Energy costs are a big line item for most UK businesses. At the same time, customers, investors, and employees increasingly expect organisations to show they take climate change seriously. That’s where green energy tariffs come in: they promise lower carbon emissions and a cleaner brand image, sometimes at a similar cost to standard tariffs.
But are green energy tariffs actually worth it for your business, or are they just clever marketing?
- What green energy tariffs are and how they work
- The difference between genuinely green deals and “greenwashed” offers
- The pros and cons for UK businesses and SMEs
- How to decide if a green tariff is right for you
- Practical steps to find a good-value, genuinely green deal
We’ll also signpost you to trusted guidance from Ofgem and UK government sources so you can dig deeper if you wish.
What is a green energy tariff?
A green energy tariff is an electricity (and sometimes gas) contract where the supplier promises that some or all of the energy you use is matched by energy generated from renewable sources,for example:
- Onshore and offshore wind
- Solar PV
- Hydro
- Some forms of biomass or biogas (depending on the supplier’s policy)
Green tariffs don’t usually mean that the electrons flowing into your premises are physically from a wind farm. Instead, they rely on a system of certificates that track renewable generation in the background.
What are REGOs and why do they matter?
In Great Britain, renewable electricity is tracked using Renewable Energy Guarantees of Origin (REGOs). These are certificates issued to generators to prove that one megawatt hour (MWh) of electricity came from an eligible renewable source. Ofgem administers the REGO scheme and maintains a register so suppliers can show the proportion of their electricity that is renewable.
When you buy a green energy tariff, your supplier should be backing it with enough REGOs (and similar evidence where relevant) to match the renewable portion they advertise.
However, just because a tariff is backed by REGOs doesn’t automatically mean it’s “high impact” or adding new renewable capacity to the grid,this is where things get more nuanced.
Types of green energy tariffs for businesses
Not all green energy tariffs are created equal. When you’re comparing deals, you’ll often see:
1. 100% renewable electricity tariffs
These tariffs claim to match 100% of the electricity you use with renewable generation, backed by REGOs or direct purchase agreements (PPAs) with renewable generators.
Within this category, there are big differences:
- High-impact tariffs: the supplier invests directly in new wind, solar or hydro projects or buys long-term PPAs. These tariffs can genuinely support additional renewable capacity.
- Certificate-only tariffs: the supplier buys REGOs on the market to badge otherwise standard electricity as “green” without changing how they physically buy power.
Both may legally count as green energy tariffs, but they’re not equally impactful.
2. Part-renewable tariffs
Some tariffs are marketed as green because they include:
- A specific percentage of renewable electricity (e.g. 30%, 50%)
- A mixture of renewable and other low-carbon sources
These can be a stepping stone if your business wants to start reducing carbon but can’t yet commit to a fully renewable contract.
3. Carbon-offset tariffs
Less common in business electricity now, but you may still see “green” or “carbon neutral” gas tariffs where:
- The supplier offsets emissions by funding carbon reduction projects abroad (e.g. tree planting, cookstove programmes)
These are usually carbon-offset products, not necessarily green energy tariffs in the strict sense, so check the wording carefully.
Why businesses choose green energy tariffs
So why do so many UK businesses look at green energy tariffs in the first place? Common reasons include:
1. Cutting your carbon footprint
Switching to a green electricity tariff can significantly reduce your Scope 2 (purchased electricity) emissions on paper, especially if the tariff is properly backed by REGOs and clearly documented in your supplier’s fuel mix disclosure.
For many SMEs, this is one of the simplest short-term actions to shrink their carbon footprint, alongside energy efficiency upgrades.
2. Meeting customer and supply chain expectations
Larger customers and public sector clients increasingly ask their suppliers to:
- Report carbon emissions
- Demonstrate credible decarbonisation plans
- Show progress towards net-zero
Being on a green energy tariff,especially one with clear, transparent backing,can help you tick some of those boxes and stay competitive in tenders.
3. Strengthening your brand and employee engagement
- Supports their sustainability messaging
- Helps with employer branding and staff engagement
- Gives them positive stories to share in marketing and annual reports
This reputational value can be hard to quantify but is very real,particularly for consumer-facing brands and purpose-led organisations.
4. Managing long-term risk
The UK has committed to reaching net zero emissions by 2050, and policy is gradually tightening to support this. As fossil fuels face increasingly strict regulations and potential carbon pricing, businesses that shift earlier to low-carbon energy may avoid future policy and reputational risks.
The risks and drawbacks of green energy tariffs
Of course, green energy tariffs are not always a slam-dunk. There are some real drawbacks and things to watch out for.
1. Potentially higher costs
- Slightly more expensive per kWh
- Or come with less flexible contract terms
That said, the price gap between standard and green electricity has narrowed in recent years, and in some cases green tariffs are price-competitive or even cheaper, especially when bought as part of a wholesale strategy. Still, you need to check the numbers carefully.
2. Greenwashing and low-impact tariffs
The UK government has acknowledged concerns about “greenwashing”, tariffs marketed as green without consumers understanding how they actually work. In 2021 it announced plans to tighten rules so people signing up to green tariffs can be sure their energy is genuinely sourced from renewable generation.
- You could overclaim your environmental impact in marketing or reports
- Stakeholders may challenge whether your tariff genuinely supports the transition
- Future regulation may clamp down on vague or misleading claims
3. Not a substitute for energy efficiency
A common mistake is to treat green energy tariffs as a silver bullet and then ignore:
- Old, inefficient equipment
- Poor insulation
- Energy waste in processes and behaviours
In reality, the cheapest and greenest kilowatt hour is the one you don’t use. A good energy strategy combines efficiency and greener supply, not one or the other.
