Generators of biomethane can claim RHI and RTFO payments

AD plants can now viably maximise biomethane production, benefitting from the highest Renewable Heat Incentive (RHI) tariff and “top up” with additional Renewable Transport Fuel Obligation (RTFO) payments, as part of a government incentivised policy for decarbonising the transport sector.

This industry update follows the latest 15% degression from 1 January 2019 for RHI tariffs for biomethane and large biogas. Lucy Hopwood from the NNFCC speaks to Bionenergy Insight exclusively, ahead of her presentation on ‘Claiming RTFO and RHI on biomethane from AD’ at the Energy and Rural Business Show this February 6 and 7 at the Telford International Centre.

“Up until recently, biomethane producers have generally either injected gas into the grid to receive RHI payments or they supply the transport sector and claim Renewable Transport Fuel Certificates (RTFCs). Combining the two historically hasn’t been done,” says Lucy.

With the new degression and the budget for RHI tariff guarantees becoming tight, it’s likely to be more financially viable to claim under both the RHI and the RTFO in future for different units of gas generated.

RTFO opportunity

Lucy explains that in June 2018 the first transport fuel supplier succeeded in earning RTFCs for UK-produced gas. “While some green gas was previously imported, domestic producers were limited to supplying the heat market. However, as a result of dual-claims being possible, domestic production of green gas is expected to increase, as producers are likely to optimise their production.

“For example, there are a growing number of commercial haulage operators seeking to improve their environmental credentials by running haulage trucks on green gas.”

RTFO stats

“Biomethane represents small volume (0.2%) of renewable fuel production registered under the RTFO to date. The obligation is on suppliers of transport fuel, supplying over 450,000 litres of fuel per annum, to supply a percentage from sustainable renewable sources,” says Lucy.

Obligated suppliers can either:

  • Produce their own biofuels
  • Purchase RTFO certificates (RTFCs) from other biofuel producers; or
  • Choose to pay the buy out

“UK Government has targets to achieve 9.75% of transport energy from renewable fuels in 2020 and 12.4% in 2032. But a cap has been placed on the use of crop-derived biofuels, reducing from 4% in 2018 to 2% in 2032; therefore waste-derived fuels will be increasingly favoured and rewarded,” Lucy explains.

  • 1 litre of biofuel = 1 RTFC
  • 1kg of biomethane = 1.9 RTFC

(Double counted if derived from wastes or residues = 3.8 RTFCs for biomethane from waste)

“It’s difficult to assign a value to RTFCs as there is no published data. The buy-out price is 30p per RTFC providing a peak price. However, trade prices have varied between £0.09 and £0.20 per certificate in recent years as a result of supply, demand and the obligation level in place at the time.” adds Lucy.

RHI Degression explained  

Lucy explains that the 15% degression to RHI tariffs for biomethane was a result of the total RHI scheme forecast expenditure as of 31 October 2018 being above the total anticipated expenditure threshold of £809.90m, and the forecast expenditure for large biogas and biomethane for injection was well in excess of the estimated budget.

“The rapid growth in anticipated future costs is a result of 25 tariff guarantees having now been granted for biomethane injection facilities, which results in them being considered in forecast expenditure calculations for the RHI. These 25 facilities have secured a tariff of 5.60p/kWh for their Tier 1 biomethane (first 40,000MWh), 3.29p/kWh for Tier 2 (next 40,000MWh) and 2.53p/kWh for Tier 3 (everything over 80,000MWh per year). Facilities applying or accrediting now will secure tariffs of 4.76p, 2.80p and 2.16p/kWh for Tier 1, 2 and 3 respectively,” says Lucy.  

In terms of what the future holds, Lucy believes it’s unlikely that there will be such a flurry of activity again in the large biogas and biomethane sector, so growth is expected to slow and further reduction to these RHI tariffs is less likely.

“In simple terms, where a degression has a significant impact on application numbers and uptake slows, there is unlikely to be any further tariff reduction. The next announcement will be made by 1st March 2019, with the next possible degression taking place on 1st April 2019; this will be based on accreditations or tariff guarantees awarded during Nov, Dec 2018 and Jan 2019. If growth has not slowed significantly during this period, there could be a further 20% or 25% decrease (depending on total scheme forecast expenditure), taking Tier 1 tariffs down as low as 3.57p/kWh.

 “At this level, and even following the first 15% which has now taken effect, the viability of biomethane solely for RHI applications is questionable, and the number of new applications is expected to decline. This is where the RTFO opportunity becomes more exciting and prevalent,” adds Lucy.

For those wanting to compare the RHI and RTFO values they can access an online calculator to see which scheme offers the most revenue by visiting: https://www.nnfcc.co.uk/publications/tool-biomethane-rtfc-calculator.

Energy and Rural Business Show

Lucy Hopwood will be speaking in the AD and Biogas session and will chair the Biomass session on Wednesday 6 February at the Energy & Rural Business Show.

The Energy and Rural Business Show is a pioneering event showcasing the latest opportunities for farmers, landowners and rural businesses looking to maximise profitable and sustainable land use. The event features three dedicated Expo’s exploring opportunities which will define rural businesses of the future.

Energy Now Expo, celebrating 10 years this February, will be joined by The Low-Emission Vehicles Expo and Rural Business Expo. Energy Now Expo will feature an exhibition, a dedicated energy storage theatre, a one-to-one advice clinic, and conference streams devoted to each type of renewable energy. New for 2019, Low Emission Vehicles Expo will have on-stand demos and presentations and the latest vehicles and machinery for rural businesses on show. Also new for 2019, The Rural Business Expo will have ‘how to’ workshops from industry experts and farmers who have implemented successful new business ventures or have integrated new projects with existing initiatives. 

There is still time to exhibit at the event and FREE tickets can be reserved to attend the event today. Find out more here.

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