Energy security strategy – an opportunity missed?

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A few thoughts on the government’s new energy security strategy, published on 7 April

First, it’s not really new.   The Energy White Paper back in December 2020, building on the Prime Minister’s ‘Ten Point Plan’, has already committed the UK to ambitious goals in areas such as offshore wind, nuclear power, low carbon heating and clean hydrogen. What the strategy does do, however, is raise the scale of ambition in some key areas.

Second, it’s really quite long term – so much of it is not going be deliverable for at least a decade.  And that’s notable considering this strategy was a reaction to the very immediate shock to the system in the form of sky high wholesale energy prices, exacerbated by the Ukraine crisis and the prospect of curtailment of Russian gas flows.

Third, it has a gaping hole in it, and that’s energy efficiency.  It is already being touted as an energy ‘supply’ strategy because it has so little to say about the demand side of energy.  And that’s disappointing, because helping GB consumers – domestic and business alike – to reduce their energy consumption is not only going to reduce the scale of the energy security challenge; it is also the surest way to help address the standard of living crisis which is not going to see energy prices reduce any time soon, and in a way which reduces carbon emissions.  Our homes are the worst insulated in Europe, and it is starting to feel like the government really doesn’t have any fresh ideas or appetite to sort this out.

Fourth, amidst all the fanfare of a shaky consensus at COP26 in Glasgow last year and the beginnings of a concerted global movement to tackle climate change, it does seem a backward step to be licensing more North Sea oil and gas, and giving an (admittedly) faint second chance to fracking.

That all said, there are some good things in the strategy.  Sharing centre stage are nuclear power and offshore wind.

On the first of these, the government aims to reverse the decline in UK nuclear by building 24 GW of new capacity by 2050, the equivalent of eight large nuclear power stations.   The government’s track record on delivering on new nuclear build projects has been poor, with just the eye-wateringly expensive Hinkley Point C to show for all the talk over many years, and so it therefore hashas some work to do to get private sector investment re-engaged, but of course it now has a ‘regulated asset base’ funding model designed to kick start projects, which will transfer construction risk to consumers.

However it has surely missed the boat if it wants to replace with new nuclear capacity our ageing existing nuclear power stations as they decommission over the coming years.

On offshore wind, the plan is to increase the previous target, 40GW by 2030, to 50GW, and crucially with a promise to reduce planning and consenting delays, and this will be welcomed by developers as these have been acting as a real barrier to new developments.

But both these technologies have long lead times, especially when compared with onshore wind, and are much more expensive.   So what about onshore wind and solar?

Onshore wind appeared to have suffered from a severe dose of nimbyism, with reluctance from within government to give it a real push.   This despite the fact apparently the majority of the public support it. And there were words of encouragement for solar, but no firm targets.

What is particularly good to see however is strengthened targets for production capacity of low carbon hydrogen (especially green hydrogen, from electrolysis), which surely has a pivotal role to play in the decarbonisation of both transport and heat. Crucial here will be funding models to get UK hydrogen production get to scale (for example contracts for differences, as used so effectively to support renewable energy production), and new business models for hydrogen transport and storage infrastructure.  Combined with the measures on nuclear and offshore wind, these important commitments on the ‘supply’ side reinforce the long term trajectory towards net zero.

But none of this will come cheap, and the short term issue right now is the cost of living crisis, with the average energy bills rising by 54% and set to increase again with a further rise of the energy price cap later in the year.  This strategy offers nothing in the short term beyond measures already announced.  And with so little to say on energy efficiency where there is the potential to make some of the biggest gains across energy security, decarbonisation and energy affordability - yet where so much of the heavy lifting is still needed - it is hard not to see it as an opportunity missed.

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Andrew is a specialist energy regulatory and contracts lawyer, who works with a range of utility and developer clients and funders to help them manage regulatory and legal risk in a fast moving and complex environment.

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We’re exceptionally proud of the deep-rooted energy and water specialisms we have here at Shakespeare Martineau. As one of our priority areas for investment and growth, much of our time and resource is focused upon these related (and converging) sectors, ensuring we are at the forefront of industry developments and are best placed to make a positive difference to our clients.

