The government is limiting support from its new Green Gas Support Scheme, which has been unveiled today (28 April), to support the production of biomethane.
The Department for Business, Energy and Industrial Strategy (BEIS) has published proposals to replace the Non-Domestic Renewable Heat Incentive (RHI) with a new Green Gas Support scheme, which will run for four years from 2021-22, when funding for the former is wound up for at the end of March next year.
The Non-Domestic RHI is the current mechanism for supporting the creation of biomethane, which is produced from food waste using the anaerobic digestion (AD) technique.
In a consultation paper on low carbon heat, issued today, BEIS says only biomethane produced from AD will be supported through the new Green Gas Support Scheme.
It says support for biomethane could be extended to other forms of low-carbon gas in future years. An update on the development of options for supporting low-carbon hydrogen production will be published later in 2020.
Biomethane production will be supported under a revised version of the tariff currently used for paying AD plants through the Non-Domestic RHI.
However, the tariff periods under the new scheme will be cut from the 20 years offered under the Non-Domestic RHI, to 15.
Plants will receive 4.9 -5.5p per kWh of biomethane produced for the first 60,000 MWh injected into the grid per annum. Due to the greater economies of scale possible as production increases, this per kWh rate then reduces to 3.25-3.75p for the next 40,000 MWh of biomethane produced with any remaining output paid at a rate of 1.5-2.75p.
The thresholds for the two lower tiers have been raised from 40,000 MWh and 80,000 MWh, which the existing scheme operates, in order to encourage the development of larger plants.
Beyond the cut-off point of the Green Gas Support Scheme in 2025-26, the consultation paper says gas suppliers could be legally obliged to ensure that a certain percentage of the gas they supply is green.
Another potential model for long-term support for green gas could be a version of the Contracts for Difference, which have helped to deliver the huge increase seen in wind energy over recent years.
Under the Non-Domestic RHI, registered producers of biomethane receive quarterly tariff payments over 20-year periods, based on the amount of the low-volume gas they inject into the grid.
The government says the aim of the new scheme is to boost the proportion of green gas in the grid by encouraging the continued deployment of capital intensive AD biomethane plants.
It also wants to minimise a market hiatus for the biomethane industry by maintaining a stable price support mechanism.
Jess Ralston, analyst at the Energy and Climate Intelligence Unit, highlighted the government’s decision to focus its low carbon heat support on biomethane.
“Facing up to the trickier aspects of getting on track for the UK’s climate targets is vital if the Government is to get net zero done. Grants to help with up-front costs of installing heat pumps will offer more certainty than schemes that repaid costs over years, while re-committing to energy efficiency spending is the minimum needed to make good on promises to cut carbon from British homes.”