Future Support for Low Carbon Heat

In the ‘Future Support for Low Carbon Heat’ consultation, launched in April 2020, the government set out its proposal for a new Green Gas Support Scheme (GGSS), and Green Gas Levy (GGL). The GGL is a levy on licensed fossil fuel gas suppliers which will fund the GGSS. BEIS have now published their response to the recent consultation, and after considering the results, the government intends to proceed with the launch of the GGSS and GGL.

Eligibility

The GGSS is a tariff-based scheme supporting the injection of biomethane produced via anaerobic digestion into the gas grid. The GGSS will support biomethane injection from anaerobic digestion only, and only new AD plants will be eligible. According to the proposed plans, the GGSS is expected to begin in Autumn 2021 and be open for applications until Autumn 2025. The GGSS comes as the Renewable Heat Incentive (RHI), which has recently been the main mechanism of government support for biomethane, comes to a close this March for the non-domestic and April 2022 for the domestic RHI.

Key Aspects to the GGSS

The tariff period will be 15 years, (unlike the RHI which provided 20 years of support) and based on three tiers of support. The proposed tariffs are:

• Tier 1 (up to 60,000 MWh): 5.51p/kWh
• Tier 2 (up to 100,000 MWh): 3.53p/kWh
• Tier 3 (over 100,000 MWh): 1.56p/kWh

There will be a tariff guarantee mechanism similar to the RHI, however it will now be compulsory and there will be modifications to the commissioning window. There will also be tariff guarantee budget caps, as was the case in the RHI. These will be set for each financial year.

The GGSS will also have a degression mechanism, which will occur against a forecast expenditure trigger (not quarter-to-quarter growth) with quarterly announcements, but there will be no degression for first 6 months. There will also be a 10% degression to all tariffs if the expenditure threshold is breached. An annual tariff review will occur to amend the tariffs offered to new applicants if costs change, with the outcome announced every Autumn.

GGSS and other Schemes

Applicants to the GGSS are not allowed any interaction with the RHI, to minimise any overcompensation risk. As such, some detail on the transition period from RHI to GGSS is laid out.

• Where an RHI tariff guarantee application has been withdrawn after the coming into force date of the GGSS regulations, an application may not be submitted to the GGSS.
• Where an RHI tariff guarantee application has failed to meet the 31st March 2022 commissioning deadline they will be able to apply to the GGSS, so long as the AD was not used to produce biogas prior to the coming into force date of GGSS.

As for the Renewable Transport Fuel Obligation (RTFO), quarterly production can be split between both the GGSS and the RTFO to enable different consignments of biomethane to receive payments from either the GGSS or the RTFO within the same quarter. Ofgem and the Department for Transport (DfT) will work with BEIS to ensure the regulations can be applied to those claiming GGSS.

Sustainability

Going forward under the GGSS, producers of biomethane will be required to make a GHG emission saving threshold of 70%.  This sees the greenhouse gas threshold lowered from 34.8 gCO₂ eq per MJ (as it was for the RHI scheme) to 24 gCO₂ eq per MJ. A new methodology will allow for averaging of emissions across consignments and accounts for covers on digestate stores. In addition, feedstocks restrictions that will apply as they do in the RHI – 50% of biomethane must be derived from wastes or residues.

By the time the scheme is open, all new AD plants under these regulations in England on the scheme will be required to cover stores, which will prevent a proportion of ammonia being released. In addition, there are specific requirements for digestate management, including that digestate must be spread using low emission spreading techniques. It is expected that BEIS will look to fund a study into further ammonia reduction technologies, which may impact digestate management under the scheme in the future.

Heating is responsible for a third of the UK’s greenhouse gas emissions, and decarbonisation of heat is one of the biggest challenges we face in meeting our climate targets. Support for the sector and green gas is key to reducing emissions and the UK government expects the GGSS to generate 21.6 Mt CO₂ eq of carbon savings over its lifetime.