Green tariffs have become increasingly popular as they offer an easy and seemingly effective way to support renewable energy. Marketed as the environmentally conscious choice, they promise customers 100% renewable energy.
In this article, we explain what green tariffs are and explore some of their limitations.
What is a green tariff?
The setup of green tariffs is typically straightforward, offering consumers the satisfaction of making an environmentally conscious choice without substantial effort or cost.
In the UK, green tariffs operate on the basis of Renewable Energy Guarantees of Origin (REGOs) (RECs in the US or GOs in Europe). Utilities can supply standard electricity to their customers and brand it as renewable electricity by separately purchasing an equivalent amount of REGOs.
Every REGO is issued alongside a MWh of renewable electricity generated, therefore giving the perception that by subscribing to a green tariff, you are consuming ‘100% renewable electricity’.
The reality of Green Tariffs:
This concept seems straightforward and can be perceived as being an effective way of financing renewable energy projects.
However, the difference between ‘100% renewable electricity’ and ‘100% backed renewable electricity’ often gets lost in translation. With green tariffs, the actual energy mix on the grid remains unchanged, and customers are not necessarily directly consuming renewable energy.
This misconception was brought into focus during recent geopolitical instabilities that led to increased global gas prices, causing electricity costs to soar – even for those on green tariffs.
REGOs are often sourced during periods of surplus production and can be obtained at a very low cost. Consequently, these tariffs provide limited support to renewable energy production and don’t reflect the real cost of a 100% renewable energy supply.
The lack of transparency in green tariffs has led to issues of greenwashing as utilities can market their energy as ‘green’ without significant environmental benefits.
What are your alternatives?
Onsite generation and Corporate Power Purchase Agreements (CPPAs) offer viable, transparent alternatives that deliver tangible benefits. We recently discussed Offtake Contracts, another effective way of reducing your environmental impact while hiding your electricity costs.
At PowerMarket, we are committed to providing clear, reliable energy solutions. We can help you transition to solar and explore offtake contracts and CPPAs, ensuring you make the most of your renewable energy investments.
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