Households on green energy tariffs who assumed they would be unaffected by soaring gas prices have been shocked to be told their electricity bills are rising, despite them being signed up to a renewable supply.
Suzanne Taylor has been told that her fixed daytime tariff with the renewable energy supplier So will double from 16p to 32p a unit if she renews it this month. “So is blaming the current energy crisis,” she says. “Its website says that 100% of its electricity is supplied from renewable sources so why would it be affected by gas prices?”
More than half of new energy tariffs are now marketed as “green” and 9 million customers have switched to deals that promise supplies from renewable sources.
However, many are unaware that because providers rely on the National Grid to distribute electricity, they can’t control its source. Energy is pooled in the grid, and when demand outstrips the availability of renewables, the grid tops up the supply with gas.
On average only about a third of the electricity from the grid is from renewable sources, while more than a third is powered by natural gas. The rest comes from other sources, such as nuclear.
Companies offering green tariffs typically invest the revenue in renewable energy sources, covering the equivalent of the kilowatt hours consumed by their customers.
However, these prices are also affected by the cost of gas because providers of renewables raise or lower their charges in line with the wider energy market in which the fossil fuel remains a key driver.
So Energy, which specialises in offering renewable tariffs, tells Guardian Money that its electricity prices are dictated by the cost of gas, but that it has advance purchase agreements with a range of renewable power plants to increase green energy generation. It also pays the plants a sum that reflects each megawatt hour of energy consumed by its customers.
“In this way, we are using the existing grid and slowly replacing its input from non-renewable to renewable sources, which is the best we can do without building a rival National Grid,” it says.
Another specialist provider, Good Energy, says that although it backed all of the power it supplied with electricity bought from a community of more than 1,900 generators, directly investing in the growth of renewables, it was still affected by wholesale prices.
“The prices we pay generators are influenced by the wider market but also … we still have to trade wholesale power. We match customer demand with renewable power as much of the time as possible, and of course 100% across a year, but when there are shortfalls our trading team have to look to the wholesale market,” it says.
Campaigners have warned that people could be misled by sales talk that fails to reflect the complexity of the green energy market.
“Essentially, you should consider your electricity to have the same carbon footprint as everyone else’s no matter what tariff you are on,” says Josie Wexler, a researcher at Ethical Consumer. “Ofgem [the energy regulator] should be forcing companies to be much more honest about what ‘100% renewable’ really means.”
Wexler says that the specialist providers have the strongest case for saying that their tariffs are fully renewable, because they are investing in their own plants or have purchase agreements with clean energy producers.
These agreements guarantee the purchase of energy to match all or most of their customers’ consumption. Ecotricity and So Energy parent ESB are constructing their own sources. Good Energy and Green Energy have power purchase agreements covering 100% of their customers’ electricity use. Wexler adds that Ecotricity also avoids the fossil fuel market.
As customers are finding to their cost, some of the specialists are not covered by Ofgem’s price cap on variable tariffs. Ecotricity, Good Energy and Green Energy have a permanent exemption because their variable deals are ones that customers have chosen to be on, and because they support the generation of renewable energy.
While the price cap means a typical unit price for electricity of 21p a kWh, Good Energy and Ecotricity’s are set are about 34p (see box). Taylor’s company, So, is price capped, so its variable tariff will be cheaper than the new fixed rate price it has quoted her.
Ofgem says that while gas remains a staple of the electricity market it will affect green tariffs, and suppliers must not make unfounded or confusing claims about their energy sources.
“As we transition to net zero, it is vital consumers can trust the renewable energy claims made by suppliers and that these are backed up by the appropriate evidence in order for them to make informed choices about their supply,” it says. “We expect all suppliers to comply with the rules on disclosing where they source their electricity from and will continue to monitor compliance, taking appropriate action where this isn’t the case.”
Taylor feels misled. “So Energy says very clearly that all its power is green,” she says. “The fact that suppliers have to use the National Grid may be true but it’s not clear to the consumer if you are not in the energy business.”
So Energy says it has links from its homepage to places where you can find this information, and has “always been transparent and clear” on how energy is supplied.
‘I’m so worried about price rises I’m considering moving out’
Kirsten Downer is a furious Ecotricity customer who feels very let down. In November the supplier increased the unit price of her economy 7 electricity by 29% and said her projected bill for the two-bed flat in south-east London that she shares with a lodger would be rising by £480 to an “unaffordable” £2,362 a year.
She is currently paying more than 35p for a daytime unit of electricity compared with the capped average of 24p/kWh. Her night-time rate is more than 16p against the 12.5p paid by neighbours on standard tariffs.
“I am so worried about these price hikes that I’m considering moving out of my home, where I’ve lived for 20 years,” she says. “My unit costs went up by 40% last autumn and my latest monthly usage was £311, compared to £90 a couple of years ago. All I read about is what will happen to those families currently protected by the Ofgem price cap when that is increased in April.
“But what about the consumers like me who did the right thing by taking out a green tariff but are now paying eye-watering sums as a result? No coverage has yet been given to the fact that we’re already suffering fuel poverty. I have tried to switch to a cheaper supplier but was told they were not taking on new customers – meaning I am stuck with these unaffordable bills.”
After the Guardian’s intervention, Octopus Energy has agreed to take over Downer’s supply from Ecotricity, which should bring her bills down significantly when she moves to its standard variable tariff, which is covered by the price cap.
An Ecotricity spokesperson says: “The price cap is expected to rise by about £700 in April – and this increase will close the gap on our tariffs to rival suppliers. Derogation enabled us to react to wholesale price movements before the rest of the market. We do not expect our prices to rise in April – but we can’t predict exactly what happens next due to the volatility in the wholesale energy market – and the fact the government has yet to reveal how much of the cost of supplier failures will be added back on to energy bills.”