What is green electricity and how green is it really?

Green tariffs. 100% renewable energy. Zero carbon electricity. As we highlighted in last week’s blog on time-of-use electricity tariffs, deciding on your electricity supplier and the best tariff for you is a complicated business. This is especially true if you care about being green.

So what is going on? Let’s start with the facts:

• The UK generated 46% of its electricity from renewable sources* in 2023, a new record! 

• 36% of electricity still came from fossil fuels. This was mostly natural gas, but a small percentage of power was from coal. The rest was from nuclear power and imports.

• Peak winter demand was 48.3 GW in 2023, equivalent to 38 large nuclear power stations similar to Sizewell B or around 3,300 of the largest offshore wind turbines currently available. This compares to minimum summertime demand of around 14 GW, illustrating how much our demand varies.

Sources: DESNZ, DUKES 2024; National Grid ESO

With the above in mind, how are some energy suppliers able to offer “100% green electricity” and other variants on that claim? They do this by purchasing sufficient quantities of renewable or zero carbon electricity over the year to cover their total sales. Most suppliers offering a full green energy product will source at least some of this from long-term power purchase contracts that they have directly with generators.

However, most suppliers do not have sufficient contracts in place to fully cover their sales, so they make up the difference by purchasing certificates. These are called Renewable Energy Guarantees of Origin, or REGOs.

Suppliers offering green electricity made up partially or fully with REGOs are technically providing you with green electrons over the year, but the overall effect is to make the energy mix of non-green suppliers more dirty. You can see this in the table below. Because several large energy suppliers get 100% of their electricity from renewables, other suppliers have a higher percentage of coal and gas than the UK average.

There is only one supplier that has contracts in place for 100% of the electricity they sell: Good Energy. Their business model is based on purchasing power from lots of smaller suppliers, including individual homes and farms with solar and other renewable resources. Others, such as Octopus Energy and Ecotricity, are big investors in renewable energy projects, but have not (yet) sourced sufficient quantities to cover their total sales.

There are some other quirks to be aware of:

• One of the legacy suppliers (OVO, who were formed out of Scottish & Southern Energy) offer a green tariff, but not as their only or main product;

• Another supplier (EDF) bills themselves as being “Britain’s biggest generator of zero carbon electricity” due to the high percentage of nuclear power (which emits no carbon dioxide on generation) in their energy mix.

So bringing all this together, who are the greenest energy suppliers? In our view, this is a somewhat subjective question, since it would not be possible for the large suppliers to instantly mimic the excellent credentials of Good Energy: there is currently insufficient renewable energy capacity available for every supplier to become 100% green!

We believe that the greenest suppliers are those with the deepest commitments - backed up by real investment - to building new renewable energy capacity and to incorporating it into the national grid. It is relatively easy to buy REGOs, but on its own this does not increase renewable energy investment.

In our view, the following suppliers meet this definition:

• Ecotricity: one of the earliest green energy suppliers in the UK, and a big investor in onshore wind - and also “green gas”

• EDF: one of the original “big five” energy suppliers, and now the second largest in the UK - they are making big, Government-backed investments in nuclear power, but also in renewable energy

• Good Energy: another early entrant to the green energy market, and increasingly focused on smaller generators including customers selling back their excess power

• Octopus Energy: entered the market as a green energy supplier in 2015, and has become the largest supplier in the UK as of 2024, but they are also a big investor through their generation company in large-scale renewable energy projects including solar and offshore wind

One final point: the final frontier for green energy is ensuring that supply matches demand in real-time, supported by storage. Good Energy claims to achieve this 90% of the time, which is impressive. However, the next big challenge is achieving this for all consumers - starting with those who have already signed up to a green tariff. We will come back to what this might look like in future articles.

* Around 11% of UK generation is from the burning of biomass in conventional power stations, which some question as to whether it is truly green