Business Energy Glossary
What is a green tariff?
A green tariff is a UK business electricity contract under which the supplier matches the customer consumption with an equivalent volume of renewable generation. The most common substantiation is through Renewable Energy Guarantees of Origin (REGOs), one certificate per MWh of consumption. Some green tariffs go further, sourcing electricity through Power Purchase Agreements with specific generators or limiting the renewable mix to certain technologies. The price premium over a non-green equivalent has historically been small but has grown as REGO prices have risen.
Green tariffs are increasingly standard for UK business customers, driven by corporate net zero commitments, ESG reporting requirements, and customer expectations. Understanding what a green tariff actually delivers (and what it does not) is essential for any business making renewable energy claims.
On this page
What a green tariff is
A green tariff is an electricity contract matched to renewable generation, usually by the supplier holding Renewable Energy Guarantees of Origin (REGOs) for the volume you use. It can cost slightly more and supports market-based Scope 2 reporting, but doesn’t change the physical supply.
For the full explanation, see Renewable business electricity: what 100% green actually means.
A green tariff has the same contractual structure as a standard fixed-rate or variable-rate contract. The difference is in the substantiation:
- The supplier commits to matching the customer consumption with an equivalent volume of renewable generation.
- The substantiation typically takes the form of REGO surrender (one REGO per MWh consumed).
- The bill usually states the green credentials and may show the supplier renewable fuel mix.
The physical electricity delivered to the customer is the same as any other supply: grid-sourced and from a mix of generation types. The “green” element is the REGO substantiation and the contractual claim, not the molecules of electricity flowing through the meter.
Tiers of green tariff
| Tier | Substantiation | Typical premium |
|---|---|---|
| REGO-backed (standard) | One REGO per MWh consumed, any UK renewable source | 0.2 to 1.0 p/kWh |
| Technology-specific | REGOs limited to specific technologies (wind only, solar only) | 0.5 to 2.0 p/kWh |
| PPA-backed | Direct PPA with specific UK renewable generator(s) | Varies by PPA structure; can be lower than wholesale |
| Time-matched (24/7) | Renewable generation matched hour-by-hour to consumption | 1 to 3 p/kWh+ |
The premium depends on the underlying REGO or PPA pricing. The most basic REGO-backed tariffs have historically added a small fraction of a penny per kWh; PPA-backed tariffs can produce more meaningful renewable supply at sometimes neutral or positive net pricing depending on wholesale market conditions.
Cost of a green tariff
Green tariff costs are driven by:
- REGO prices. The base substantiation cost has grown from negligible pre-2022 to £5 to £15 per MWh recently.
- Technology preferences. Tariffs limited to wind or solar carry higher REGO costs than tariffs accepting any renewable source.
- Time-matching. 24/7 matching requires holding REGOs from generation that occurred during the same hour as consumption, which is much harder to achieve and more expensive.
- Supplier margin. Suppliers add a margin on top of the underlying REGO cost.
For a typical business consuming 100,000 kWh per year, a basic REGO-backed green tariff might cost £100 to £500 per year more than an equivalent non-green tariff. Higher-tier tariffs can cost considerably more.
Green tariffs and reporting
Under the GHG Protocol for Scope 2 emissions reporting:
- Market-based method: A green tariff backed by REGOs allows the customer to report zero Scope 2 emissions for the supply, since the supplier-specific carbon factor is effectively zero for renewable supply.
- Location-based method: Reports emissions based on the average grid carbon intensity, regardless of any green tariff.
Best practice reports both methods. The market-based figure shows the contractual commitment; the location-based figure shows the physical reality. Various frameworks (Science Based Targets, CDP, ESG ratings) have their own preferred approach to recognising green tariff claims.
Is the electricity actually renewable?
No, in a physical sense. The electricity delivered to any UK consumer is grid-sourced and from a mix of generation including gas, nuclear, renewables, and imports. Switching to a green tariff does not change what flows through the meter.
The “green” credentials are administrative:
- A REGO-backed tariff means the supplier has bought enough REGOs to match the customer consumption.
- A PPA-backed tariff means the supplier has a contractual relationship with a specific renewable generator.
- A 24/7 matched tariff means the supplier has secured renewable generation in the same time period as the customer consumption.
Critics describe basic REGO-backed claims as “thin” renewable supply because the REGOs come from generators that exist regardless of the tariff and the cost premium is too small to incentivise new renewable build.
How to choose a green tariff
Three questions to ask:
- What is the substantiation? REGOs only, PPA-backed, or a higher-quality structure?
- What is the additionality? Does the tariff contribute to new renewable build, or simply rebadge existing generation?
- What is the cost premium? Does the additional cost match the value of the renewable claim for the business?
For businesses making material claims (Science Based Targets, public commitments, ESG ratings), higher-tier tariffs with PPA-backing or 24/7 matching usually provide stronger evidential support than basic REGO-backed claims. For routine procurement focused on cost with minor renewable commitments, basic REGO-backed tariffs are often sufficient.
a green tariff FAQs
What is a green tariff?
A UK business electricity contract under which the supplier matches the customer consumption with an equivalent volume of renewable generation, typically substantiated through Renewable Energy Guarantees of Origin (REGOs).
Is green tariff electricity physically renewable?
No. The electricity delivered to any UK consumer is grid-sourced from a mix of generation types. The “green” credentials of a green tariff are administrative (REGO surrender, PPA contracts) rather than physical.
How much more does a green tariff cost?
A basic REGO-backed green tariff typically adds 0.2 to 1.0 p/kWh to the unit rate, equivalent to 1 to 4 per cent of a typical business rate. Higher-tier tariffs (PPA-backed, 24/7 matched) cost more.
Can I claim zero Scope 2 emissions on a green tariff?
Under the GHG Protocol market-based method, yes: a REGO-backed green tariff allows zero Scope 2 reporting. Under the location-based method, no: emissions are calculated from average grid intensity regardless of tariff. Best practice reports both methods.
What is the difference between a green tariff and a PPA?
A green tariff is a standard supply contract substantiated by REGOs. A PPA is a long-term contract between a buyer and a specific generator, often providing stronger evidential support for renewable claims and higher additionality.
Are all green tariffs the same?
No. Tiers include basic REGO-backed (any UK renewable source), technology-specific (wind only, solar only), PPA-backed (direct generator contracts), and 24/7 time-matched (renewable matched hour-by-hour to consumption). Higher tiers cost more and provide stronger evidential support.
How do I know my green tariff is genuine?
Ask the supplier for evidence of REGO surrender against the supply, request the supplier annual fuel mix disclosure, and review the specific contract terms for the renewable substantiation method.
Does a green tariff contribute to new renewable build?
Basic REGO-backed tariffs typically do not have strong additionality (the REGOs come from existing generation). PPA-backed tariffs can have higher additionality if the PPA supports new construction. Customers seeking high additionality should consider direct corporate PPAs or 24/7 matched arrangements.