How green business energy tariffs work

Green business energy tariffs guarantee that renewable or low-carbon electricity is supplied to British businesses.

There isn’t a separate green grid that exclusively supplies renewable power. Instead, wind farms share the same infrastructure as gas power stations, raising legitimate questions about how green tariffs can deliver exclusively renewable energy.

This article explains how green business energy tariffs are delivered and certified. We cover:

Sources of green energy – How green energy is generated in Britain.
Green energy distribution – How green energy is delivered.
Green energy certification – How green tariffs are guaranteed.

Sources of green energy

In a green business energy tariff, electricity is generated from renewable sources in Britain.

This section explains Britain’s main sources of renewable energy that feed into the national grid.

Wind power

UK wind farms contributed 29.4% to electricity generation in 2023. Windy conditions in the North Sea are highly favourable to offshore wind farms, and the new Labour government has lifted the ban on onshore wind farm development, which is the cheapest form of green energy.

Biomass energy

In 2023, the burning of wood pellets and biogas from anaerobic digestion plants contributed 5% to electricity generated in Britain. The Drax power station in Yorkshire is a converted coal power station that now runs on wood pellets and is the single biggest electricity generator on the national grid.

Solar power

In 2023 solar power contributed approximately 4% to Britain’s electricity generation. Solar farms are typically small-scale, with individual homes and businesses installing solar panels to generate green energy locally and feeding it back into the grid through the Smart Export Guarantee.

Hydroelectric power

Hydroelectric power contributed 1.5% to overall electricity generation. Despite this small contribution, hydroelectric power plays a key role in balancing supply and demand on the national grid through pumped hydro storage facilities.

Nuclear power

UK nuclear power plants contributed 20% of electricity generation in 2023. While nuclear power is not renewable, some suppliers include it in clean energy tariffs because nuclear power plants do not produce greenhouse gases.

Green energy distribution

The national grid in Britain is a centralised system that distributes electricity from renewable and non-renewable sources, connecting homes and businesses across the country.

This section explains how green energy suppliers use the national electricity grid to deliver renewable power.

Connections of renewables to the grid

The table below shows how the main sources of green electricity feed into Britain’s electricity distribution infrastructure.

Green Energy Source	Connection to the Grid	Description
Onshore Wind	Connected to regional distribution networks.	Onshore wind farms generate electricity, which is fed into local regional distribution networks where the power distribution is managed by the local distribution network operator.
Offshore Wind	Connected via offshore substations to undersea cables, linking to the national transmission network.	Offshore wind farms are located at sea and connected to the grid through offshore substations and undersea cables.
Solar Power	Connected through local inverters to regional distribution networks.	Solar power systems (e.g., solar farms) are connected to local regional distribution networks through schemes like the Smart Export Guarantee.
Nuclear	Connected directly to the high-voltage national transmission network.	Nuclear power stations generate large amounts of energy and feed it directly into the national transmission network.

Other non-renewable forms of electricity generation, such as gas power stations, also feed into this shared infrastructure.

Distribution to your business

Green business energy suppliers pay TNUoS and DUoS charges to use the national and regional electricity distribution networks to deliver electricity to individual commercial properties.

These charges are the same regardless of whether the electricity is generated from renewable or non-renewable sources.

Matching green purchases with your supply

In a renewable business electricity tariff, a green business energy supplier guarantees that an equivalent amount of renewable energy is added to the grid to match the consumption of individual customers.

The purchases made by your green energy supplier are either:

Long-term Power Purchase Agreements (PPAs) directly with renewable energy generators.
Purchases of renewable power on the wholesale market.

The power generated is certified as renewable using the REGO guarantee system.

Certification of green energy for businesses

Renewable Energy Guarantees of Origin (REGO) certificates are issued for each megawatt-hour of electricity generated by renewable sources.

When a business energy supplier purchases renewable electricity, they receive the associated REGO certificates.

The supplier records green energy consumption through meter readings of the business electricity meters installed at individual commercial properties.

When the consumption of customers on a green tariff is matched against a REGO certificate, the supplier retires the certificate so that it cannot be used by another consumer.

Retiring REGO certificates creates a transparent record, demonstrating that a green business energy supplier has met its renewable energy obligations to its green tariff customers.

Ofgem is the administrator of the REGO scheme in Britain.

Separate purchases of REGO certificates

A controversial aspect of the REGO certificate scheme is that renewable power generators can decouple and sell separately the electricity generated and the associated REGO certificates.

This system allows green business energy suppliers to purchase additional REGO certificates separately when required to match excess business energy consumption on their customers’ green tariffs.

Theoretically, this system allows a green business energy supplier to purchase electricity solely from non-renewable sources and then simply buy cheap REGO certificates on the open market.

The cost of green energy certificates

Drax business energy reports that a REGO certificate costs approximately £10 (equivalent to 1p/kWh).

When delivering a business energy tariff, the only verifiable difference compared to a standard tariff is the retirement of an equivalent amount of REGO certificates.

This additional cost explains why business electricity rates on a green tariff are slightly more expensive than the equivalent standard tariff.