As part of the complete decarbonisation of the energy sector, the government is proposing to introduce a new noncommodity element into everyone’s gas bills called the Green Gas Levy. The government believe that electricity is well on its way to becoming predominately a renewable sourced generation system, almost certainly within the next 10 years, and is pushing for a similar approach on the gas supply side.

What is Green Gas (GG) and how will it work?

Biomethane from Anaerobic Digestion plants will be the targeted suppliers of GG into the national network and incentives will be made available from 2022 to encourage the expansion of volumes.1 Applicants can apply over the next 4 years (although it could well be extended) with payments made quarterly for 15 years in proportion to the volumes of GG supplied to the grid. It is very similar in set-up to the Feed in Tariff scheme operated for electricity from solar panels. The levy will be calculated and charged on a pence-permeter point per day and will be set in advance by Ofgem in January of each year. At the time of writing, 45 new biomethane projects in the UK will be supported through the new Green Gas Support Scheme (GGSS).

Costs to consumers

The first levy payment will be collected during the first quarter of financial year 2022-23 by suppliers for all gas consumers. It will initially be applied at meter supply point level and will affect all supplies including domestic. The Government are looking at reviewing this to potentially volumetric, but any changes will only be considered once the Levy has commenced operating.

At this point in time (Oct 2021), it is difficult to forecast exactly what the cost to individual gas users will be since the extent to which this initiative is going to successfully grow, how many other applicants will be approved, how large the AD plants will be and whether it will materially increase the volumes of GG in the system, will only become clearer in the coming months and years. Initially the costs though are likely to be minimal for individual gas consumers. For those consumers of both gas and electricity, the government has indicated that they see the balance of non-commodity costs switching over time from electricity (where pass-through costs for renewable support, FiT, and network improvements have been a large component of the bills) to gas, where thus far those non-energy costs have been relatively minor.

One to watch 

All energy buyers need to be aware that from 2022 their bills will include this charge and it will be most likely bundled into the non-commodity costs and not a separate line item, but also that Optimised Energy is aware of this impending change and are prepared to assist clients in understanding the costs.