Notice

Green Gas Support Scheme (GGSS): Annual Tariff Review 2022

Updated 30 August 2024

Applies to England, Scotland and Wales

Overview – tariffs and degression thresholds to remain unchanged

The Green Gas Support Scheme Regulations 2021 allow for the Secretary of State to review and change GGSS tariffs and tariff degression thresholds annually with an announcement by 1 September. If applicable, changes then come into force from 1 October. The Annual Tariff Review (ATR) publishes and explains the decisions.

Following the review of tariffs and thresholds, the Secretary of State has decided that GGSS tariffs and degression thresholds will remain unchanged on 1 October 2022.

By reviewing GGSS tariffs annually, we aim to ensure that tariff payments are sufficient to incentivise deployment under the GGSS, whilst ensuring value for money for the billpayer. Tariff rates that are too high would overcompensate producers while rates that are too low could decrease deployment or lower the quality of equipment and feedstocks used, leading to lower carbon savings. Tariff rate degression can be triggered if forecasted spend exceeds the scheme’s Expenditure Threshold for a quarter. This could occur if there is an unexpected spike in applications.

The principles and timetable for the ATR are laid out further on the GGSS Budget Management page.

Tariffs from 1 October 2022

GGSS tariffs will remain unchanged on 1 October 2022, staying at the level set out in the Regulations prior to the scheme’s launch. These are:

• Tier 1: Up to 60,000 MWh – 5.51 p/kWh
• Tier 2: the next 40,000 MWh – 3.53 p/kWh
• Tier 3: 100,000 MWh to 250,000 MWh – 1.56 p/kWh

The review found that these tariffs are effective in providing revenues to incentivise plant development and intended levels of returns to industry.

GGSS tariffs are uprated automatically for inflation every year on 1 April starting in 2023, using the percentage increase or decrease in the Consumer Price Index (CPI) of the previous calendar year. New, uprated tariffs will be published here by Ofgem by 1 April 2023.

On 1 September, the date of the publication of the ATR, we also publish one of the GGSS’s quarterly Expenditure Forecast Statements (EFSs), which can be found on the Green Gas Support Scheme (GGSS): expenditure forecast statements and tariff change notices page. EFSs measure potential future scheme spend against degression thresholds and can, for other quarters, trigger a tariff degression. This quarter, however, the ATR takes precedence for setting tariff levels and the Statement is provided for transparency only.

Degression thresholds from 1 October 2022

The GGSS degression thresholds will also remain unchanged on 1 October 2022. The review found that the existing degression thresholds are at an appropriate level. They should only be reached if there are considerable unexpected spikes in applications, signalling potential over-compensation. GGSS tariffs, as found in this review, provide appropriate rates of return to plant developers and there have not been major changes to plant economics and or industry outlook.

We publish degression thresholds, along with detailed information on the degression assessment process, on the GGSS Budget Management page. We have reproduced it below in Table 1 for clarity. The latest expenditure forecast assessments against these thresholds can be found on the Green Gas Support Scheme (GGSS): expenditure forecast statements and tariff change notices page.

Table 1: GGSS Expenditure Degression Thresholds

Assessment Date	Expenditure threshold figures (£ million)
31 July 2022	92.44
31 October 2022	103.80
31 January 2023	115.34
30 April 2023	127.05
31 July 2023	139.90
31 October 2023	152.89
31 January 2024	166.00
30 April 2024	179.43
31 July 2024	193.33
31 October 2024	207.36
31 January 2025	208.39
30 April 2025	209.42
31 July 2025	210.46
31 October 2025	211.51

Process of reviewing tariffs and degression thresholds

The annual review of GGSS tariffs and degression thresholds involves a re-running of the tariff-setting process and an evaluation of whether degression threshold levels will continue to reflect a theoretical spike in applications, as intended.

