BEIS Biomethane Cost Review

This project for The Department for Business, Energy and Industrial Strategy (BEIS) aimed to establish the current costs of deploying and running an anaerobic digestion (AD) facility producing biomethane for injection into the grid in Great Britain. The cost data obtained was required to support BEIS in carrying out internal modelling and to inform the tariff levels for the future Green Gas Support Scheme (GGSS).

The approach that NNFCC took for this work included a Market and Literature review, to better understand and analyse the current AD market in the UK, identify any shortcomings of the most recent price review, and capture key changes in the industry that may have influenced capital and operational costs since the previous Biomethane Tariff Review consultation, which was conducted in 2014.  This analysis was used to inform an industry survey, in-depth interviews and data modelling, which were conducted as follows;

  • An online survey was designed and sent out to UK AD plant operators, developers and investors, to collect information on the costs related to AD development and operation.
  • In-depth interviews were held with the same target group of stakeholders, to better understand costs and terminology used, to fill data gaps and to discuss appropriate allocation of costs from financial models provided by a number of developers.
  • Data was anonymised and collated in a database to enable detailed analysis on individual and aggregated cost lines, by scale, type and age of plant.
  • Graphs were produced and appropriate trendlines plotted, to extrapolate representative costs across a full range of scales and types of plant, to allow ease of comparison with previous data published and used by BEIS. This step benefitted from NNFCCs expert industry knowledge, to understand where individual cost lines were linear or static, dependent on scale and type of plant, and where minimum or maximum cost thresholds were required, at upper and lower scale boundaries.
  • A sensitivity analysis for Capex and Revenue was performed for different feedstock scenarios, to determine the extent of cost increases incurred for additional infrastructure, processing equipment and higher operational costs, where food waste is used. Furthermore, sensitivity analysis was also performed on commissioning dates, to better understand changes in costs over time, reflecting additional regulatory compliance requirements.

The Market and Literature Review was combined with the methodology and results from the modelling exercise, in a comprehensive report which was presented to BEIS alongside the detailed Excel model. The report also included NNFCC’s expert narrative justifying cost variations from previous analysis, to improve BEIS’ internal knowledge on the current state and requirements of the industry.


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