The Department for Energy Security and Net Zero (DESNZ) has announced changes to the tariff rates for the Green Gas Support Scheme (GGSS) following their Annual Tariff Review. The new rates will take effect on 1 October, 2023.
Following the review of tariffs and thresholds, the Secretary of State has decided that GGSS Tier 1 and 2 tariffs will remain unchanged, and the Tier 3 tariff will increase from 1.72p/kWh to 3.45p/kWh on 1 October 2023.
GGSS tariffs on 1 October 2023 will be:
- Tier 1: Up to 60,000 MWh per year – 6.09p/kWh
- Tier 2: the next 40,000 MWh per year – 3.90p/kWh
- Tier 3: 100,000 MWh to 250,000 MWh per year – 3.45p/kWh
This new change means, that a very large biomethane plant with a biogas capacity of 15,000 kWh, producing 116,420 MWh of biogas per year will receive the following payments for year 1, compared to the previous values.
DESNZ stated that the Tier 1 and 2 rates continue to provide appropriate incentives for smaller and mid-sized green gas projects without overcompensating. The Tier 3 increase brings the rate more in line with project costs for larger plants after updating assumptions. The goal is to offer comparable returns across all three tiers to drive quality deployment.
The new rates will apply to any projects receiving tariff guarantees from 1 October, 2023 onwards, until the next review leads to additional changes. Tariffs are also adjusted annually on 1 April for inflation based on the previous year’s Consumer Price Index.
By reviewing and adjusting tariffs each year, DESNZ aims to strike the right balance between incentivising green gas projects to help meet net zero goals, while delivering value for energy bill payers funding the scheme. Too high would overcompensate producers, while too low could limit deployment and equipment quality.
The GGSS remains an important support scheme for biomethane and other low-carbon gas production. The tariff changes keep pace with the evolving economics to spur further development. They provide developers with the certainty needed to make investment decisions in 2023 for new projects coming online in 2024 and beyond.