Ethical Energy Suppliers

The 2021 Energy Crisis - suppliers collapsing

A number of energy suppliers are going bust in 2021 because they are making a net loss - costs have climbed quicker than the regulator’s cap on energy tariff prices. The companies were unable to weather the surge in the cost of wholesale gas without passing it on to their customers which the regulator's cap prevents them from doing.

Several of the companies that were in this guide have therefore gone out of business:

• People's Energy - supply taken over by British Gas
• PFP Energy - supply taken over by British Gas
• Bulb - gone into 'special administration', and at the time was the 7th largest supplier with 1.7m customers, and a relatively high-scorer in the table.

Best Buy Green Energy UK changed its name to GEUK because people were confusing it with another supplier that had gone bust.

UK renewable energy targets

The UK is taking steps in the right direction on electricity: about 37% of UK electricity now comes from renewable energy, with onshore and offshore wind generation rising by 7% and 20% respectively since 2018.

But this looks better than it is, because we don’t just need to decarbonise 100% of our electricity. If we’re going to start using electricity for heating and transport, we need to decarbonise 200% of it.

During 2019, UK grid electricity came from the following sources:

We consumers need to take the lead 

People have been producing proposals as to how to decarbonise for many years now. The main official body that advises the government, the Climate Change Committee (CCC), produced a report in 2019 that calculated that it was possible to do it at a “manageable” cost of 1-2% of GDP each year.

However we are missing nearly all our targets, and it really doesn’t look like a serious attempt is being made to rectify that. Given what we have committed to do, the measures in place to do it are profoundly inadequate.

Consumers thus need to take more of the lead. Much electricity decarbonisation needs to be done at the national level – offshore wind is the UK’s really big renewable resource - but you can help by getting solar PV panels, and to an extent supporting companies that are doing more to help build renewables. 

Green and renewable energy suppliers 

The UK energy market has changed a lot in the last few years. Many of the small energy companies have either gone bust or been bought out by larger ones.

This includes two of our previous Best Buys. Robin Hood was sold to British Gas, and Bristol Energy was sold to Together Energy, resulting in falling scores and the loss of their best-buy status.

Meanwhile, the number of tariffs claiming renewable electricity credentials has boomed, increasing from 9% to over 50% in just four years. The largest energy companies in the UK now offer green tariffs for domestic and/or small business customers. Many smaller companies specialising in ‘green’ energy have entered the market and seen huge growth in recent years.

However, what renewable tariffs actually do is complex. They only have a small effect, but some are better than others.

Understanding green energy tariffs 

We have written before about the issues with ‘green tariffs’, because they operate on so many levels of detachment from physical reality.

Not only does everyone get the same physical electricity from the same grid, but the way the regulatory system is set up means that we all pay very similar renewable subsidies through our bills, whatever tariff we are on.

This makes it hard to trace a causal line between buying a green tariff, even from a specific company, and any more money going to building renewables.

We think that there are companies that are doing a bit more, which are worth supporting, as detailed below, but we suggest that it isn’t really worth thinking in terms of individual tariffs. Ultimately, which tariff you are on is just a matter of someone having shuffled some numbers around on a computer screen.

The problem with REGOs

One confusing aspect of the system is REGOs. Each bit of renewable electricity created generates a certificate called a REGO, which can then be sold separately from it.

Legally, in order to call its electricity ‘100% renewable’, a company just has to buy an equivalent amount of REGOs. It doesn’t have to produce, or even buy, any renewable electricity itself.

The idea behind REGOs is that selling them should provide a small subsidy to renewable developers, although renewables get other larger subsidies as well.

However, about 37% of UK electricity now comes from renewables. This means that there is a large pool of REGOs – far more than anyone wants, and even though the big companies have started doing green tariffs again, prices are still very low, at around 30p-50p per certificate. This equates to only around 1% of the wholesale cost of electricity, so the subsidy they supply is extremely minimal.

This isn’t about to change either - domestic customers only account for about 1/3 of the electricity market, so even if 100% of domestic customers were on green tariffs, it would still account for less than proportion of the grid that is powered by renewables.

We therefore don’t consider that buying REGOs is a meaningful way to support renewable energy development.

Green energy tariffs and Carbon offsetting

Many ‘green’ tariffs offer tree planting as part of your package, while others claim to provide ‘carbon neutral gas’ through offsetting emissions. However, many forms of offsetting – including planting trees – are deeply controversial and often ineffective.

Trees do absorb carbon slowly while growing. However, once at maximum size they only sit and hold it while the forest remains there. If the land is ever cleared the carbon is released back into the atmosphere.

Forestry offsetting projects have also been linked to human rights abuses.

People have been evicted to make way for tree planting, violating indigenous rights.

In 2019, Shell was criticised for the carbon offsetting scheme it used as part of its emissions reduction plan. Six NGOs, including Justiça Ambiental in Mozambique and Amigos da Terra África do Sul, signed an open letter stating: “solving the climate crisis requires deep, urgent and immediate emissions cuts, which means that dirty and harmful energy must be held at source and cannot simply be ‘compensated’ [for] in other parts of the world.”

