NB This text first appeared in Ethical Consumer 95, July/August 2005

There was no obligation before 1st April for energy suppliers to buy green electricity, so customers signing up to a green tariff were increasing the demand for renewables. Since April 1st 2002, suppliers have been required by the government to ensure that an increasing proportion of the electricity they sell comes from renewable energy sources. This is currently 4.9% and will rise annually until it reaches 15% in 2015 (currently the level is set to remain at 15% until 2027).(1)

Takeup of green tariffs have been disappointingly low (less than 1% of the total market) so with the introduction of the obligation there is now much more demand for renewables than supply. This was the intention of the government in introducing the obligation; to create increased prices for green power and thus stimulate increased investment in new renewable capacity.

However these new regulations mean that companies which promise to match green tariff customers demand by buying green electricity do not necessarily create additional demand, as they are already obligated to buy 4.9 of their electricity from renewable sources. With the exception of small niche green electricity suppliers, this will invariably exceed the proportion demanded by their green tariff customers. So some consumers may be duped into thinking they are making a difference by signing up to a green tariff when in fact the electricity company is obliged to supply the renewable energy customers are supposedly buying regardless of whether customers choose the green tariff or not. (1)

ROCs
To check that the companies are meeting the 4.9% target, for each unit of renewable energy that the power companies buy they receive a �Renewable Obligation Certificate� (ROC). If companies don�t match their required percentage they can buy ROCs from companies that exceed the required level. If the price of purchasing ROCs becomes too high, or there aren�t sufficient to meet demand, suppliers can pay a buy-out price to OFGEM (The Office of Gas and Electricity Markets), essentially a fine. This money is redistributed to companies who do comply. (1)

Even the small niche renewable energy suppliers, despite buying 100% green electricity to meet their customers� demand do not necessarily create additionality to the green market either if they sell their ROCs to other companies to help them meet their obligation. (1)

ROC-Retirement
Some companies offer tariffs where some of the ROCs generated in producing the green electricity supplied to their customers are retired and taken out of the market so that they can�t be sold to meet another company�s obligation. This creates additionality i.e. the proportion of green electricity supplied under these tariffs is in excess of the 4.9% required across the board by law.

The value of ROCs is currently high, so green suppliers are reluctant to retire 100% of the ROCs they generate. Setting up a new renewable supplier-generator company requires capital outlay and the money from ROC sales may be important in making these companies financially viable, at least in the preliminary stages. Green companies also argue that their tariffs would be too expensive for customers to afford if they retired 100% of their ROCs. (2)

Fund Based Tariffs
Some suppliers have developed products where contributions are made to a green fund. See the �fund� column in the product table 29. Contributions are deducted from a customer�s bill at a fixed rate or in the form of a premium. Suppliers can themselves contribute by match funding or as a separate donation. Rather than immediately affecting the market, funds can be used to amass capital to build future renewable supply capacity.

Funds can also provide grants for community or other off-grid renewable projects including energy efficiency, awareness raising and even land acquisition to mitigate the effects of climate change.

Funds can have a positive beneficial impact but measuring and comparing the extent of that impact is not easy. The table on page 29 gives brief details of the different fund based tariffs on offer.

Demand vs Supply
There is some debate within the green energy industry. Some companies, Good Energy being the main example, focus on creating demand, by selling 100% green energy to all of its customers and then retiring 10% of ROCs produced from the market.

Ecotricity on the other hand focusses on increasing supply, its new green energy tariff offers its customers only 10% green energy in the first year, 20% in the second and 30% in the third. Ecotricity does not retire ROCs with this tariff, instead it sells them and uses the money to invest in new renewable energy capacity. It plans to invest �7m in wind energy in 2005. Ecotricity argues that this is better because there is a shortage of ROCs i.e. not enough green energy is being produced so investing in capacity is more important than creating additional demand.

A balanced response is that both are valid practices and have a place in the market. Friends of the Earth favours ROC retirement as the best way of guaranteeing that customers create a higher demand for green electricity than is created by the government�s legal obligation, as they are the most transparent, easily auditable and effective proof of additionality.(3) Thus FoE would recommend any of the three green energy companies 100% green energy tariffs (see table) as they all include an element of ROC retirement. All three energy companies also invest in new renewable energy capacity.

Ofgem encourages green tariffs to retire ROCs. If there was a supplier or tariff offering 100% ROC retirement it would be certain to receive recommendation at ECRA.

Independent Verification
As this report shows, working out what the different green tariffs available mean in terms of actually increasing the amount of energy generated through renewables can be very confusing. An accreditation scheme would guarantee that consumers get what they expect and a simple rating system would enable consumers to make an informed decision about which tariff to choose.

