13 September 2023
The Department for Energy Security and Net Zero (DESNZ) has recently unveiled revisions to the tariff rates within the Green Gas Support Scheme (GGSS) as part of their Annual Tariff Review. These revisions specifically pertain to biogas facilities generating over 100,000 MWh of gas annually, signalling an increase in compensation for injecting environmentally friendly gas into the National Grid.
The tariff increase is primarily driven by revised cost assumptions for larger plants. Factors such as escalating equipment costs, rising expenses in transportation and fuel, and elevated borrowing costs due to increased interest rates have played a pivotal role. The tariff adjustments are engineered to establish fair returns for plants operating at Tier 3 injection levels. This annual tariff review serves the dual purpose of ensuring that tariff payments continue to be effective incentives for GGSS deployment, all while maintaining cost-effectiveness for the consumers. This approach strives to strike a balance, avoiding excessively generous tariff rates that could overcompensate producers and avoiding excessively low rates that might hamper the deployment of quality equipment and feedstocks, diminishing the scheme's ability to reduce carbon emissions.
The increased tariffs create the potential for larger biogas ventures to generate greater revenue, enhancing their financial appeal. This may inspire both newcomers and established operators to consider expanding their involvement in biogas production. Additionally, these elevated tariffs provide added motivation for the progression of significant anaerobic digestion initiatives that may have been delayed or postponed. Nonetheless, the persistent challenge lies in securing a consistent feedstock, as one of the eligibility criteria for the GGSS is that the biogas plant must use at least 50% waste or residue feedstocks.
Concerns relate specifically to the availability of food waste feedstocks, with reports indicating difficulties for developers in securing contracts. With the Department for Environment Food and Rural Affairs (Defra) recently announcing that consistent household collections, including mandatory food waste, will be delayed until at least October 2025, it is difficult to see how higher GGSS tariff levels will help projects secure funding.
In summary, the revised tariffs send a signal that the government is committed to supporting renewable and low-carbon gas production in Great Britain and provide incentive for the development of more biogas plants. However, it is crucial to note that the persistent issue of securing reliable waste feedstocks contracts remains an outstanding challenge, warranting further attention and resolution to move forward.