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Decarbonising gas supplies with the Green Gas Levy – its goals and impact explained

6 September 2021 | 10 minutes

What is the Green Gas Levy and the what are the impacts for businesses?

The phrase ‘net-zero’ has been pulled sharply into focus as the UK government’s decarbonisation agenda gathers momentum. It seems both new legislation and new taxes hurtle regularly towards businesses as they also scramble to adapt their operations and modify their supply chains in an effort to mitigate climate change.

But what does net-zero actually mean? It’s the term that refers to the balance between emissions being produced and entering the atmosphere and those that are taken out. In 2019, the UK became the first major economy to commit to achieving net-zero by 2050 when the government announced that it would implement a legally binding target. The latest initiatives introduced to help achieve this within the 30 year timeframe is the Green Gas Support Scheme (GGSS) which will be supported by the Green Gas Levy (GGL).

The Green Gas Levy explained

Both the GGSS and the GGL have been designed to support the government’s low carbon heating ambitions and will facilitate the deployment of biomethane gas - a ‘green’ gas that is produced through 1anaerobic digestion. Anaerobic digestion is the name of the process given to the transformation of organic matter like animal manure and food waste into biogas. By sealing waste in an anaerobic digestion plant and removing the oxygen, microorganisms break down the material to produce green gas which is then transmitted to the grid by producers.

The GGSS has been set up to aid in the development of anaerobic digestion plants and increase the deployment of green gas by paying the gas producer for each unit it injects into the grid. The majority of gas currently on the UK network is brown and it’s planned that the Green Gas Levy, which will land on all UK licenced gas suppliers and consumers, will provide the incentive to produce more biomethane gas through investment in the process and infrastructure.

In March 2021, Ofgem was announced as the administrator of the GGSS and GGL by the Government Response to the Future Support for Low Carbon Heat and the Green Gas Levy consultations.

Who does the Green Gas Levy impact?

The levy will be placed on all licensed UK fossil fuel gas suppliers with the only exemption being those suppliers that provide 295% biomethane gas from green fuel sources already. End users of the UK gas network will also be affected; however, the increase in the daily charge is not expected to be particularly significant. The levy will be included within the elements of the daily charge that are related to non-gas costs such as Use of System charges and infrastructure. As administrator of the scheme, Ofgem will be accountable for collecting the levy payments from energy suppliers on a quarterly basis with the first expected to be taken in the first quarter of the 3financial year 2022/2023.

When the Green Gas Levy launches, and for the first few years following its introduction, the plan is for it to be calculated on a flat-rate per-metre basis. In its consultation the government considered this approach to be the fairest and most practicable at first, avoiding certain consumer groups being responsible for, or carrying the burden of higher costs in relation to their overall gas consumption.

A transition to a volumetric levy is in planning by the government for 2024/2025 and this option would ensure costs of the levy are more closely aligned to the amount of gas consumed. The result is that smaller consumers are likely to pay less and larger consumers, such as energy intensive industries would pay more.

4The Green Gas Support Scheme is expected to save 8.2 million tonnes carbon dioxide equivalent (MtCO2e) of carbon savings over its lifetime and play a significant role in the decarbonisation of Great Britain’s gas supplies.

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We’re able to offer renewable gas from a variety of sources; biodegradable residues, waste and biomass, plus each option is Renewable Gas Guarantee of Origin (RGGO) guaranteed. So why not contact us today for a bespoke quote for your business?

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