Financial incentives

The government incentive schemes are designed to support the deployment of renewable energy generation in the UK, allowing producers to compete with fossil fuel generated technologies which may be cheaper in the short term. Renewable energy is essential if Britain is to meet its binding climate change targets – to deliver 15% of all energy from renewable sources by 2020 and to reduce greenhouse gas emissions by 80% by 2050 (relative to 1990 levels). Oxford research has shown that the negative impact that spikes in global oil, gas and coal prices have on the UK could be reduced by over 50% in 2050 by increasing deployment of renewable energy.

Biogas is innately flexible - it can be used to generate heat or power, or upgraded to biomethane where it can be stored in the national grid or used as a transport fuel. AD can be supported by a number of incentive schemes depending on how the biogas is used– the RO or FIT for electricity generation, RHI for supplying heat or injecting biomethane to the gas grid, or the RTFO for transport fuel.

Incentive FIT RO
Eligibility Electricity generating plants under 5MW (FIT is not available if plant has received any other state aid such as a WRAP grant to help with the capital cost of plant) Electricity generating plants of all sizes
Tariff rate ≤250 kW = 12.46p/kWh 2 ROCs/MWh ≈ 9p/kWh
>250-500 kW = 11.52p/kWh
>500-5000 kW = 9.49p/kWh
Tariff length 20 years 20 years
Further info DECC website, Ofgem website to apply DECC website, Ofgem website to apply

Heat from biogas combustion (RHI)

The Renewable Heat Incentive (RHI) supports heat produced from biogas combustion (up to 200 kWth limit) at 7.5p/kWh for 20 years. Support for heat from biogas combustion at other scales is due to be available from Spring 2014.

Biomethane grid injection (RHI)

Injecting biomethane into the grid is also supported for 20 years, at all levels, under the RHI. This incentive was introduced in January 2012, and supports biomethane injection at 7.5p/kWh.

Biomethane as a transport fuel

The use of biomethane as a transport fuel is supported under the Renewable Transport Fuels Obligation at the level of two Renewable Transport Fuels Certificates (RTFCs) per kilo of biomethane if the feedstock is from waste sources, and one RTFC otherwise. The price of a RTFC is approximately 20p/kg. The EU is considering increasing the number of RTFCs/kilo of biomethane to four if the feedstock is from waste sources.

Future changes to incentives:

Incentive Consultation Change announced/expected
FIT Review of the scheme in 2015, where operation of the degression mechanism may be considered
RHI Response to ‘Expanding the non-domestic scheme’ (December 2013) Current 200kWth limit for biogas combustion to be extended, with new support levels in place by spring 2014
RHI Review of biomethane injection tariff (Feb 2014) Biomethane injection tariff under review, to tackle “risk of overcompensation” for larger projects
RHI Response to ‘Expanding the non-domestic scheme’ (December 2013) For plants above 1MW treating non-waste feedstocks, GHG emissions sustainability criteria mandatory for reporting purposes from Autumn 2014. Land use criteria due to be implemented from April 2015.
RHI Response to ‘Expanding the non-domestic scheme’ (December 2013) Tariff guarantee for larger projects (over 1MW) proposed to be introduced from spring 2015
RO CfD contract terms & strike prices (December 2013) Final strike prices confirmed ahead of RO being replaced by FIT with Contracts for Difference for new generation in 2017

Northern Ireland

Current incentives:

Incentive RO RHI
Eligibility Electricity generating plants of all sizes Heat from biogas combustion (up to 200kWth limit) and biomethane grid injection at all levels. Plants which are RO accredited will not be eligble.
Tariff rate ≤ 500kW = 4 ROCs/MWh 3.1p/kWh
500kW – 5MW = 3 ROCs/MWh
>5MW = 2 ROCs/MWh
Tariff length 20 years 20 years
Further info DETI website DETI website

Future changes to incentives in Northern Ireland:

Incentive Change expected
FIT FIT likely to be introduced in 2017 when RO closes to new generation
RO Support up to 5MW will remain unchanged. Over 5 MW, 2 ROC/MWh support will be reduced to 1.9 in 2015/16 and 1.8 in 2016/17