BEIS Consultation on the Future of UK Green Gas Support

Posted in: bioenergy

With a week to go in BEIS's consultation, what is being proposed to continue to support UK biomethane for heating?

One of the bioeconomy’s greatest opportunities lies in provision of renewable heat, specifically from the injection of biomethane from anaerobic digestion (AD) into the gas grid. This­ provides a consistent and reliable source of renewable heat for both domestic and non-domestic purposes by decarbonising the gas grid, lowering the carbon emissions profile compared to natural gas.

However natural gas remains significantly cheaper than biogas, meaning a switch to biobased heating can hit consumers in the wallet. In order to mitigate this the UK government provides financial support to biomethane producers, to allow the heat from the gas they generate to be competitively priced and thus to stimulate the uptake of renewables across the energy sector.

The chief system through which the government has supported renewable heat has been the Renewable Heat Incentive or RHI. Under this system, biomethane generators receive a tariff proportional to the amount of gas and resultant heat generated. Plants that come onto the RHI are eligible to receive tariff payments for the next 20 years, provided they continue to generate.

However, the original RHI scheme is coming to an end, and the UK’s Department for Business, Energy and Industrial Strategy (BEIS) is conducting a consultation into the nature of the system that is expected to replace it. As the consultation enters its final week, what potential changes are on the cards?

A New System for Renewable Gas

The RHI is due to end in March 2021 for non-domestic applications, and a year later for domestic ones since a 12-month extension has recently been granted. BEIS’s long-term goal is to have renewable heat supported by either a market-based mechanism analogous to the Contracts for Difference (CfD) system employed for renewable electricity, or a minimum supply system like that seen for transport fuels. The former system ensures best value for public money by having generators bid for the lowest level of support they can afford, ensuring no more taxpayers’ money is spent than necessary, whereas the latter system puts the onus on energy suppliers to provide support. In the consultation document, BEIS acknowledges that the current green gas market would not be able to support such a system at this time, and so has proposed the Green Gas Support Scheme (GGSS) to act as an interim support measure until 2026, at which time a market- or supply-based system is intending to be put in place.

The GGSS will run in a similar fashion to the RHI, providing generators with a tariff for each kilowatt-hour of biomethane they inject into the grid. The tariff levels have yet to be set, but the ranges proposed in the consultation document extend higher than current tariff levels available under the non-domestic RHI, and the restructured tariff tiering system allows generators to receive the highest tariff level for 50% more injected biomethane before receiving lower tariff levels. However, tariffs under the RHI were subject to degression once certain market conditions were met, and this is likely to be the case again, although the consultation does seek stakeholder input on how the degression system could be improved, particularly to prevent situations like the enforced raising of tariffs in 2018, where too much degression had led to unsustainably low tariffs.

Other significant differences in the proposed GGSS include potentially reducing the length of tariff support from 20 to a maximum of 15 years or less, as the original 20-year tariff length was intended to incentivise investment in AD, which was then deemed a novel technology. Now the market has developed, BEIS wishes to reduce the tariff length to reduce costs and improve value for public money.

The second significant proposed change is to integrate the popular Tariff Guarantee system as a mandatory stage in applying for support. Introduced in 2018, Tariff Guarantees ensure generators do not lose out if a degression occurs before a plant is commissioned. BEIS believes that the odds of a new plant not wishing to have a tariff guarantee are so low that it might as well form part of the support system outright.

Sustainability Requirements

Of course, it is bad practice to presume that any renewable energy system is automatically sustainable, and so any plant should still be subject to sustainability requirements to ensure that renewable energy does not come at the expense of other environmental damage.

AD is an attractive system for energy generation because it dovetails as an effective way of dealing with organic waste. As AD produces digestate it offers similar benefits to compost for mitigation of soil damage from agriculture, but with the added benefit of energy generation.

In order to try and promote AD’s usage for waste management, the RHI comes with a minimum requirement for 50% of a digester’s biogas output to be generated from waste. This indirectly controls the requirement for energy crops, which are an otherwise popular feedstock for AD due to the reliability of their supply, but potentially occupy cropland that could otherwise be used for food crops, or are food crops themselves – something the government does not wish to encourage. The consultation does not contain a definite proposal for an increased minimum percentage of waste feedstock, but does imply that it is BEIS’s wish to increase this percentage. Duly, the consultation requests industry feedback on what higher threshold would be sustainable within the industry. This system is in contrast to the Renewable Transport Fuels Obligation (RTFO), which instead of mandating a minimum of a desirable feedstock, employs a cap on undesirable feedstock. This does however align with another Government policy, for separate food waste collection to be made mandatory by 2023, whichis expected to increase availability of food waste for use as AD feedstock. However, the time gap between the GGSS coming into force and the start of mandatory separate food waste collection could cause issues with reliability of supply.

Another proposal put forward in the consultation is to amend the sustainability requirements of plants to be aligned with the EU’s Revised Renewable Energy Directive (RED II). Currently plants under the RHI are subject to the original RED’s requirements: that a plant must offer 60% carbon savings against a fossil fuel baseline. RED II increases this to 70% by 2021, and 80% by 2026. According to industry body, the REA, 46% of the UK’s current biomethane plants would fail to meet these requirements.

In publishing this consultation, BEIS has made it clear that it continues to support the UK’s biomethane industry, specifically when the gas is derived via anaerobic digestion, and sees it as a key contributor to future decarbonisation plans. Heating contributes to a third of the UK’s emissions, which makes it a key sector to tackle in the pursuit of environmental sustainability, and with the right support AD could continue to do this for years to come.

The Consultation closes on the 7th of July. You can find out how to respond and read the full consultation documents here.

NNFCC continues to work with planned AD and biomethane developments, and will support new projects through the transition period to ensure the maximum possible support is secured. We also work with operational facilities, using our bespoke Biogas and Biomethane Carbon Calculator, to ensure compliance with the sustainability criteria and offering advice should any compliance risks arise. Further information on this service is available here.

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This article was written by Bob Horton, Research Analyst at NNFCC.

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