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Biodiversity Net Gain – opportunities for landowners, obligations for developers

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With the ink still wet on some of the policies and agreements to come out of COP26, sustainable development is high on the political agenda.

Improving biodiversity is a major issue for landowners, developers and planning authorities and biodiversity net gain is a method utilised to improve a sites value – the higher the biodiversity net gain, the potentially higher the value, and who doesn’t want that?

What is meant by biodiversity?

The biodiversity of an area is the variety of plant and animal life in a particular habitat. A high level of biodiversity is considered to be desirable and important.

What is biodiversity net gain and what does this mean for Developers?

Biodiversity net gain (BNG) sits within the Environment Act 2021 which received Royal Assent in November 2021. The act requires, amongst other things, that all development schemes in England must deliver a mandatory minimum 10% biodiversity net gain which must be maintained for a period of at least 30 years. This is now a legal requirement.

Biodiversity Net Gain follows a mitigation hierarchy – four steps designed to result in a win- win situation. Wins for the environment and wins for the developer.

  1. Avoidance – avoiding any impact completely such as changing the location of development

  2. Minimisation – reducing the time, extent, impact, intensity of the development

  3. Onsite restoration – measures taken to restore the habitat involved

  4. Offset - measures taken to compensate for the adverse impacts after the previous three have been explored in full

What does this mean for landowners?

By 2028 the farm subsidy, known as the Basic Payment Scheme will be eradicated and in its place (to a degree) the new Environmental Land Management Scheme (ELMS), set under the Agriculture Act 2020, will be fully integrated. The ELMS is based on the philosophy of “public money for public goods”, and biodiversity (along with all natural capital considerations) will play a huge role within the various schemes planned.

What we don’t know at this stage is how the private sector contracts between developers and landowners will sit with the ELMS and whether there will be the ability to benefit from both. (‘Stacking’ is the issue of whether the same land can ‘stack’ one payment upon another).

It would appear that there is opportunity for landowners and farmers to take advantage of developers offsetting their BNG requirements, by adding a new revenue stream for any farm business or landed estate, which may be more lucrative than what the ELMS have to offer. However, a word of caution. All businesses will need to consider their own carbon footprint before embarking on entering into any offset BNG contracts, to ensure they can reach their own net zero carbon target.

Furthermore, as this is still a new concept, values need to be carefully considered. With land needing to be set aside for BNG for a minimum of 30 years (with the Secretary of State having powers to increase this as it sees fit), it might have the negative effect of reducing the capital value of the land. This needs to be compensated by the offset contracts between landowners and developers. Tax planning for future generations also needs to be considered for landowners.

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Amy specialises in agricultural property law, bringing more than 16 years’ experience.

She advises on a variety of matters such as buying and selling farms and estates, agricultural tenancies, easements, bank security work, and advising landowners on diversification projects such as commercial leases and selling land for development.

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Eat or Heat? Net Zero Carbon Britain needs plans, not bans

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Net Zero Carbon Britain

There is currently a great deal of speculation and chatter circulating in the media regarding Net Zero Carbon Britain and the potential problems the country could encounter between now and  2050. 2050 is the proposed deadline for the UK to reduce its carbon emissions to net zero, and at present there are considerable technological, economic and social obstacles to enable us to achieve this. Equally, while the UK should be applauded for being amongst the leading agents for change, it is important that both industry and consumers alike can afford such change. 

One big issue is whether or not the journey to net zero carbon emissions, together with the current shortages of both power and fuel, will  leave many people facing a throwback to the darkness of the 70s’ three-day working week and “lights out” rules. Could we really be heading towards an “eat or heat” way of living? 

What would cause such a dilemma? 

To accelerate and facilitate change, the government has made it clear that carbon levies will be imposed. Certain commentators are convinced that carbon levies hurt industries in transition, and those costs are passed on to consumers and it is the most needy that feel this increase acutely. 

A net zero carbon economy

Right now, there isn’t much clarity on how this will work. Threats of poverty are starting to emerge in the media and people are panicking at shortages, so what will happen when heating and light become more expensive? 

