Part 3 - The scope of the opportunity
The UK government has now provided the outline of the “Green Gas Support Scheme" (GGSS), the tariffs that enable some meaningful comparisons with the two principle schemes that support the production of biomethane: the non-domestic renewable heat incentive (RHI) and the renewable transport fuel obligation (RTFO).
In this third article on the Government’s response to the consultation, Jonathan Croley, Senior Associate at Ashfords LLP examines the scope of the opportunity presented by the GGSS, and considers implications of the GGSS on the decarbonisation of heat and wider potential impacts on the UK economy.
What is the opportunity presented by the GGSS?
The GGSS presents an opportunity for those considering investing in and constructing biomethane plants, creating a need for new anaerobic digestion (AD) plants to deliver this additional green gas.
Once accredited, the plant will be eligible to receive payments under the GGSS for 15 years. The tariffs payable are discussed in the second article in this series, which can be read here.
What is the commercial value of the impact of the GGSS?
It has been estimated that the GGSS will stimulate the production of around 2.9 TWh of green gas per year, tripling the amount of biomethane in the gas grid by 2030.
The Anaerobic Digestion and Bioresources Association (ADBA) calculates that this equates to a further 45 AD plants.
What are the timescales to take advantage of the opportunity?
The GGSS is due to open in Autumn 2021 and will close in Autumn 2025.
What are the potential costs of delaying involvement in the GGSS?
In order to incentivise early investment, the tariffs will be subject to degression against a forecast expenditure trigger. If expenditure thresholds are breached, a 10% degression on the level of the tariff will be applied.
Degression is likely to favour those developers who already have an extant planning permission for a site that has not been accredited for RHI, or have advanced plans which can be imminently submitted for planning approval.
At first sight the GGSS is more an evolution of the RHI than revolution in achieving the decarbonisation of heat, but it is certainly a significant step towards Net Zero in the UK.
With the upcoming introduction of mandatory local authority domestic food waste collections, the GGSS will also serve as an opportunity to decarbonise the food waste sector, together with the many benefits that the AD sector can offer to the UK Agriculture Sector.
In this wider context, the GGSS can be seen as a step to embedding the circular economy into the “green recovery” which has been the subject of much rhetoric over the past twelve months.
The government's full response to the "Future Support for Low Carbon Heat" consultation can be found here.
Ashfords has recently been appointed to the Anaerobic Digestion and Bioresources Association (ADBA) Advisory Board and will be represented by Partner Brian Farrell and Senior Associate Jonathan Croley, from Ashfords LLP's Commercial and IP team (please see the article here).
We are grateful to ADBA for contributing to the analysis set out in this article.