In fact, investing in renewables is one of a few forms of ‘offset’ that works. Energy companies would do much more for the planet if they focused on this, rather than planting trees.

If you do decide to look at a company that claims to have carbon-neutral gas or to offset some of your non-renewable energy, we’d advise checking carefully what form of offsetting they use.

We discuss carbon offsetting in more detail here.

Instead of green tariffs: making a meaningful difference

There are two things that companies can do which we do consider makes a meaningful difference – building renewables themselves or buying renewable electricity through ‘power purchase agreements’ (PPAs), which give generators security.

They can also – on the negative side- commit to not building any more fossil fuelled plants.

Researchers felt that to make a meaningful contribution to the UK’s environmental agenda, companies selling electricity tariffs as ‘green’ should have a commitment to not build any further fossil-fuelled plant, and be either building renewables or buying sufficient renewable electricity through purchasing PPAs to cover 100% of customers’ electricity use.

We awarded product sustainability marks to the companies that did this. Those that passed were Ecotricity, Good Energy and Green Energy UK. Other companies lost half a mark under Climate Change for meaningless environmental claims.

Ofgem appears to be in agreement with us. It has issued Ecotricity, Good Energy and Green Energy UK with a permanent exemption to the bill price cap, on the basis that “by consumers being on the tariff, support is given to renewables to an extent that is materially greater than that which is brought about as result of subsidies, obligations or other mandatory mechanisms.”

Some other companies do purchase some electricity through PPAs. Ovo purchases enough to cover 20% of its energy customers, Bulb purchases "some", British gas and EDF purchase enough to cover their green tariff customers.

Other companies are doing varied things. Octopus is a major investor in renewables, and it does own a few of its own. But it is also 20% owned by Origin Energy, which is the largest owner of natural gas-fired power stations in Australia, and we could find no commitment not to build more fossil fuelled plant.

Many of the big companies are building renewables, For example, EDF UK Renewables has 36 wind farms in operation with many more in development.

However, we did not make them best buys because we could not find a public commitment from any of them not to build any more fossil fuelled plant.

The worst of the bunch, Shell Energy, offers 100% renewable energy backed by REGOs, while continuing to funnel 90% of its capital into fossil fuels. Shell and RWE (15% owner of E.ON) are both being sued by those on the frontline of climate breakdown.

The energy mix of the different energy providers

In our ratings scoretable, companies lost half a mark under Climate Change if their fuel mix was over 5% from coal, or less than the national average from renewables (37%). The table below shows the fuel mix of different energy suppliers.

However, the important thing is not whether a company can legally claim to be providing 100% renewable energy, but whether it actually is making any meaningful contribution to renewable capacity building for all energy supplied, as shown by the colour coding, with green being best. Companies in orange were marked down for making meaningless environmental claims.

Carbon management and reporting

Companies automatically received a worst rating if they owned fossil fuel-fired power stations and had no published commitment not to build any new ones (we didn't find such a commitment from any of the companies that own fossil fuel-fired power stations).

Companies received a best rating if their entire model is geared towards energy transition - if they are primarily supporting new sources of green energy.

For all other companies, we rated them as usual on their carbon management and reporting.

Lobbying against climate action

While an increasing number of companies are putting on a public show of supporting renewables, some also continue to be involved in lobbying against climate action in private.

EDF and Shell have both been criticised for their membership of industry lobby groups that are known to have opposed robust climate measures. Shell was found to be a member of eight trade organisations opposing action just in Australia and the USA. Both companies lost a full mark under Political Activities.

Switching Tariffs

If you want to switch to a more ethical energy supplier, Citizens Advice has this step-by-step guide to switching energy suppliers.

How green is nuclear energy?

Nuclear energy does not emit greenhouse gases during power generation. Yet, it remains controversial. Nuclear power relies on uranium, a non-renewable fuel source obtained from mining. It produces radioactive waste, which must be stored carefully underground.

There are already 5,600 canisters of radioactive waste stored in the UK. It is unclear what the environmental impacts of storing radioactive waste will be in the future.

Andrew Blowers, author of The Legacy of Nuclear Power and a former member of the Committee on Radioactive Waste Management, set up to advise the British government on how and where to store nuclear waste, said:

“There is no reliable method to warn future generations about the existence of nuclear waste dumps. The nuclear legacy stretches into the far future; it poses a risk to environments and human health for periods which extend well beyond our comprehension.”

There are also worries about the connection to nuclear weapons. If lots more countries are going to get nuclear technology in order to decarbonise, might that lead to nuclear weapons proliferation?

In recent years, support for nuclear power has declined significantly around the world. The lower cost of renewables, and a better understanding of how abundant renewables supply is, has meant that the downsides to nuclear are now more easily avoided.

