Green energy contracts - a worthwhile business endeavour or just green washing?

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Apollo Energy urges businesses to investigate the benefits of switching to a renewable energy supply

At Apollo Energy we're finding it's now increasingly common for energy suppliers to offer both green and brown business energy contracts. As utility management consultants, when we broker energy contracts for our clients we can specify in the tender document if we want green energy options from the energy suppliers, as by default many will still simply offer brown energy.

For those of you not familiar with these terms; brown energy is provided by traditional power station technologies such as coal or gas, while green energy typically comes from renewable sources such as wind or hydro. The source mix for green energy does vary a lot, some suppliers offer 100 per cent renewable, however a lot of green energy also comes from good quality combined heat and power (CHP) plants.

The cost, or uplift, for green energy and even how it appears on your bill depends upon the supplier. Generally suppliers will offer a cost neutral green option; cost neutral because if your business is liable for Climate Change Levy (CCL) but uses green energy then you do not have to pay the CCL premium (currently 0.509p/kWh). So if your energy supplier applies a green energy uplift of 0.509p/kWh you are essentially getting green energy at no additional cost.

That said, some suppliers are also offering discounted green energy for half-hourly metered businesses, meaning you can pay less for green sourced energy than you would for your 'normal' brown energy.

However, as suppliers invoice green contracts differently, it pays to have an impartial utility management consultant such as Apollo Energy working with you. For instance, one supplier will charge a green premium (sometimes called CCL equivalent), but others build it into the unit rate. This will make contracts look better than they actually are and often require further explanation to ensure a fair comparison is made.

Once you agree to a green energy contract, your supplier will probably send out a certificate confirming you are receiving green energy which your business can then display to demonstrate your environmental credentials to your employees, suppliers and customers.

Admittedly, some clients will simply choose the cheapest contract available to them at the time of their renewals and although sometimes this is green, other times it's a brown energy contract. Other customers will specify that they want green energy from the outset - so we will work to get it at the best possible price for them, ideally cost neutral.

It is also worth bearing in mind that green energy does not mix well with CCL exemptions. Businesses with Climate Change Agreements (CCAs) must inform HMRC if they accept a renewable orgreen energy contract by submitting a new PP11/10 to their supplier showing 0 per cent relief entitlement. So depending on the size of supply and current exemption it may be more cost effective to ‘stay brown'.

Furthermore, the cost saving element of green energy contracts depends heavily on the type of business or organisations signing the contract. For instance housing associations and commercial landlords may not benefit from ‘cost neutral' green contracts. Many of their sites may be charged the lower VAT rate and therefore not be liable for CCL due to the ‘de minimis' rule. So, paying a green premium on all electricity consumed will inevitably result in a higher overall expenditure even if it's at the same additional cost as CCL would have been. But the client may be willing to pay that premium for the kudos of a more environmentally friendly source for their electricity.

Ultimately the decision of whether a green energy contract is right for your business depends on your business ethics, current CCL status and utility procurement strategy. If your business wants to promote a more sustainable image, you don't have any CCAs so pay CCL and your energy broker can negotiate with suppliers to get you green energy cost neutral then go for it and let everyone know it's just another step you've taken to be a 'green business'.

Apollo Energy Ltd is an energy brokerage, with directors who have combined experience of more than 50 years in the utility industry. We offer a "one stop shop" for all our clients' utility issues including electricity, gas, water and the CRC Energy Efficiency Scheme. Please visit www.apolloenergy.co.uk to find out more about what we can do for your business.

This sponsored content was provided by Apollo Energy LTD.

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