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The Green Gas Levy explained

Blog
Ben Young
26 May 2021

It’s very hard to have a conversation around utilities without the topic of renewables coming up these days. The objective to ‘Be Greener’ is everywhere – from straws and cups to cars and planes. Though with everything you hear these days about how Earth is hurtling toward ruin as a result of the industrial revolution; I suppose it’s not all that surprising.

Keeping with the times, the gas industry is going through major changes. Although you will find long term ideas plans for the ‘greenification’ of supply and infrastructure – for example, the proposed use of Hydrogen instead of Natural Gas – many are hindered by that very phrase – long term. Over the last few years we have seen the cost of biomethane shoot up from trading at ~0.2p/kWh up to values as high as 1p/kWh, largely driven by demand increasing dramatically off the back of the announcement of net zero by 2050 governmental target – with increase in supply unfortunately not being able to keep up.

As a result of the need to meet target and recognition around the country needing to keep up, the government has proposed the introduction of a ‘Green Gas Levy’ to be imposed on gas bills; having been in the offing for a while now it may be something you have heard about already that is coming in the not too distant future.

What is the Green Gas Levy?

Of the gas that is pumped into the UK the vast majority is brown, with a little green in the mix. The production and injection of green gas is facilitated and paid for through the green gas certification scheme, which a user will receive a certificate from should they contribute. The Green Gas Levy is a proposed consultation to help to fund the GGSS (Green gas Support Scheme), which is similar to other schemes seen in both gas and electricity where for every unit of Green Gas that is injected into the system under the GGSS, the injecting party receives a payment which is funded by the Green Gas Levy – incentivising Green Gas generation and injection into the grid and in turn assisting the nation with its renewables targets.

Who is impacted by the Green Gas Levy?

This Levy is going to be charged to all end users of the UK gas network. To put into context, where at the moment you may have a daily charge, that charge can be broken down into many parts that pay for many different things such as infrastructure, emergencies and more. The Green Gas Levy is essentially being proposed to be an additional aspect of the ‘non-gas’ aspect of gas costs in order to aid the country in achieving it’s 2050 net zero target.

When does the Green Gas Levy start?

The scheme is confirmed to be starting in October 2021, with suppliers seeing first bills later on that year. For end users, from a costing perspective the scheme is expected to begin relatively flat, with charging being largely dependent on the size of the supply in question – potential initial figures suggested £2, £20 or £220 per meter per year dependent on the size of the supply the charge is being attributed to. There has been some debate amongst parties in consultation over the charge around whether a volume based charge would be preferable, but it is thought that things will at least start with flat rate as a volume based charge would be relatively more complex to administer, with volume-based potentially following on in the future.

Future Green Gas Levy rates will depend on how many biomethane generators start operating under the new GGSS scheme. Biomethane has historically made up a low proportion of the network (around 1% of gas is Green Gas) which is why they think this scheme is needed to incentivise growth in this sector.

If you have any questions or would like to know more about our Gas framework and how can YPO can help, please get in touch with the team!

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Author

Ben Young

Senior Key Account Manager

Corona Energy