The industry was formerly audited by The Energy Savings Trust under their Future Energy scheme funded by the DTI, until the funding ran out. Suppliers offered to put up the money but this raised the question of impartiality. Ofgem has proposed independent third party accreditation for green electricity tariffs, whereby suppliers will have contracts with independent auditors which give consumers confidence that they are getting what they pay for. Friends of the Earth are pushing for the government to set up such an accreditation scheme run by either a government agency or an external body and are calling for more transparency in the industry.

Alternatives
Friends of the Earth have changed their campaign strategy as a result of the introduction of the renewables obligation and the confusion it has caused within the green electricity market. Whilst they wouldn�t discourage anyone from signing up to any of our Best Buys they are now concentrating on encouraging consumers to reduce their energy consumption and consider investing in their own micro-renewables where possible.

A company not listed on the table is Utilita, not strictly speaking a green electricity company as its focus is on energy reduction rather than supplying renewable energy but given the confusion surrounding green tariffs, some customers could choose this option instead. Once signed up Utilita will conduct a survey of your home to ascertain the best ways for you to save energy. The company then allows customers to gain credits with which they can purchase energy saving devices for the home e.g. low energy bulbs or loft insulation, donate money to charity or offset your carbon emissions. You can also opt to spend your credits on sourcing your electricity from renewables. Utilita is an independent company. For more information call Utilita on 0845 450 4357.

Equipower is another different kind of tariff from a company supplied by Scottish & Southern Energy. It is not marketed as a green plan but as a �fair trade� one where all consumers pay the same unit rate. For information call Equipower on 0845 456 0170.

Company in descending order of ethical record	Parent Company	Ethiscore	Percentage from renewables	ROC retirement	Investment in renewables	Fund	Buy Back?*	FoE recommended?
Good Energy	Monckton Group	14	100%	10%	100% of investment funds	No	Yes	Yes
Green Energy 10	Green Energy (UK) plc	14	100%	6.8% from renewables invested in by the company	50% of profits invested in renewables	No	Yes	No, not 100% green electricity
Green Energy 100	Green Energy (UK) plc	14	100%	6.8% from renewables invested in by the company	50% of profits invested in renewable	No	Yes	Yes
Ecotricity Old Tariff	Nexgen Group	14	100%	11%	Increases in customer numbers used to secure new investment in windfarms	No	Yes	Yes
Ecotricity New Tariff	Nexgen Group	14	100%	No (1)	Increases in customer numbers used to secure new investment in windfarms	No	Yes	No, not 100% green electricity
Eco Energy	Viridian/Northern Ireland Electricity	12.5	100%	N/A	No	No	No	Yes
RSPB Energy	Scottish and Southern	12	100%	10%	5% pa invested in renewables	Yes (2)	Yes	No, parent company recently bought 2 coal-fired power stations
Green Energy Fund	Scottish Power	11	4.9% legal requirement	No	5.8%	Yes (3)	No	No, not 100% green electricity
Green Energy H20	Scottish Power	11	100%	N/A	5.8%	No	No	No, not regarded by the government as new green electricity
Juice, NPower	RWE	9	100%	No	'Modest'	Yes (4)	Yes	No, no ROC retirement
Green Energy (London Energy/SWEB)	EDF	8.5	100%	No	'Modest'	Yes (5)	Yes	No, no ROC retirement
Seeboard, Go Green	EDF	8.5	4.9% legal requirement	No	'Modest'	Yes (6)	Yes	No, no ROC retirement
Green Plan, Powergen	E.ON	7.5	100%	Yes from small scale eligible renewables	.5%	Yes (7)	No	No, due to ownership of coal fired power stations

Notes on table
* Buy Back = whether the company will buy back electricity from microgenerators.
1 Increasing to 20% in second year and 30% in third year.
2 £30 per customer in first year, £5 pa after that put into fund for environmental projects
3 Contributes to Green Energy trust which has donated £320,000 to over 40 small-scale UK renewable projects
4 Invested in cutting edge renewable technologies (up to £500,000/annum)
5 £13.20/customer pa into a fund and matched by the company
6 Fund will match £12.60/customer to develop future renewable energy sources including wind, wave, solar, small-scale hydro, biogas and landfill gas.
7 Additional new renewable generation projects in communities, also an environmental fund

Best Buys N.B. the companies listed below were the Best Buys as of June 2005.
As our ratings are constantly updated, it is possible that these companies will not always come out top on the Ethiscore table.
Ecotricity (01453 756111), Good Energy (01249 766090) and Green Energy (0845 456 9550) are all Best Buys. Eco Energy (0845 745 5455) is also recommended for those in Northern Ireland.

References 1 www.foe.org.uk, viewed on 16/05/05 NB this site is due to be taken offline soon due to a change in FoE policy. 2 ENDS Report 317, June 2001, pp 25-26 3 Telephone conversation with Friends of the Earth Climate Team Campaigner Katie Elliot 28/04/05 4 Telephone conversation with Ed Reed, Energywatch, 28/04/05