British Gas has launched a consumer gas and electricity tariff that will cost 10% more than its standard rates but which offers better green credentials than any other consumer utility tariff in the UK market. The product has the following important features:
- The electricity is derived from renewable sources. The company says that this is not the key ingredient of the tariff. Later in this note I try to explain why.
- British Gas will buy and retire Renewable Energy Certificates for 12% of the electricity it supplies. This is probably the most important aspect of the proposition.
- British Gas will 'offset' all of the carbon dioxide produced as a result of each household's purchases. This is the most expensive part of the deal for British Gas.
- There will be a small donation to a green education fund for schools.
BG says that it makes no extra money from the sale of its Zero Carbon product. This looks a justifiable statement to us. The important other questions to ask are:
- Why did BG decide that 10% was the appropriate premium to its main tariff? It could have designed a less costly offering with reasonably strong green features. Do mainstream 'concerned consumers' regard 10% as an acceptable price increment? Did BG need to 'gold plate' the new product to avoid any criticism that it was a proper green tariff?
- How will the company manage to ensure that it buys high quality offsets, and not the dubious offerings sold by consumer offsetting companies?
- The product is slightly complex and difficult to explain. Can BG cut through the competing claims of other green suppliers to build a large customer base for this high quality offering?