RTFO buy-out price increase to 50p/litre confirmed

This week, the Department for Transport (DfT) confirmed that it will increase the Renewable Transport Fuel Obligation’s (RTFO) buy-out price from 30p/litre to 50p/litre, to help protect the scheme’s annual carbon savings and support producers of biomethane and other low carbon fuels. While this change is subject to Parliamentary process, it is expected to come into effect by 1st January 2021.

This announcement has been driven, in part, by the numerous responses to the DfT’s consultation, with the majority supporting their proposal. As outlined in a recent blog, the RTFO certificates have been trading in excess of 25p for the last 12 months, where fuel suppliers become increasingly likely to opt out of the scheme whenever the certificates’ price nears the 30p buy-out price. Under these conditions, it is cheaper for fuel suppliers to pay the buy-out and are therefore not required to supply low carbon alternatives, regressing back to fossil fuels. Raising the buy-out price to 50p ensures that fuel suppliers stick to their renewable obligation, purchasing increasing levels of renewable fuels, and enables AD plants to receive more money for their RTFCs. If (and when) RTFC prices exceed 30p next year, the AD industry could see a second boom in growth, where the RHI or GGSS provides the back-up price guarantee.

As the leading trade association for the AD industry in the UK, ADBA’s consultation responses are highly valued by government departments, such as DfT. It is important that all members provide their insight where possible to future consultations, allowing us to lobby for changes which effectively support the AD industry. This change to RTFO could have profound impacts to AD’s cost model, and it has been made possible with our collective support.

For more information about the RTFO and its consultation, please contact nick.primmer@adbioresources.org