Energy prices and fuel poverty

Energy prices have risen considerably over the last two decades. One in ten households in England and Wales are now in fuel poverty, meaning that if they heat their homes adequately, they will be left below the poverty line.

In Scotland this rises to one in four. It makes the UK one of the worst countries for fuel poverty in all of Western Europe. Over thirty people in the UK die every day from living in a cold home.

Government action on energy prices

Since 2017, the government has introduced a series of energy price caps, limiting the amount that suppliers can charge for those on default or standard variable tariffs or prepayment meters. However, much more needs to be done.

One of the key government measures to tackle high consumer energy prices is the reduced VAT rate on domestic electricity and gas, at 5% rather than the normal 20%. But critics say the tax break essentially acts as an electricity subsidy, encouraging higher energy use, and since gas still makes up 41% of the grid, a lot of it is going to fossil fuels.”

Libby Peake, Head of resource policy at Green Alliance says that the tax break “maintains the high-carbon status quo and does little to help those in fuel poverty,” and argues that the government should instead ring-fence the VAT from gas sales, to be “redistributed to low income homes and used to install energy efficiency measures and low-carbon heating systems.”

Avoiding high energy prices

From a consumer perspective, switching energy providers frequently can save money. Providers often entice customers through cheap rates that usually last for one year, but then automatically switch them onto a higher tariff, once the initial contract is over.

Citizens Advice has a price comparison tool to check whether you could be getting cheaper energy.

Low-income pensioners or low income households also qualify for government support known as the Warm Home Discount, which is currently £140 off your bill each winter. The following suppliers are part of the scheme: British Gas, Bulb, Coop Energy, EDF Energy, Npower, Octopus, OVO, Scottish Power, Shell Energy, SSE, Utilita and Utility Warehouse. Ecotricity and GEUK support it for the ‘core’ low-income pensioner group.

Energy prices and renewables

So why have renewables not yet driven consumer prices down?

Renewable generation is now cheaper than fossil fuel. However, renewables still only account for, on average, 37% of our grid makeup, and fossil fuel prices are expected to keep rising.

Unfortunately, “Whichever plant was required to meet the last megawatt of demand is the price-setting technology,” according to Tom Edwards, senior modeler for Cornwall Insight. While the UK grid still relies heavily on gas, it is often this that will set the price.

In the long run, turning to renewables instead could cut consumer prices. But in the meantime, the government needs to provide support for up-front transition costs, in a way that supports those on the lowest income.

Tariffs for green homes

Those with solar panels, electric vehicles or heat pumps will have specific energy needs and may want different tariffs for these.

Heat pumps, batteries and electric vehicles

Smart tariffs can be good for those with large, flexible electricity needs – for example using electric vehicles, batteries or heat pumps. They essentially offer two energy prices: a higher price when demand is high (and more energy is therefore being sourced from fossil fuel power stations) and a lower one when demand is low (and a greater proportion of the energy is therefore sourced from renewables).

Households can decide – or even pre-programme tech – to charge a battery or car or turn on a heat pump when the energy price drops below a certain threshold. Some tariffs even pay consumers to use excess energy when demand drops below supply.

Jonathan Atkinson from Carbon Co-op says: “Heat pump owners can benefit, but they need to be able to integrate and automate their heat pump, and they need to be able to accept the loss of heat that this might lead to.”

Sarah Hughes, who owns a heat pump told us that she automates her energy use using Homely, which checks the provider’s smart energy prices and predicts temperatures to decide when to use the heat pump to heat the tanks and house: “It’s grown from a PhD project over the last couple of years and it’s been working really well for us.”

We have more information on smart tariffs available here.

Home generators

For those generating at home, the Smart Export Guarantee scheme helps subsidise home generation. The government’s less-generous successor to the Feed-In Tariff scheme, it requires energy suppliers with over 150,000 domestic customers to pay home-generators for any excess energy they provide to the grid. The average sized domestic system is likely to be worth £50-100 from the scheme each year, going some way to subsidising upfront generation costs.

Some of our Best Buy and recommended companies offer special tariffs designed for the needs of those with green home energy needs:

Smart meters

Smart meters provide both you and your supplier with information on how much gas and electricity you’re using.

They replace your existing gas or electricity meters and send automatic updates to your provider, so that your bills reflect actual energy use. It also helps you control your energy use and make cuts.

And it is hoped that they will, in the future, be able to turn appliances on and off in response to the demand and supply of electricity, to help deal with renewables that it isn’t possible to turn up and down.

Energy providers are required to install smart meters in businesses and homes, as part of the government’s ‘smart grid’ plan. The initial deadline for installation in all small businesses and homes was the end of 2020, but (partly due to the pandemic) this has been delayed until mid-2021.

If you haven’t yet had a smart meter installed, you should be contacted by your supplier over the coming months and offered one for free. You can also request one from your provider.

Several providers in this guide lost a half mark under Climate Change, after being fined by the government for failing to meet smart meter installation targets.