The Green Gas Levy

Green Gas Levy

If you read the government's Energy White Paper published in 2020, you will have found a small paragraph on page 111 that stated:

Budget 2020 confirmed that a green gas levy imposed on gas suppliers will fund a new support scheme to achieve this goal, the first of its kind applied to gas in Britain. The costs of the levy are expected to be passed onto gas bill payers. We are considering the responses to our consultation on the green gas levy design and intend to publish a government response in early 2021.

Subject to the outcome of the consultation, we expect the Green Gas Support Scheme (GGSS) to launch in autumn 2021 and run for four years. It will support continued deployment of anaerobic digestion biomethane plants in order to increase the proportion of green gas in the grid. We anticipate that the GGSS could deliver an annual generation of 2.8TWh of renewable heat in 2030/31, the equivalent of the gas requirements of roughly 230,000 homes.

This scheme will be designed to minimise any associated negative environmental impacts from the anaerobic digestion process, such as ammonia emissions. We believe that through these new measures, building on the success of existing government policies, we have the potential to treble the amount of biomethane in the grid between 2018 and 2030.

Fast forward to 20th November 2021; the Green Gas Levy and Green Gas Support Scheme comes into effect.

What is the Green Gas Levy (GGL)?

The green gas levy applies to all licensed fossil fuel gas suppliers. It places obligations on suppliers and requires them to make quarterly levy payments to fund the Green Gas Support Scheme.

This levy comes out of Regulation 39(2) of the Green Gas Support Scheme Regulations 2021. BEIS has published the first two levy rates as below.

  Year 1: 30th November 2021 to 31st March 2022 Year 2: 1st April 2022 to 31st March 2023
Daily Levy Rate £0.484p £0.576p
  £0.484p per meter per day, equivalent to 59p per meter over the period £0.576p per meter per day, equivalent to £2.10 per meter over the period

BEIS has calculated that the maximum levy amount that can be collected in any one scheme year is £209,692,472.

This Levy is charged to all end users of the UK gas network. It forms part of the ‘non-gas’ aspect of gas costs in order to aid the country in achieving its 2050 net zero target.

What is the Green Gas Support Scheme?

The GGSS, funded by the green gas levy, is created by BEIS and administered by Ofgem.

The scheme provides financial incentives for new anaerobic digestion biomethane plants to increase the proportion of green gas in the gas grid. Registered participants will receive quarterly payments over a period of 15 years. Payments are based on the amount of eligible biomethane that a participant injects into the gas grid.

The scheme follows the Non-Domestic Renewable Heat Incentive (RHI) Scheme which closed to new applicants on 31 March 2021. Registered participants will receive tariff payments for 15 years.

Ofgems role is to assess and register GGSS applications. These assessments are made based on the evidence provided by gas suppliers and any circumstances specific to the biomethane production plant.

What are the exemptions?

Like any energy legislation, there are exemptions. If gas suppliers can provide evidence that they have procured at least 95% biomethane using green gas certificates from a recognised certification scheme, then they can claim exemption.

BEIS has provided two schemes that are approved for this exemption:

  • The Green Gas Certification Scheme, run by Renewable Energy Assurance Ltd
  • The Biomethane Certification Scheme, run by Green Gas Trading Ltd

What's the aim of this scheme?

The government plans for the scheme to help support the decarbonisation of the UK’s gas supplies by increasing the proportion of ‘green’ gas into the grid. Further to this, they believe that, during peak years of production, biomethane plants incentivised by the GGSS will produce enough green gas to heat around 200,000 homes. The GGSS is expected to contribute 3.7 million tons of CO2 equivalent of carbon savings over Carbon Budgets 4 and 5, and 8.2 million tons of CO2 equivalent of carbon savings over its lifetime. This is equivalent to taking approximately 3.6 million cars off the road for a year.

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