The tariff-setting process was designed for, and used in, the setting of the first scheme tariffs prior to launch. It is centred around a model for a reference biomethane anaerobic digestion (AD) plant, designed to represent the average plant we expect to apply for the GGSS. The model indicates what rate of return a set of tariff rates will provide for the reference plant given costs, revenues, and macroeconomic forecast input levels. Further details of the tariff-setting methodology can be found in the GGSS final stage Impact Assessment.

Up-to-date data on biomethane AD plants and the AD market environment is drawn from a Call for Evidence, which is published at the outset of the review. BEIS also undertakes ongoing engagements with industry and investors, which are factored in. The process is run using up-to-date macroeconomic forecasts and BEIS fossil fuel price assumptions.

We published the Call for Evidence for the 2022 ATR on Thursday 19 May, requiring responses by Friday 10 June 2022. It asked all respondents to answer a list of 14 questions and requested developers and operators of biomethane AD plants to fill in a template with information on their planned or operating plant(s). We have provided a summary of responses in Annex A.

The tariff review provides an opportunity to alter tariffs if there are considerable changes to biomethane production and/or cost/revenue factors across the industry. Inflationary impacts on capital and operating costs are factored in through the automatic uprating mechanism conducted by Ofgem.

Annex A: GGSS Annual Tariff Review Call for Evidence

The GGSS Annual Tariff Review Call for Evidence was open from Thursday 19 May to Friday 10 June 2022. It contained 14 questions and, for biomethane anaerobic digestion (AD) plant developers and operators, a template to include information on planned or operating plants. In total there were six responses, one from a trade association and five from biomethane AD plant developers and operators. Three respondents submitted plant data templates.

Overall, responses were consistent with the view that the GGSS tariff levels and degression thresholds were appropriate, though some concerns around costs were raised:

• respondents view the overall attractiveness of developing biomethane AD plants as having either stayed the same or increased since the pre-launch consultation on Future Support for Low Carbon Heat in July 2020
• responses pointed to the increasing maturity of the sector, the balanced and appropriate level of tariffs, the clear support framework provided by current policies, and the sustainability and Environmental, Social and Governance (ESG) benefits of developing biomethane AD plants as reasons for this
• most respondents viewed tariff tiers as appropriate
• respondents either viewed the level of the scheme degression thresholds as appropriate (2/6) or did not comment on its level (4/6)
• most responses said that the higher gas prices seen in 2021 and 2022 had, at the time of response, not been factored into assessments of project viability because there was a high level of uncertainty over whether they would remain high by the time new projects have commissioned
• all responses referenced increasing costs as an issue for plant developers and operators, with most respondents linking this to overall inflation levels in the economy
• respondents pointed out individual areas in which costs have increased or could increase:
  • fossil fuel prices have increased costs of propane, fuel for heat and electricity costs, as well as transportation, costs for crop cultivation, and costs of digestate spreading
  • increased lead times for importing technology required in plant development
  • Business Rates have increased in recent years
  • other costs such as digestate handling could increase depending on future regulations
• most respondents said that feedstock availability and price was an important issue for the industry. They indicated that increasing feedstock supply through regulation of the separation of food waste is important to the biomethane AD market’s development (5/6) and could change overall market dynamics (3/6)
• Renewable Fuel Transport Obligations are seen as a good revenue source but are not considered bankable and therefore do not impact project viability (4/6 said that they are either not bankable or do not have an impact on viability, while 2/6 said they may have a positive impact)
• respondents also noted that Green Gas Certificate revenue was helpful to plant viability but remained low, and that carbon dioxide capture and sales viability had improved

Plant template submissions contained commercially sensitive information and, in line with the approach outlined in the ATR Privacy Notice, these are for internal use only.

BEIS regularly engages with industry and investors for market intelligence gathering purposes, covering topics that include tariff levels; GGSS application numbers; the industry deployment outlook; developer, operator and investor sentiment; costs and other challenges for the industry; and rates of return required by investors in AD plants. This intelligence was also considered in the ATR.