Choosing and Switching to a Green Energy Supplier

Can I switch my energy supplier?

There are various statutory and regulatory requirements on electricity network operators and suppliers to facilitate competition and encourage consumer choice. Whilst commercial landlords are not afforded the same level of protection as a domestic customer (where licensed electricity suppliers are obligated under the terms of their licences to encourage each customer to consider switching tariff or electricity supplier), suppliers are required to make the switching process as easy and efficient as possible and there is a general prohibition on blocking a customer transferring to another supplier.

However, suppliers are able to ‘raise objections’ within the parameters of the contract and the Retail Energy Code. These grounds are limited and may include situations where the customer has unpaid bills or is in arrears with the existing supplier. The current supplier may have the right to object to switching until the customer resolves the outstanding payments. It is imperative to review the terms of the contract, as certain retail contracts may stipulate minimum contract periods and specific switching windows. Further, suppliers may object to switching on the suspicion of fraudulent activity.

Switching energy suppliers may also entail early termination fees, particularly for retail landlords with fixed term tariffs. Since the onset of the energy crisis in 2021, there has been a notable escalation in termination fees, resulting in some consumers being bound to unfavourable tariff deals. Ofgem, however, emphasizes that these termination fees must be proportionate and should not surpass the direct economic loss incurred by the losing supplier. Nonetheless, before deciding whether to switch supplier it is important to thoroughly examine the contractual terms of existing tariff(s) to determine whether early termination fees would apply, and how much these would be.

Commercial landlords should keep in mind other external limitations to freely choosing tariffs, specifically:

• Planning permission – the property may be subject to planning conditions or obligations imposed by the local planning authority specifying a maximum carbon intensity threshold, of which the carbon intensity of energy supplied to the property will be a factor.
• Development agreements – development agreements between a landlord and a master developer can limit the freedom to choose tariffs. A developer cannot mandate this in relation to electricity supply as it goes against the open access principles above. At best, they can only mandate that the landlord obtains a green energy tariff.

 

What is meant by “green” energy tariffs?

These are electricity tariffs that are supported by renewable or “clean” power. Renewable energy sources are generally considered to include:

• Solar power through converting sunlight directly through photovoltaic (PV) cells or by solar thermal systems using mirrors and lenses to concentrate heat that can be used for steam and drive turbines.
• Wind power, through capturing kinetic energy from wind and converting it into electricity.
• Hydropower which harnesses energy flowing or falling through water.
• Biomass energy from the burning of organic materials (such as agricultural waste or food products) which produces heat and converted into biogas.
• Hybrid systems of varying renewable systems, such as solar and wind.

Suppliers generally use two types of tariff model to categorise the degree of sustainability associated with their energy sources: “dark green” and “light green” tariffs. These terms are not universally standardized so consumers must review the details of the policy carefully to understand their specific characteristics.

”Dark green” generally means energy being procured directly from renewable energy generation and physically delivered to consumers. Providers with these tariffs may also support additional initiatives such as carbon offset or biodiversity investment. The supplier will also usually adhere to more stringent environmental standards and certifications. These tariffs may be ‘off the shelf’ for immediate use or set up through a bespoke Corporate Power Purchase Agreement (CPPA), details of which are set out in the next chapter.

”Light green”, on the other hand, generally means a less direct relationship between the renewable energy generated and that supplied to the consumer. In this scenario, the supplier procures power from the grid as normal but then matches each megawatt hour of electricity its customer uses with Renewable Energy Guarantees of Origin certificates (REGOs) representing the same amount of renewable energy.

Suppliers can buy REGOs from other suppliers who do produce renewable energy, and so its primary purpose is to track and certify the origin of the electricity.

 

What is better: a “dark green” or “light green” tariff?

The table below sets out the main advantages and disadvantages of “dark green” and “light green” tariffs for landlords:

DARK GREEN	LIGHT GREEN
Advantages	Advantages
Green energy sources are transparent and traceable to the source, giving confidence to the market you are selling to.	More abundant availability in the market for “light green” tariffs.
These tariffs can bolster ESG credentials to disclose to potential corporate tenants and investors. If you are a corporate landlord, this can contribute to corporate social responsibility performance indicators.	Less complex and more flexible contract terms than “dark green” tariffs, making them cheaper. Still more expensive than not going ‘green’ at all.
Good marketing to incoming tenants (who are particularly environmentally conscious) and contribute to setting the property and corporate investor apart from competition.
May provide energy price stability in the long run compared to a volatile mix with fossil fuels.
Depending on the context, these tariffs may be recovered by government incentives, subsidies or grants.
Disadvantages	Disadvantages
Limited availability for such tariffs given it is the physical delivery of green power.	REGO certificates do not identify the relationship with the source resulting in a lack of traceability.
Usually more expensive than “light green”. There are higher initial costs involved with negotiating more complex terms and pricing models, particularly if the CPPA route is chosen.	Questionable ESG credentials – may even lead to accusations of “greenwashing” by environmentally conscious stakeholders.
Must consider whether truly green sources are imperative for investors and tenants through a cost vs value analysis. Research has suggested tenants overall value lower cost ahead of green sources.	Will not have the same effect as “dark green” in marketing value and strength as a competitor.
	“Light green” tariffs may not be adaptable to future green energy regulations that are introduced. Is it worth making the investment now?

 

How do I choose the best green energy supplier for me?

Hiring an energy broker is highly recommended to navigate the complexities of the energy market. They can undertake market analysis and provide insights, use their network to broaden the pool of potential suppliers (especially important if you are looking for “dark green” tariffs or CPPAs overleaf), and negotiate on your behalf. Furthermore, where applicable you should consider buying tariffs for multiple sites at once to benefit from “bulk” discounts that are offered by suppliers.

You should consider any internal or external corporate ESG policies and find a supplier which matches these ambitions. Researching thoroughly is necessary to ensure that the energy offered really is ‘green’ so to avoid accusations of greenwashing if the policy is weak.

We can help find you a solution for your energy procurement and answer any questions that you may have.