According to the Financial Times, “Britain has arrived at this spectrum of different carbon prices as a result of history, politics and very little economics. Many governments since the second world war, for example, have seen motorists as an easy target for revenue raising, which is why fuel duties still bring in £28bn a year — almost 3.5 per cent of government receipts — even though they have been frozen for a decade” (Financial Times).   

EVs are becoming more common but they are still expensive to most private consumers. For those who cannot afford an electric or relatively new vehicle, will carbon levies be imposed on their old vehicles or on the public transport systems they use?  

To frack, or not to frack?

Britain’s green activists have made the case that fracking could cause issues such as earthquakes or other disasters. But fracking would enable Britain to source its own gas rather than rely on imports. The impact on the earth could be too much of a risk and could be socially and politically unacceptable. 

Only last week, it was reported in iNews that UK Onshore Oil and Gas has said the energy crisis we currently face is “a bizarre state of affairs” when in fact, the gas lying beneath Northern England and the Midlands would be enough to “meet the UK’s gas demands for 50 years” (iNews).   

Should we therefore use the fossil fuels available whilst the transition is made affordable? There is much to ponder.     

The EV conundrum

Recently, there has been talk of the government withdrawing its grants for electric vehicle manufacturing and purchasing. This would not only cause an indirect carbon levy, but could create a confusing landscape for those investing in R&D in these areas.  

Every driver is expected to have an electric, hybrid, hydrogen or bio-fuelled vehicle by 2030. But what hasn’t been explained, is how this can be brought about on an affordable basis. How will residents of apartment blocks charge their cars? And how will residents of terraced streets with little to no parking arrangements charge theirs?  

There are those seeking to provide such services, but they must be legally enabled to do so. Equally legislation must protect consumers who purchase such goods or services. Furthermore the safety of those working with such goods should be trained and protected by regulatory measures.  

A leading voice in this debate is that of the Society of Motor Manufacturers and traders, the SMMT. They have voiced their view that rather than bans which can create innovative panic, there should be plans formed between government and industries that will lead to targeted innovation and implementation. This is a time when meaningful change can be made to the environment of the country’s citizens, but not at the cost of those consumers who will be adversely affected by carbon levies. 

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To discuss any of the issues covered here contact Edward Flanagan or another member of the green energy team.  

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Eddie works with a highly skilled team to deliver industry-specific advice to the asset finance and leasing sector.

Eddie and his team advise clients on a wide range of issues concerning leasing, hire, consumer credit, the FCA source book and the regulatory landscape affecting the UK finance and leasing sector.

Energy

We’re exceptionally proud of the deep-rooted energy and water specialisms we have here at Shakespeare Martineau. As one of our priority areas for investment and growth, much of our time and resource is focused upon these related (and converging) sectors, ensuring we are at the forefront of industry developments and are best placed to make a positive difference to our clients.

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COP26 - Round up of week 1

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A few reflections on COP26 after week 1 in Glasgow, by head of energy Andrew Whitehead

First, you don’t have to be in the blue or green zones to find some great events going on around the city, and beyond.  And Glasgow has plenty of venues to meet up for breakfast, lunch, dinner, or just a coffee, which is just as well as there are plenty of clients and contacts coming and going.

So, what are people talking about?

Well, beyond the big headline announcements around methane emissions, deforestation and carbon reporting, and looking to the energy sector, there are some recurring themes.

First, hydrogen surely has an important role to play, not just for heating homes and cooking, but as a substitute for natural gas in industrial processes and as a transport fuel.   In fact, some say the hydrogen economy in 2050 could be the size of the oil and gas industry now. Our gas network companies are doing some vital work in this area, to develop demonstration projects to prove the concept and ensure our existing pipeline system is up to the job of safely conveying hydrogen at high pressure.

We are proud to be working for clients in this area on the cutting edge of research and development, a great example being the Birmingham Centre for Railway Research and Education (BCRRE), at the University of Birmingham, which is showcasing at COP next week its HydroFLEX hydrogen-ready passenger train, an exciting collaboration with Porterbrook.

