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My OVO electricity is 100% from renewable sources so why do global gas prices affect my electricity bill?


My OVO electricity is 100% from renewable sources, so why should global gas prices affect my electricity bill ?

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Best answer by Tim_OVO 12 October 2021, 10:00

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Userlevel 7
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Hey there @Buzby !

It’s a bit complicated to answer this one, but the details about OVO’s Fuel Mix sheds some light here. Roughly half of it on the last declaration was from natural gas which has been significantly impacted by price increases on the wholesale market. The prices for electricity and gas in general are closely linked so changes to one will often affect the other in some form. This blog post also helps to explain OVO’s fuel mix a bit further as well.

I hope this helps. I’m only a forum volunteer myself so I can’t speak on behalf of OVO in any official capacity, but I try to double check everything before responding.

So what OVO are really saying is “All the electricity we buy is 100% renewable, but what we sell to our customers is only 50% renewable.”

That is a bit disingenuous.

 

OK, I’ve been reading a bit more about the ‘mix’, and think I understand, nearly.

OVO need to supply, say, 100 units of renewable energy to their customers.

They buy, say, 80 units from genuine renewable sources.

They buy the remaing 20 from ‘dirty’ sources.

To comply with advertising 100% renewable, OVO then pay a third party the value of 20 units of green energy which has been generated, and used, somewhere else in the World.

Doesn’t this mean OVO, and their customers, are paying twice for the ‘dirty’ part of the mix ?

And the third party generator gets paid twice !

 

 

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Not quite. You only pay once rather than twice and it’s the same for OVO.

Also, OVO pays for the equivalent of all your electricity usage to be fed back into the National Grid from renewable sources, even though it’s physically impossible to force your home to only be supplied purely by them. So what this means, is that if you pull 10kWh of electricity from the National Grid today, OVO will pay a renewable source (like a wind farm) to put the same 10kWh back into the National Grid to balance it out, which is compliant with the rules about advertising 100% renewable electricity. It may not always happen on the same day, but it does happen. The individual generator sources also only get paid once though, as there’s not much value in paying them for something they didn’t provide. The renewable sources that receive payment also need to be in the UK, so it’s not a case of them going offshore and used elsewhere.

OVO does also have a presence in a few other countries and my understanding is that the other countries OVO operates in use a similar setup. However, they’re not interconnected and OVO’s international sister companies cannot make use of or share the same renewable energy obligations certificates that are available to OVO’s UK operations. They get their certificates from the local schemes in the relevant country.

It’s not always possible to have a constant supply of renewable energy right now, but it’s always being worked on. In the meantime, the current mechanisms are a stepping stone towards the future, but it’s definitely better than it used to be!

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An alternative way of looking at the energy mix and being able to compare suppliers is to look at the energy mix data each supplier has to provide as part of the ofgem regulations.

This is one of the websites that has collated the information and presented it in a table. 

https://electricityinfo.org/fuel-mix-of-uk-domestic-electricity-suppliers/

I quite like this as it is consistent across suppliers so i personally think easier to compare suppliers over time.

I don't personally particularly like REGOs. I think they can be too confusing for many customers as can be seen from the number of queries that regularly crop up. 

Userlevel 7

Thanks for this question, @Buzby, and for everyone that’s posted since. 

 

Let’s break this down into two areas and talk about renewable energy generation first, and then touch on how energy is priced for energy suppliers here in the UK. We’ve got some help from a few different teams to get you OVO’s take on this!

 

The UK has made great progress to decarbonise the power sector with cheaper and more affordable renewable energy now making up almost half of the electricity generation across the UK. 

 

Currently, no matter what supplier you use, a home won’t actually run on 100% renewable electricity. Electrons generated by all sorts of technologies, including fossil fuelled power stations, mix together and travel through the electricity grid to the end customer.  Apart from being off-grid and having renewable microgeneration, there is currently no way to put exclusively renewable electricity into a home.

 

To support your 100% renewable energy tariff, we make sure that the amount of electricity you use is matched with renewable energy generation on the grid through purchasing certificates and from contracting with wind farms directly.

 

As there aren’t separate markets for green and non-green energy sources, there’s one wholesale price for electricity at any given time. This means that when the cost of electricity produced by burning gas goes up, so does the cost of electricity from renewable sources such as wind and solar.


There’s a few other elements of electricity pricing which can get fairly complex. We’ve touched up this in another related forum thread which you might find interesting, here. More info on this in our latest blog post here, and our FAQs, here.

 

:) 

My OVO Account is coming up for renewal and will be a huge increase on what I am paying now. Naively I thought my energy came from renewable sources and therefore would not increase greatly. What am I missing?

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Hey there @Arty80 !

Sorry about the wait. A few other threads today took up quite a lot more time than anticipated.

OVO does have a commitment to supplying renewable energy, but it’s almost impossible to physically force your home to only ever receive power from purely renewable sources alone, as the National Grid isn’t capable of doing that until all legacy fossil fuel sources are permanently decommissioned - which is a long way off yet.

The best answer I can find right now is probably what’s listed on the OVO Fuel Mix and one of the guides on the main site. I think there might be more though, so I’ll see if I can find any others too.

It’s worth noting that OVO also uses Renewable Energy Guarantee of Origin (REGO) Certificates to help prove that all energy sold is renewable, not least by paying for every kWh of electricity sold by OVO is replenished with the same amount of electricity from a renewable source back into the National Grid. However, this doesn’t fully protect OVO from fluctuations in the market and since Natural Gas currently makes up roughly 50% of the OVO Fuel Mix, this can expose them to more costs than some other suppliers do.

Userlevel 7

This is a great question, @Arty80 and we’ve actually responded to this one recently so I’ve moved your comment over to this relevant thread, check out our advice below:

 

Let’s break this down into two areas and talk about renewable energy generation first, and then touch on how energy is priced for energy suppliers here in the UK. We’ve got some help from a few different teams to get you OVO’s take on this!

 

The UK has made great progress to decarbonise the power sector with cheaper and more affordable renewable energy now making up almost half of the electricity generation across the UK. 

 

Currently, no matter what supplier you use, a home won’t actually run on 100% renewable electricity. Electrons generated by all sorts of technologies, including fossil fuelled power stations, mix together and travel through the electricity grid to the end customer.  Apart from being off-grid and having renewable microgeneration, there is currently no way to put exclusively renewable electricity into a home.

 

To support your 100% renewable energy tariff, we make sure that the amount of electricity you use is matched with renewable energy generation on the grid through purchasing certificates and from contracting with wind farms directly.

 

As there aren’t separate markets for green and non-green energy sources, there’s one wholesale price for electricity at any given time. This means that when the cost of electricity produced by burning gas goes up, so does the cost of electricity from renewable sources such as wind and solar.


There’s a few other elements of electricity pricing which can get fairly complex. We’ve touched up this in another related forum thread which you might find interesting, here. More info on this in our latest blog post here, and our FAQs, here.

 

Hope this helps explain why even renewable energy prices are affected by wholesale gas costs. You might also be interested by this recent AMA thread:

 

 

Thanks for your explanation I now have an understanding of how the energy market works.

i do think, however, the OVO claim that I am being supplied with renewable energy is misleading.

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