Green Gas: Ensuring value for money through tariff changes - more detail
Updated 16 February 2022
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This publication is available at https://www.gov.uk/government/consultations/future-support-for-low-carbon-heat/consultation-section-ensuring-value-for-money-through-tariff-changes-more-detail
This consultation has concluded.
Detail of outcome
The government response to the Future support for low carbon heat consultation incorporates a response to this consultation
Original consultation
In the Green Gas: Ensuring value for money through tariff changes section of the consultation, pages 16-17, we propose that a degression mechanism is used to adjust tariffs to reflect true industry costs, and we ask for further suggestions to improve value for money.
As potential examples of this, we reference requesting more detailed costing information from biomethane tariff applicants and conducting an annual tariff review. We would like your views on the following areas and any potential impacts of these proposals.
Requesting more detailed costing information
We are proposing that we request more detailed costing information from tariff applicants than is currently collected under the RHI. This could include requesting figures for a small (c. 5-10) number of generic line items within each of the 3 categories of:
- upfront capital plant costs
- ongoing operational costs
- non-tariff revenue
We are considering requesting such information (forecast or actuals, as appropriate) at the application stage and requiring participants to provide it on an ongoing basis, for example annually, with the intention of avoiding any significant administrative burden. Doing so could ensure we understand true industry costs as they evolve, provide an evidence base for future policy on longer term support for green gas (post-Green Gas Support Scheme), and potentially be used in a tariff review process during the life of the Green Gas Support Scheme. In line with current cost collection under the RHI, we envisage that submitted information would only ever be published in anonymised and aggregate form.
Tariff review
We are proposing that a tariff review mechanism could provide a way to adjust tariffs during the life of the scheme, by changing the tariffs offered for new applicants (those who have successfully applied for tariff guarantees would be unaffected). A tariff review could be determined by significant or unexpected cost changes in industry, for example unit gas prices or capital and operating costs for plants.
The review could be conducted :
- annually
- as a single review point midway through the scheme
It could be:
- mechanistic and based on defined rules set out in regulations (as with the RHI’s degression mechanism)
- a manual review process which would include consultation at the time of it happening
We welcome views on each of these options.