All about Good Energy's Standard Variable Tariff
The energy price cap was announced by the government in 2017 and implemented by the energy regulator Ofgem in 2019. It was intended to be a temporary measure to prevent big energy suppliers charging higher prices to customers who don’t switch to subsidise the cheap fixed deals they used to attract new customers. Find out why our Standard Variable Tariff (SVT) is exempt.
As such, it still only applies to suppliers’ default Standard Variable Tariffs. No suppliers’ fixed deals are subject to the cap. In Good Energy’s case, neither is our Standard Variable Tariff.
This is because after it was first announced, a government committee recommended that there should be an exemption to the price cap for suppliers which contribute more than others to investing in renewables. After a thorough review by Ofgem, Good Energy was granted such an exemption. They agreed that we support renewables beyond other suppliers and that our costs are materially higher as a result.
So what is it that we do differently? And why is there a cost to being genuinely green in a market that is still controlled by fossil fuels?
Good Energy and the energy price cap
Most suppliers that claim to offer green tariffs simply buy the electricity they supply customers on the wholesale market, which comes from a mix of sources, including fossil fuels. They calculate the overall amount of power their customers use and then buy enough renewable certificates to claim that it’s green through what’s essentially an accounting trick.
This means that in the case of most suppliers, there is a straightforward answer to the question ‘why has my 100% renewable tariff increased in a gas crisis?’. It’s because these suppliers are not buying 100% renewable electricity.
Some suppliers such as British Gas have even bought certificates relating to renewable electricity generated in other countries that never enters the UK power grid. Thankfully, the government is closing this loophole as part of a wider crackdown on the greenwashing of electricity tariffs.
What makes Good Energy genuinely green?
Directly supporting renewable generation takes a lot of work. We set up Power Purchase Agreements (PPAs) with independent renewable generators, to buy their power. These long-term contracts provide a level of financial certainty that helps get new generation projects off the ground. Many of our generators are not big corporations with energy industry knowhow but small businesses or non-profit cooperatives. So a key part of the value we provide is simply expertise — our team of energy originators who can provide that knowhow.
Our SVT gas tariff is also exempt from the price cap for a similar reason — our Gas Purchase Agreements support green gas generators.
Then, because renewable electricity generation technologies like wind and solar depend on the weather, our team of forecasters and traders work hard to make sure our generators are supplying enough renewable electricity to the grid to match what our customers are using. They do this for every half hour of every day and manage to match supply with demand in real time over 90% of the time.
Sometimes, we have too much renewable electricity, so the team sell it to the wholesale market. And at other times, we have to buy wholesale energy. When the market is as high as it is right now, this brings a lot of risk. If the wind simply doesn’t blow, the power we have procured doesn’t show up, and we are exposed to extremely expensive market prices.
This, coupled with the fact that gas tends to drive energy market prices in the UK and that our PPAs are increasingly high cost when the market is high, is why our 100% renewable electricity is more expensive in a gas crisis.
Over the course of the full year, the power our customers use is matched to 100% renewable electricity supplied to the grid from generators with which we have PPAs.
Our SVT: the tariff powering independent renewable generation
The work it takes to sustainably support renewable generation means that we have higher operating costs compared to suppliers that simply buy certificates. The cost of providing material support for renewables means that our Standard Variable Tariff is exempt from the energy price cap.
As the recent turmoil in the energy market has shown, the energy price cap is struggling to keep pace with the true cost of supplying energy to customers. Our Standard Variable Tariff is priced at a level that provides us with the flexibility and security we need to keep supplying 100% renewable electricity in this volatile market, as well as cover the non-energy-related costs all suppliers have to pay.
Unlike the price cap, which is set based on Ofgem’s observation of the wholesale market during a set period we take into account the power we have procured from our generators, what we are expecting the weather to do, as well as what we can see the wholesale energy market is doing.
And unlike high cost, high exit-fee fixed tariffs which are also not covered by the cap, it can go down in price when the cost of energy drops.
Our approach to sourcing renewable energy has led to us being credited by independent panels of experts, including Uswitch, Which?and Ethical Consumer.
Good Energy’s view on the UK’s long-term energy strategy
High energy prices are contributing to the cost-of-living crisis that is hitting millions of households across the UK. Short term support is coming in the form of the Energy Bills Support Scheme, which will provide a £400 grant from October 2022, with higher amounts available for the most vulnerable households.
The government has also approved a windfall tax on the eye-watering profits made by fossil fuel companies such as Shell and BP (although the fact this will not touch profits raked in earlier this year has caused criticism).
When it comes to long-term solutions to the crisis, we’ve long argued that the way to make energy sustainable and affordable is to invest in locally generated renewable sources. The sooner we can break away from our reliance on expensive, volatile fossil fuels, the more stable energy prices will be for everyone.