What will be interesting is how hydrogen networks supplying homes will play out against the government’s drive to install electric heat pumps.  It feels like a VHS/Betamax technology battle, but actually there must be a place for both; heat pumps on their own are not going to be sufficient.  What seems clear is that developing hydrogen, at least initially, around industrial clusters, is a good start.  These can bring together production and demand, and utilise carbon capture and storage, allowing a transitional space to deploy so-called ‘blue’ hydrogen as a kick start to the eventual sustainable development of green hydrogen production.

This holistic approach to creating a circular carbon economy has also been a theme in discussions around how we can decarbonise the “hard to abate” energy intensive industries such as cement, steel and chemicals.  This is a vital nut to crack, as emissions from the industrial sector account for over 35% of overall emissions.  And the challenge is not just one of decarbonising energy usage, but also to address the emissions associated with the industrial processes themselves.

At COP26 we heard from many businesses who are doing the right thing and leading from the front, and we have also heard from our own government on its plans to ramp up carbon reporting to improve transparency.   Critical here will be how each of us as individuals embrace making the right consumer choices – which will often not be the cheapest – in order to stimulate demand for low or zero carbon products and services.

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There is also plenty of talk at COP26 on the role of nuclear.   Large scale nuclear has been given a boost recently with the new finance bill which will allow developers to share construction risk by guaranteeing a pre-build revenue stream.  For smaller “modular” reactors, constructed offsite in purpose-build factories, Rolls Royce reckon that, from the early 2030s, they can turn out two a year on current projections, in time more.  These could be a game changer for nuclear – at 430MW each, one is enough to power a city the size of Leeds.

The electrification of heat and transport is of course going to involve a seismic shift in how our power system works, and indeed that transition is well underway.  In its role as system operator, National Grid is already using a host of new balancing tools to “keep the lights on”, and in due course to keep many of our homes warm and our cars on the road.  And those tools are deployed alongside sophisticated weather forecast modelling and digital optimisation technology. This is no straightforward task; the UK government has committed to a zero carbon power sector by 2035, consistent with the 6th carbon budget, and National Grid is working ahead of the curve to ensure that, over the next four years, it will be able to operate the system without fossil fuels whenever there are sufficient renewables running.   The company has been innovative in this space, and one of the themes of COP26 has been to find opportunities to share best practice and ideas with other system operators around the world.

And this theme of collaboration has been a recurring one.   Look no further than the North Sea, where the UK expects to meet the bulk of its 40GW offshore wind ambitions, but these ambitions sit alongside those of countries like Norway, Denmark and Belgium.   Brexit and politics is not getting in the way of genuine international collaboration where we have shared objectives with our neighbours, the most recent example being the subsea electricity interconnector between the UK and Norway, the world’s longest.  This and the other interconnectors need to be optimised alongside planned offshore wind and other energy projects to create an integrated whole which delivers secure and efficiently delivered energy where it’s needed.

And this is where, once again, it comes right back to the individual.  These big projects need local buy in; they typically involve new cables, convertor stations, substations and other onshore infrastructure, and so the benefits and the bigger picture need to be clearly explained and understood.

But isn’t that the case also for the climate change challenge itself? If we are to keep global temperature rise to within 1.5 degrees, we each of us need to make some hard and difficult choices about how we live our lives. People don’t take kindly to being told what to do; far better to explain and win hearts and minds.

For me, that’s been the recurring question over the course of this opening week at COP26; are the world’s politicians brave and bold enough to commit to what’s needed and back themselves to make the case for change when they go back home next week?

Andrew Whitehead, Senior Partner & Head of Energy

A lot rests on the shoulders of our politicians, who must start thinking and acting long term.  And we need to reverse the recent trend of isolationism because the climate change threat will only be solved by collective action in a spirit of generosity, trust and compromise. We have heard during COP26 that we don’t lack availability of global finance which can be raised and deployed in developing and implementing the necessary solutions.  What we risk seeing is a failure of governance, and at this late hour, with the stakes so high, that cannot be allowed to happen.

