How to… select a green energy tariff

There is a wealth of green energy tariffs now available to businesses. Amy Sims explains how to pick out the wood from the trees

However environmentally friendly your business is, or aspires to be, you still need energy to operate. This is typically in the form of electricity and gas, which provide you with power and heat.

Electricity supply is the largest single source of carbon emissions in the UK, so if you are looking to reduce your company's carbon footprint, one obvious way of doing this is to "de-carbonise" your electricity supply. This means increasing the proportion that comes from renewable sources, as well as reducing the amount of it you use in the first place, of course.

You can now negotiate with energy suppliers who frequently offer a special tariff for "greener" electricity. But how can you be sure you know that the electricity you are buying is greener than the average when you can't see it?

The answer to this question is very complicated, and you need to be very careful that you are getting what you think you are getting before signing up to any green tariff.

Unfortunately, like so many other services recently marketed as "green", many of these tariffs are quite a few shades lighter than Kermit. But there are also some good peas in the pod – you just have to know what you’re looking for.

The first rule of selecting a green tariff is to be sure to talk to a few different energy suppliers, tell them what you want and find out what the cost of their electricity is per kWh. Also remember that, as businesses, you have the right to negotiate individual contracts with suppliers, unlike domestic consumers.

The second step is to ask the supplier what proportion of the electricity is renewable, and what proportion of that is over and above the amount they are already required to supply by law.

Electricity suppliers are legally required to source a small but rising proportion (currently about seven per cent) of the electricity they supply from renewable sources. We are all paying the extra cost of this through our bills but unfortunately some suppliers offering a "green" supply are simply selling you energy they are already required to generate by law. As a result, if you want your green tariff to be genuinely contributing to an increase in the UK's renewables capacity, which is surely the point of selecting one in the first place, you need to make sure that the energy comes from renewables capacity that goes beyond the seven per cent obligation.

Ask to see your supplier's "Fuel Mix Disclosure" chart, which should show you this information graphically, both for the tariff they are offering you and for their overall supply.

Next you need to ask suppliers how you can be sure that what they are saying is true. Always ask them for proof that the proportion of electricity they describe as renewable really is green.

There are a number of ways they can provide you with independent proof of this. First, the renewable part of the electricity should be backed by so-called "Levy Exemption Certificates" (LECs). Electricity from renewable sources is exempt from the Climate Change Levy (CCL), an energy tax added to the cost of electricity at a rate of 0.46 pence per kWh. This can add upto 10 per cent to your bill, so not having to pay it is already a bonus. You will need the LECs to claim the exemption from levy though, so make sure you get them. However, electricity from Combined Heat and Power (CHP) is also exempt from the CCL, so if you want carbon free energy make sure your LECs are from renewable electricity, not CHP.

Second, renewable electricity should be backed by so-called "Renewable Electricity Guarantees of Origin" (REGOs). These are certificates that suppliers can apply for to show that the electricity is really renewable. If they provide customers with the REGOs then they can't provide them to anyone else and this gives you assurance that the same renewable electricity is not being sold to more than one customer.

Lastly, if the proportion of electricity from renewable sources is more than seven per cent, then the amount over and above seven per cent should be backed by Renewable Obligation Certificates (ROCs). ROCs are electronic certificates issued by Ofgem and must be used by suppliers to show they are complying with the legal obligation to supply at least seven per cent of their electricity from renewable sources.

As you can tell, the legislation and science behind renewable electricity is quite detailed, and continues to develop. Fortunately, there are plenty of places you can go for help, including Defra, Energywatch and Carbon Trust, but the basic rule is the same mantra of caveat emptor that should be applied to any purchasing decision. The onus is on the company buying green energy to make sure it is really getting what it is paying for.

Although, for a more certain way of generating renewable electricity, your business may want to explore installing renewable energy technology and producing its own!

Amy Sims is communications manager at environmental charity Global Action Plan