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
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
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.
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.