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Andrew is a specialist energy regulatory and contracts lawyer, who works with a range of utility and developer clients and funders to help them manage regulatory and legal risk in a fast-moving and complex environment.

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Energy & Water Law

We’re exceptionally proud of the deep-rooted energy and water specialisms we have here at Shakespeare Martineau. As one of our priority areas for investment and growth, much of our time and resource is focused upon these related (and converging) sectors, ensuring we are at the forefront of industry developments and are best placed to make a positive difference to our clients.

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Budget Announcement: Clear action towards net zero needed as COP26 draws closer

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The Budget Announcement and the UK net zero target

The budget announcement was delivered yesterday by Rishi Sunak, and here in the energy sector we queried whether some bold action around climate change was going to be taken. As we look forward to COP26 in Glasgow next week, expectations have been low that the Chancellor was going to have much more to offer on the climate agenda.

The Treasury’s spending promises were largely stuffed into last week’s net zero strategy.  This included around £26bn of commitments, including £14bn of new money in areas such as green technology and flood defences as well as measures for building retrofits including the much publicised £5,000 grants for households to replace their gas boilers.

Mixed messaging ahead of COP26

But the government needs to be taking every opportunity to put some clear actions and policies behind its multiple net zero strategies and targets, which so far are generally considered to be laudably ambitious but lacking in substance and detail in too many areas.   And on a global stage, our government is being increasingly called out over its “mixed messaging”, the clearest example being the new Cumbrian coalmine.

At such a critical time, with COP26 only days away, it’s therefore ‘inconvenient’, putting it mildly, to see two of our principal green taxes getting ‘cut’, namely fuel duty and air passenger duty.

That’s not an easy message for the world to hear next week, despite all the government rhetoric in this budget about investing in innovation and R&D and the UK as a ‘science superpower’.

Faced with some admittedly difficult short term challenges, the Chancellor clearly judges that consumers are already getting hit in the pocket by high fuel prices, both at the pump but also at home.  The energy sector continues to be rocked by the surge in gas prices which are having such a traumatic effect on the country’s retail energy suppliers.  They are faced with a domestic price cap sitting way below the cost of supply, and industrial users unprotected by the cap are in many cases unhedged and exposed to massively increased energy costs.

Hard decisions needed to tackle climate change

The cut in air passenger duty is aimed at domestic flights, and is no doubt aimed at improving the fortunes of our airlines and getting people moving again, against the backdrop of the levelling up agenda.  But is it really right to be encouraging me to be taking the plane from Birmingham to Glasgow next week, rather than using the train?

In isolation and out of context, these decisions are understandable, and there is as always a balancing act to perform.  However, this tension between ‘doing the right thing’, and cost, is one that is going to be played out around the world in coming months and years, as governments grapple with the unpalatable truth that taking real action to combat climate change requires hard decisions, in many cases involving increased costs and inconvenience for consumers and tax payers.  And the UK has an opportunity to help ram home that message next week.

At the end of the day, there is an even bigger cost – and not just financial, but human – to adapting to unmitigated climate change, and this is a case that needs to be made much more loudly and frequently.

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Andrew is a specialist energy regulatory and contracts lawyer, who works with a range of utility and developer clients and funders to help them manage regulatory and legal risk in a fast moving and complex environment. Andrew is also currently our elected Senior Partner.

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We’re exceptionally proud of the deep-rooted energy and water specialisms we have here at Shakespeare Martineau. As one of our priority areas for investment and growth, much of our time and resource is focused upon these related (and converging) sectors, ensuring we are at the forefront of industry developments and are best placed to make a positive difference to our clients.

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The Green Gas Support Scheme Regulations

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What is the Green Gas Support Scheme (GGSS)?

As part of the UK Government’s target to reduce greenhouse emissions to net zero by 2050, it is introducing the GGSS this November.  The draft Green Gas Support Scheme Regulations 2021 (“the Draft Regulations”), which establishes the GGSS in Great Britain, were laid before Parliament on 9 September 2021. 