Are green energy tariffs worth it? A step-by-step test
To decide whether green energy tariffs are worth it for your business, work through this simple checklist.
Step 1: Understand your current usage and costs
- Your annual kWh consumption (electricity and gas)
- Your current unit rates and standing charges
- Any existing contract end dates and termination clauses
If you’re not sure where to start, doing a structured review like an energy audit (for example, using a business energy audit checklist) can highlight where you use energy and where savings are possible.
Step 2: Clarify your sustainability goals
- Do you have net-zero or carbon reduction targets?
- Are customers asking for emissions data or green credentials?
- Is sustainability a core part of your brand or more of a hygiene factor?
If sustainability is a strategic priority, a high-quality green energy tariff is more likely to be worth a small price premium.
Step 3: Compare costs like-for-like
- Compare unit rates (and standing charges)
- Check whether prices are fixed (and for how long)
- Understand any non-commodity costs and fees
If a green tariff is slightly more expensive but still within budget, weigh this against the reputational and compliance benefits.
Step 4: Assess how “green” the tariff really is
When you see a deal marketed as a green energy tariff, ask:
- Is the electricity 100% renewable, or only partially?
- Does the supplier invest in new renewable projects or just buy REGOs?
- Can they provide clear documentation on their fuel mix and certificate use?
- Do they explain how you should report your emissions when using their tariff?
The more transparent and evidence-based the answers, the better.
Step 5: Consider the bigger picture
- Are you also working on energy efficiency (e.g. LED lighting, better controls)?
- Do you have smart meters and good quality meter readings so your bills are accurate?
- Could you schedule an energy audit to identify further reductions?
If the answer to these is yes, then a green energy tariff may be the final piece that turns your energy use into a strong sustainability story.
How to choose a genuine green energy tariff
1. Check the supplier’s fuel mix and REGO backing
- Their fuel mix disclosure (what proportion of their electricity is from renewables)
- How they use REGOs and whether they invest directly in renewable generation
You can cross-check the general approach using Ofgem’s information on the Renewable Energy Guarantees of Origin scheme, which explains how REGOs work and how they’re used to give consumers transparency about suppliers’ renewable proportions.
2. Look for simple, transparent explanations
- Explain clearly what “green” or “100% renewable” means in plain language
- Distinguish between renewable electricity and carbon-offset products
- Provide straightforward documentation for your environmental reporting
If the explanation feels vague or overly complex, be cautious.
3. Match the tariff to your risk appetite
- Fixed vs variable pricing: how much budget certainty do you need?
- Contract length: longer contracts may lock in today’s green prices but reduce flexibility
- Volume tolerance: if your usage changes significantly, will you be penalised?
A tariff might be very green but completely wrong for your risk profile. Aim for a balance between price, flexibility, and sustainability.
4. Use trusted guidance when you compare
- Speak to a reputable broker or consultant with experience in sustainable procurement
- Use independent guidance and consumer information from Ofgem, which provides advice for businesses on energy contracts, tariffs and switching.
Combining green tariffs with other energy actions
To get the best value from green energy tariffs, combine them with other practical steps:
- Smart meters and accurate meter readings: ensure your bills match your real usage
- Regular energy audits: identify quick wins and long-term efficiency projects
- Staff engagement: encourage simple actions like switching off equipment and optimising heating
- Investment in efficient equipment: modern HVAC, motors, refrigeration and lighting can significantly cut consumption
By reducing your total use first, you can often afford to pay a small premium (if necessary) for a higher-quality green energy tariff without increasing your overall energy budget.
Conclusion: Are green energy tariffs worth it?
For many UK businesses, green energy tariffs are worth considering, especially if you:
- Have sustainability or net-zero goals
- Face pressure from customers or regulators to cut emissions
- Want to strengthen your brand and employee engagement
However, they’re not all equal. The key is to:
- Understand how the tariff is backed (e.g. REGOs and investment in renewables)
- Avoid greenwashing by asking tough, specific questions
- Combine greener supply with serious energy efficiency efforts
When you do that, green energy tariffs can become a powerful, credible part of your wider energy and sustainability strategy,not just a marketing label.
FREQUENTLY ASKED QUESTIONS (FAQs)
What is a green energy tariff for businesses?
A green energy tariff for businesses is an electricity (and sometimes gas) contract where your supplier promises to match some or all of the energy you use with power generated from renewable sources like wind, solar or hydro. They prove this using certificates such as Renewable Energy Guarantees of Origin (REGOs), which show that electricity has been produced from eligible renewable sources.
Are green energy tariffs more expensive than standard business tariffs?
Not always. Sometimes green energy tariffs cost slightly more per kWh, but in other cases they’re very close in price,or even cheaper,than standard tariffs. The only way to know is to compare like-for-like quotes, including unit rates, standing charges and contract terms. When deciding if a small premium is worth it, weigh in the benefits to your carbon footprint, brand and customer expectations.
How can I tell if a green energy tariff is genuine and not just greenwashing?
- Clear evidence that your electricity is backed by REGOs and/or long-term contracts with renewable generators
- A transparent fuel mix disclosure from the supplier
- Simple explanations of what “green” or “100% renewable” means in practice
- Documentation you can use in your environmental or net-zero reporting
