United Kingdom: the 2023 GGSS review raises the Tier 3 rate from 1.72 to 3.45 p/kWh

On 1 September 2023 the UK government published the annual review of Green Gas Support Scheme (GGSS) tariffs. The most important change: the rate for the third production band (Tier 3) rose from 1.72 to 3.45 p/kWh. The review did not change Tier 1 and Tier 2.

Rates from 1 October 2023

The GGSS supports biomethane injected into the gas grid. The rate depends on the annual production volume of the installation:

For comparison, in 2022 the rates were 5.51, 3.53 and 1.56 p/kWh. Indexation on 1 April 2023 raised them to 6.09, 3.90 and 1.72 p/kWh, and the review of September 2023 changed only Tier 3 (to 3.45). The review of 1 September 2022 did not change them; the collection of comments for that review ran from 19 May to 10 June 2022.

Indexation and review are two different processes

According to the government, rates are automatically raised by inflation on 1 April each year (the change in CPI in the previous calendar year). A simple comparison shows that 6.09 p/kWh is about 10.5% more than 5.51 p/kWh, and a similar increase applies to Tier 2 (3.90 versus 3.53), which is consistent with inflation indexation. The separate annual review, by contrast, allows the structure of rates and thresholds to be adjusted. In 2023 it affected only Tier 3.

How the payment is calculated

The bands are marginal: the first 60,000 MWh a year receive the Tier 1 rate, the next 40,000 MWh the Tier 2 rate, and so on. An illustrative example: an installation injecting 80,000 MWh of biomethane a year would receive 60,000 MWh at 6.09 p/kWh (about GBP 3.65 million) and 20,000 MWh at 3.90 p/kWh (about GBP 0.78 million), that is about GBP 4.43 million a year in total. This calculation is illustrative, based solely on the rates from the review.

What this means for producers

Tier 3 applies only to the largest installations, which produce more than 100,000 MWh of biomethane a year. For small and medium-sized projects Tier 1 and Tier 2 are key, that is the rates for the first 100,000 MWh. Doubling the Tier 3 rate therefore improves the economics mainly of large plants, but it also shows that the government treats the scheme as an instrument tuned every year.

Support for biomethane is the main channel for new biogas projects in the United Kingdom. The feed-in tariff was phased out earlier (see the post on the Smart Export Guarantee), and in CfD auctions anaerobic digestion did not win contracts (AR4 results).