The GGSS will be administered by Ofgem and will replace the Non-Domestic Renewable Heat Incentive scheme which makes regular payments, for 20 years, to individuals and organisations that inject biomethane (which is gas derived from organic matter such as agricultural materials and waste, food waste, manure, sewerage etc.) into the gas grid and which, subject to prescribed extensions, closed to new applicants on 31 March 2021. 

The GGSS aims to provide financial incentives to producers of biomethane from anaerobic digestion (AD), encouraging the deployment of new AD biomethane plants to increase the proportion of green gas in the gas grid.   

The GGSS is specifically targeted to producers of biomethane from anaerobic digestion for injection into the gas grid.  It will not support other technologies – eg process heating, biogas combustion, solar thermal, hybrid heat pumps, heat networks and production of hydrogen. 

Biomethane producers must produce a minimum of 50% of biomethane (by energy content) using waste or residue feedstocks (which have higher carbon savings and a lower environmental impact on soil and quality than bioenergy crops). Gas produced from landfill will not qualify for support under the GGSS. 

Prospective applicants will need to submit a detailed application to Ofgem, along with supporting information including, amongst other things, details of their organisation, the date on which injection of biomethane will commence, the location of the AD plant and grid injection point, a description of the equipment used to produce biomethane, details of feedstock and the volume (in cubic metres) which the biomethane producer intends to inject into the gas grid each year.  

How long will the GGSS last?

The draft regulations provide for the GGSS to run until 31 March 2040.  However, the final date on which biomethane producers can be registered under the GGSS is 30 November 2025. 

How will the GGSS be funded?

It will be funded by a levy on all licensed gas suppliers which will be administered by Ofgem.  

The levy will be calculated on the basis of a pence per meter point per day basis and will be set in advance by Ofgem in January of each year (taking into consideration the GGSS budget cap for the upcoming year plus headroom and the associated administration costs for the GGSS and Green Gas Levy and any underspend from the previous year).  Gas suppliers will be charged quarterly levy payments according to the number of meter points they serve.  However, the Government intends, in due course, to move to a volumetric levy design. 

It is expected that gas suppliers will pass through the costs of the levy to domestic and non-domestic end users.  However, it is estimated that increases in gas bills for consumers will be minimal.  

The first levy payment (based on the prescribed tariffs) is due by gas suppliers in April 2022 with subsequent levy payments being collected quarterly. 

Gas suppliers will be exempt from paying the levy in any year if Ofgem determines that at least 95% of their gas portfolio comes from biomethane that is certified by a certification scheme approved by the Secretary of State.  If Ofgem subsequently determines that a biomethane producer is not exempt, Ofgem can require that it makes a backdated levy payment for that year.  

Gas suppliers must arrange credit cover as specified by Ofgem for each of their quarterly levy payments. The amount of the credit cover may differ from supplier to supplier. Ofgem will make an assessment based on, amongst other things, the number of meter points such gas supplier is serving or is due to supply the following year. 

Gas suppliers must comply with certain obligations including obligations to provide Ofgem with information.  If a gas supplier does not pay its levy payments and there is insufficient credit cover from such defaulting gas supplier, Ofgem can carry out a mutualisation process whereby the outstanding amount is recovered from non-defaulting gas suppliers participating in the GGSS.  The draft regulations also provide for Ofgem to serve penalty notices where a gas supplier is in breach of its obligations under them, for financial penalties of up to 10% of a gas supplier’s annual turnover to be imposed, and for unpaid amounts to be recovered as a civil debt. 

The costs of the GGSS will be managed by introducing an annual overall scheme expenditure budget cap, an annual tariff guarantee budget cap (beyond which the scheme closes until the next financial year) and a quarterly degression mechanism to reduce tariffs as costs reduce.  Tariffs will not degress in the first six months of the GGSS.  After the first six months, a 10% degression on the tariff will happen if forecast expenditure thresholds are breached.  Degression thresholds will be published before the GGSS launches. 

Tariff guarantees for biomethane producers

Upon being successfully registered for the GGSS, biomethane producers will be entitled to receive tariff payments for 15 years.  

