EDF Energy has a won a four-year contract worth £1 billion to supply renewable energy to 300 government departments and civil service bodies.

The deal, which includes the supply of electricity to Downing Street, is part of a government plan to convert public sector offices to green power. EDF Energy won the tender on the condition that a third of the power distributed to civil service and government offices would come from renewable sources. All leading suppliers were invited to tender for the “green energy” contract, commencing on October 1.

The Office of Government Commerce (OGC), a division of the Treasury, is expected to announce the deal today. Under it, the Government will also purchase electricity wholesale from day-ahead markets for the first time – a move expected to save up to £25 million by 2011. The Government will also have the option to choose to source power direct from particular generators, such as wind turbines, under the deal.

EDF Energy, the French utility that bought London Energy in 1999, has supplied public sector electricity for the past four years. Its supplies come from UK and European generators that are accredited “renewable sources” by Ofgem, the energy regulator. EDF declined to say how much it would profit from the deal.

A spokesman for EDF said: “This contract provides us with long-term relationships with many public sector clients, creating the right atmosphere for a collaborative approach to finding solutions to their energy requirements. The public sector is looking [at] . . . buying renewable energy, accelerating their efforts to reducing energy consumption and installing low-carbon electricity generation in government buildings.”

The Government has said that all public sector departments will source at least 10 per cent of their power from renewable sources by March 2008. However, nuclear energy is not regarded as a renewable energy source.

Despite incentives to promote the use of renewable energy, such as the climate change levy, green electricity still proves too expensive to buy in large amounts. Most businesses and government agencies tend to buy energy from sources seen as polluting, such as coal – so-called “brown” energy, which attracts a climate change levy of 0.441p per kilowatt hour.

However, Claire Manning, the head of energy at the OGC, said that under the deal with EDF Energy, green power would be bought at no extra premium, as public sector departments had leveraged better rates. “Access to day-ahead markets and sell-back options can deliver significant savings and price management in a volative energy market,” she said.

The Department for Environment, Food and Rural Affairs also advised on the deal.

Times Recommends

• Gazprom brands Ukraine 'a barbarian' in gas row
• Services sector raises fears over UK jobless
• Retailers surge as profits survive sales plunge