge you for your energy consumption.
If you’re living in Europe where the energy crisis is the most severe, you might sympathize with the increasing electricity bills. But did you know that electricity bills aren’t cut out the same? Depending on your energy supplier, you may or may not be paying more than others.
While world economies slowly adjust with the impact of the pandemic, the supply and demand aren’t still at par with each other. Right now, there is surging consumer demand as lockdown restrictions ease down around the world. On the other hand, suppliers are still behind the line — tipping the balance. Hence, the current global energy crisis.
This leads us to the nerve-racking rising electricity bills.
If you don’t look closely at your utility bills, you probably won’t see how energy suppliers pass on the power crunch problem to you, the consumer. I know energy tariffs can be confusing, so here are a few basics that you should know about.
What are Energy Tariffs?
Energy tariffs are the rates at which energy suppliers charge you for consuming electricity and gas.
Energy suppliers are companies that either generate the electricity themselves or buy energy reserves from the National Grid. There are different types of energy tariffs depending on where the energy comes from or the type of meter used. For consumer protection, they are regulated by the U.K. government through the Office of Gas and Electricity Markets or Ofgem.
Types of Energy Tariffs
Fixed vs. Variable
The most common classification of energy tariffs either falls between fixed or variable rates. From the name itself, fixed rates have rigid per kWh rates regardless of the market volatility in fuel prices. Meanwhile, the default energy tariff — standard variable rate — goes up and down depending on the energy’s market action.
See the table below to tell the main differences between fixed and variable rate energy tariffs.
Green vs. Non-Green Tariffs
This classification depends on the type of energy source you’re using. The National Grid has a diverse mix of fuel sources consisting of coal, gas, nuclear energy, biomass, and renewables. Green energy tariffs are from energy suppliers that provide low-carbon sources such as renewable and nuclear energy. Meanwhile, non-green tariffs are from suppliers that provide traditional fuels like coal and gas.
Green energy suppliers will be classified with green energy tariffs if:
- They produce their own renewable or low-carbon energy and distribute it to the users
- They buy green energy reserves from the National Grid for their users
- They invest in carbon-offsetting projects
- They are certified by the Ofgem with the Renewable Energy Guarantee of Origin (REGO)
The REGO certificates are issued by Ofgem to energy companies that generate clean energy. For every 1 MWh of clean energy produced, the energy company gets a REGO certificate. Just be aware of greenwashing because not every green energy tariff is necessarily green. Buying REGO certificates from clean energy generators without the renewable electricity is possible. If you don’t practice due diligence, green energy may still come from traditional fuels. The Ofgem is aware and looking into these greenwashing tendencies to make sure that the customers are treated fairly.
Other Types
There are still other types of energy tariffs. Most are classified by payment schemes. To explore more on these, you can read here.
Energy Suppliers in the United Kingdom
As of June 2021, there are 49 active energy suppliers in the market according to Ofgem’s records. The landscape of the energy market in Great Britain has expanded with more competitors. But before, 6 big energy companies dominated the market — The Big Six — supplying almost 100% of household electricity.
The Big Six
- British Gas — the leading energy supplier in the U.K. for electricity and gas. Apart from traditional fuel sources, they also have green tariffs that support green projects. It’s owned by Centrica, a British utility company.
- EDF Energy — Britain’s biggest generator of zero-carbon electricity. Their investment portfolio consists of 36 wind farms — 2 of which are offshore wind farms. They also run nuclear power plants. Its main shareholder is the government of France.
- E.ON — a German company that invests in renewable energy from wind, solar, and biomass with over £3.3 billion investments since 2009.
- SSE — the leading generator of renewable electricity in the U.K and Ireland with approximately 4 GW of clean energy in its investment portfolio. Since January 2020, SSE Energy Services merged with OVO, another independent energy supplier.
- Scottish Power — the first integrated energy company in the U.K to produce 100% green electricity. It’s owned by Iberdrola Group, a Spanish company known for being a world leader in renewable energy. Scottish Power’s green tariffs come from clean energy produced mainly from wind farms.
- NPower — it was one of the largest energy suppliers in the U.K with around 6.5 million customers. NPower is closing down because it was bought by E.ON in 2019.
Ofgem mandates all energy suppliers to disclose their mix of fuel sources used to produce or distribute energy to their customers annually. Take a look at the chart below to compare the fuel mixes of the former Big Six, as well as the U.K.’s national average.
The chart below compares the CO2 emissions from The Big Six with U.K.’s national average. Among the group, only British Gas was below the national average with zero CO2 emissions. Their fuel mix only consists of renewables and nuclear energy.
The U.K. as a whole has a climate action goal of reducing CO2 emissions in 2030 by at least 68% relative to 1990 levels. This is the main reason why leading energy suppliers are investing more into renewable and nuclear energy.
Top-Rated Green Energy Suppliers
The Big Six is a term that hasn’t been used anymore since more players came into the market. Now, Ofgem refers to them as “Large Suppliers”. Three of the new major players in the U.K.’s energy market are Octopus Energy, OVO Energy, and Bulb Energy.
Octopus Energy
Octopus Energy is a relatively new energy supplier in the market that started in 2015. It distributes 100% renewable electricity only. Some of which they generate themselves, some are bought from other generators, and some are matched with REGO certificates.
But even though they’re new in the business, it already garnered raving feedback from review sites like Which?. Octopus Energy received their annual Recommended Provider award 4x in a row! It’s a reflection of how customers find great value for their money with Octopus Energy. Customers get discounts if they live near wind farms or if the winds are strong. Also, none of its green tariffs have exit fees,
OVO Energy
When it bought other energy companies like SSE, Spark Energy, and Boost Energy, OVO Energy became the second largest energy supplier in the U.K after British Gas. They have 4 available green tariffs which are all backed by 100% renewable energy through REGO certificates. For people wanting to go for the greener mile, they can upgrade to OVO Beyond for carbon-offsetting projects like tree planting.
Bulb Energy
Another green energy supplier in the U.K. market is Bulb Energy which started in 2015. Since then, it became one of the fastest-growing companies now serving around 1.7 million customers in the U.K. They only offer 1 green tariff that’s backed by 100% renewable electricity and green gas. If their customers are charged with exit fees from their previous suppliers, Bulb Energy says they’re willing to refund when they switch.
They do not generate electricity themselves, but they either purchase directly from generators or backed by REGO certificates. They are one of the biggest buyers of carbon-neutral gas from biomass.
Why is Renewable Energy Getting Cheaper?
Green tariffs are not always more expensive than traditional energy suppliers. In fact, Bulb Energy offers one of the cheapest green tariffs in the market. There are a lot of green tariffs to choose from — it’s best to sift through them to get the greatest value for your money.
But despite this momentary setback from the power crunch, renewable energy has made a lot of progress in terms of capacity and prices getting more affordable. This is why more and more investors are attracted to green technology because of the price.
So when you buy green tariffs, more renewable energy will be supplied to the National Grid. And as more companies invest in green technologies, the faster the increase in capacity and the lower the prices would be. Increased competition among the energy suppliers also contributes to the price becoming more affordable for the consumers.
