Two reasons why you might not want to switch to a green electricity supplier

Miles Brignall castigated us in Guardian over the weekend for not switching to green electricity, pointing out that electricity generation is the single biggest source of greenhouse gases yet only 350,000 homes (1.3%) are on a green tariff. There are two reasons why a rational consumer might decide not to switch at the present time:

  1. It is an expensive way to reduce emissions. In Balance calculates the average cost to consumers of avoiding one metric ton of greenhouse gas emissions by switching to a green electricity supplier to be £32. This is quite high. As a crude comparison, Climate Care sells offsets for £7.50 per ton. Most of the things you can do to improve your home’s energy efficiency will cover their costs very quickly.
  2. It might not do anything anyway. Although there are only 1.3% of households on green tariffs, 4.6% of electricity generated in the UK comes from renewable sources. Some of the difference is sold to customers on standard tariffs (with the rest being sold to businesses). In many cases, when you switch to a green tariff, the retailer simply repackages the mix of electricity that it already generates or purchases on the wholesale market. Generation, and hence greenhouse gas emission, is not affected at all.

In Balance talked to some of the main suppliers on the second point. EDF Energy, which supplies over five million households, told In Balance that “renewable supply offerings have only a modest impact on overall new renewable capacity. The main driver for new renewable capacity is the Renewable Obligation which places an obligation on electricity suppliers to purchase a growing percentage share of renewable electricity or pay a buy out price.”

Scottish Power, with a retail base of around 3.5 million households, said that “when a customer signs up to Green Energy H20 [Scottish Power’s most popular green tariff], we align the electricity that they consume with renewable power that we are already generating”.

(Note – the Renewables Obligation currently requires suppliers to source 7.9% of electricity that their customers use from renewable generators or pay a fine of £34.30 per megawatt hour to Ofgem, which is redistributed to suppliers according to the volume of renewable electricity that each supplied. The gap between the obligation and the proportion that is actually generated, which grows every year, demonstrates that suppliers often prefer to pay the fine than invest in new renewable capacity.)

Consumers should think carefully about where their money is going when they decide to switch suppliers. Many new green tariffs spend a proportion of the premium on offsets or a fund that is invested in renewable projects. It would be prudent to decide for ourselves how this money is spent, rather than handing it over to the utilities.

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