The UK government has announced that they are seeking views on options for the future support for low carbon heat beyond the Renewable Heat Incentive (RHI). The outlining of future support arrangements for renewable technologies such as anaerobic digestion (AD) is broadly welcomed following a period of uncertainty for renewable heat asset operators, developers and investors. The consultation sets out an extension to the current RHI scheme and also presents proposals for a successor initiative for AD plants producing biomethane – the Green Gas Support Scheme.
Here is a summary of what’s in the announcement for the anaerobic digestion sector:
- The current RHI tariff for biomethane has been extended for a further two years. Applicants must reach Stage 2 (financial close) in their application by March 2021 with the full application (following commissioning of the plant) being submitted by March 2022;
- Following closure of the RHI, the introduction of a Green Gas Support Scheme with a tariff payment system that is broadly similar to the RHI, both in terms of tariff structure and, it has been suggested, initial tariff rates;
- An increase in the quantity of biomethane eligible within the tier 1 tariff payment band within the Green Gas Support Scheme;
- A reduction in the term of tariff support from 20 years to 15 years;
- An additional stage in the application for the Green Gas Support Scheme designed to provide further certainty to applicants as they commit to capital outlay; and,
- A potential increase in the current requirement to use at least 50% waste derived feedstock.
The announcement of an extension to the existing support mechanism, along with a successor scheme, provides a clear framework for the development of biomethane producing anaerobic digestion plants well into the next decade. Short term certainty is offered to developers who may have been battling against pressing RHI deadlines. In the longer term, the detail in the announcement signals that the Government is looking to the market to develop larger waste fed AD facilities that can take advantage of economies of scale and can collectively make an impact in decarbonising the UK gas grid.
Industry has until July 7th to respond, and the full suite of consultation documents (including your opportunity to respond!) can be accessed on this link: Future support for low carbon heat
Here at WRM, we anticipate the announcement may revive or reinvigorate a number of previous project opportunities that may have been discounted or mothballed. Why not get in touch with the team to discuss what this announcement means for your AD projects?