There will be three tiers of tariffs to reflect the cost of producing biomethane at different scales: 

Tariff  Limit (megawatt hours (MWh)  Level p/kilowatt hour (kWh) 
Tier 1  The first 60,000 MWh of eligible biomethane  5.51 
Tier 2  The next 40,000 MWh of eligible biomethane  3.53 
Tier 3  The remaining eligible biomethane  1.56 

The tariffs will only be made for biomethane injected into the gas grid.   

The tariffs will be subject to an annual review, following which, they can be lowered, raised or maintained. One month’s notice will be given of any changes to tariffs.  

Biomethane producers must comply with certain obligations eg keeping records on the type of feedstock used, provision of information, complying with registration provisions, providing access rights for Ofgem to inspect equipment, and obligations to submit independent sustainability audit reports to Ofgem.  Biomethane producers must also notify and keep Ofgem informed of any change in its circumstances (eg if it is no longer able to comply with any of its requirements or where there is a change of producer). 

Biomethane producers’ sustainability requirements

Upon being successfully registered for the GGSS, biomethane producers will be entitled to receive tariff payments for 15 years.  

There will be three tiers of tariffs to reflect the cost of producing biomethane at different scales: 

Tariff  Limit (megawatt hours (MWh)  Level p/kilowatt hour (kWh) 
Tier 1  The first 60,000 MWh of eligible biomethane  5.51 
Tier 2  The next 40,000 MWh of eligible biomethane  3.53 
Tier 3  The remaining eligible biomethane  1.56 

The tariffs will only be made for biomethane injected into the gas grid.   

The tariffs will be subject to an annual review, following which, they can be lowered, raised or maintained. One month’s notice will be given of any changes to tariffs.  

Biomethane producers must comply with certain obligations eg keeping records on the type of feedstock used, provision of information, complying with registration provisions, providing access rights for Ofgem to inspect equipment, and obligations to submit independent sustainability audit reports to Ofgem.  Biomethane producers must also notify and keep Ofgem informed of any change in its circumstances (eg if it is no longer able to comply with any of its requirements or where there is a change of producer). 

Additional Capacity

Existing participating biomethane producers will be able to add additional capacity if such additional capacity is in operation by Autumn 2025.

Transfer of biomethane production plants and GGSS payments

The Government proposes to implement a mechanism to allow the transfer of registration of biomethane production between parties – enabling biogas production plants to be bought and sold and GGSS payments to be transferred. 

Sanctions against biomethane producers for non-compliance

The draft regulations provide for Ofgem to take action if a biomethane producer fails to comply with an ongoing obligation or was registered as a participant on the basis of information which is incorrect.  Ofgem will be entitled to conduct investigations, withhold or reduce a biomethane producer’s support payments, revoke its registration, correct the level of tariff being paid to it and recover any overpayment of periodic support payments.  

Guarantees of Origin

Biomethane producers will not need to surrender gas Guarantees of Origin (GOOs).  This means that the GGSS will not be compliant with the sustainability criteria in the EU Renewable Energy Directive 2018 (RED2) and so UK biomethane plants will not be able to sell green gas certificates to EU buyers. 

Interaction with the Renewable Transport Fuel Obligation (RTFO)

Biomethane producers will not need to surrender gas Guarantees of Origin (GOOs).  This means that the GGSS will not be compliant with the sustainability criteria in the EU Renewable Energy Directive 2018 (RED2) and so UK biomethane plants will not be able to sell green gas certificates to EU buyers. 

GGSS and the future

The Government said there may be scope in the future to open up the scheme to supporting other green gases such as hydrogen. 

James Wood, Director of energy consultancy, Optimised Group, advises businesses, property developers, energy project developers etc on how they can reduce their carbon footprint and manage their energy needs more efficiently said: 

“It is excellent to see a further 45 new biomethane projects in the UK being supported through the new Green Gas Support Scheme (GGSS). In addition to supporting the decarbonisation of the gas grid and reduced dependence on imported natural gas, new projects developed under the scheme will offer a green supply of CO2 to an already fragile and fossil fuel dependent UK industrial market.” 

 

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Sushma is a renewable energy specialist having advised on numerous renewable energy,  projects and on heat networks. She has specific expertise in green gas.

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