The GGCS encourages a conservative approach to any additionality claims made by gas consumers purchasing Renewable Gas Guarantees of Origin (RGGOs).

From 2017 to February 2024 our guidance on additionality was that “no additional green gas can be said to have been directly produced as a result of a gas consumer buying a Green Gas Certificate [RGGO], and it is important consumers don’t make any such claims. However demand for Certificates [RGGOs] “does create an important driver for further growth of green gas production in the UK.” (Ecofys, 2016)”

We have revisited this position based on the evolving role of RGGOs in the business model for biomethane production and their recognised role within government support frameworks in the UK and the EU.

Our revised guidance is that consumers should maintain a conservative approach and should not assume that additional biomethane was directly produced as a result of their purchase of RGGOs, but if proper consideration is given, they may wish to develop a nuanced claim of additionality based on the type of production model their RGGOs relate to and their conversations with biomethane producers.

Note there is no legal or regulatory definition of “additionality” which can be said to have been met or not. Any claims should be made with full disclosure of the reasoning behind them and in coordination with stakeholders such as sustainability auditors and relevant reporting frameworks e.g. CDP.

Parties should ensure they adhere to the GGCS Scheme Rules on marketing green gas - Scheme Rules - Governance - Green Gas Certification Scheme – and we strongly advise producers, traders and consumers of green gas to be aware of the UK’s green claims code - Green claims code: making environmental claims - GOV.UK (www.gov.uk)  

Information is provided below to support gas consumers purchasing RGGOs to understand their role in supporting additional biomethane production.

Role of RGGOs in subsidised biomethane production

RGGOs issued for biomethane produced with subsidy at the point of injection will be labelled as “Production Support – Yes”.

For producers that receive a subsidy from the UK government, income streams are typically:

• Support from the UK government – a production subsidy is paid to biomethane producers under the Non-Domestic Renewable Heat Incentive (NDRHI) and now the Green Gas Support Scheme (GGSS).  The level of subsidy will vary between plants and is adjusted with inflation over time. A typical plant starting operation in the last few years may receive a payment of around £60/MWh of biomethane injected. Ofgem publishes all tariffs here - Non-Domestic Renewable Heat Incentive (RHI) - Payments & tariffs | Ofgem. All RGGO certificates for gas that has received a subsidy at the point of injection are marked as “Production Support – Yes”
  
  
• Sale of gas – the biomethane produced is sold by a licensed Gas Shipper in the UK gas market (with no reference to it being biomethane). The biomethane producer will receive an income according to their commercial agreement with their Gas Shipper and the movement of the market price. Before the recent energy price increases (since 2022), a typical wholesale gas price had been around £17/MWh. Prices rose to over £100+/MWh in 2022 and 2023 and have now dropped to (as of Feb 2024) around £40/MWh.
  
  
• Sale of RGGOs – prices have historically been over £1/MWh. This means that the RGGO market has never suffered from the extremely low values seen in the electricity GoO system, which underpin many of the accusations of greenwash and the lack of additionality in that sector. In the £1-3/MWh range RGGOs represent a small percentage of the total income secured by biomethane producers but do represent a useful value stream to help ensure the economic operation of plants. Since 2020 there have been independent assessments of RGGO prices (more information here - Market Information - Certificates - Green Gas Certification Scheme). These have shown that most sales have been conducted at £5/MWh and above, with prices of over £20/MWh seen in 2023. While these prices are assessed by external parties and GGCS makes no claims around their accuracy or validity, it does give an indication of the scale of contribution to the biomethane production model that is being made from the RGGO market.
  
  
• Some biomethane producers may also generate income from their processing of wastes, sale of digestate and captured carbon dioxide.
  
  

As detailed above, income received by biomethane producers will vary from site to site and change over time according to the gas market and RGGO market (and the exposure producers have to those markets). Based on the assumptions above, if a plant was accessing today’s market prices (Feb 2024), RGGO income is likely to be between 5-20% of total income received.

Further to the information above, the type of support received from UK Government may influence if it is appropriate to make a claim of additionality.

Non-Domestic Renewable Heat Incentive 

RGGOs will generally be labelled to show which support scheme was accessed by the producer and 90%+ of RGGOs issued to date are for production where the NDRHI was received.

The NDRHI did not include in its modelling any income producers might receive from RGGO sales. However it is possible that plant developers and operators have used RGGO income in their modelling and that marginal projects went ahead that would have otherwise not have been viable, or that RGGO income may encourage producers to generate biomethane in tiers of production where NDRHI payments are lower i.e. (beyond 40,000 MWh/year). See Non-Domestic Renewable Heat Incentive (RHI) - Payments & tariffs | Ofgem for further information. Consumers would need to discuss with individual producers the role of RGGO income in their business before making any potential claims of additionality.  

 

Green Gas Support Scheme

RGGOs will generally be labelled to show which support scheme was accessed by the producer and a small number of RGGOs are now coming from producers supported by the GGSS.

In its Impact Assessment of the GGSS, the UK government recognised the role of RGGO income (page 55). On the basis of this assessment the Green Gas Certification Scheme believe the likely result of no RGGO income being available would be a lower amount of biomethane produced because one of the following outcomes would occur;

• the UK government would have to set the GGSS subsidy at a higher rate per kWh to make up for the lack of RGGO income, and if it kept the total investment the same, that would mean less biomethane produced overall, or;

• the UK government would have to set the GGSS subsidy at a higher rate per kWh to make up for the lack of RGGO income, and increase the total investment to achieve the same production volume, making the subsidy harder to establish, maintain and repeat in the future therefore effecting the long term production levels of biomethane, or;

• the UK government could have set the same lower subsidy as they are currently offering in the GGSS, but a smaller number of projects will be viable because there is no supplementary RGGO income.
  
  

This model of combining public subsidy with private income from guarantee of origin sales is set out in the European Union’s Second Renewable Energy Directive (REDII) (Article 19 Clause 2) where is states that “when a producer receives financial support from a support scheme, the market value of the guarantee of origin for the same production is taken into account appropriately in the relevant support scheme.”

Therefore, when purchasing RGGOs for biomethane supported by the GGSS we believe consumers the may wish to reference the GGSS impact assessment in making a nuanced and transparent claim of additionality. They should transparently describe how their contribution via RGGO purchases provides an income but that the main income for producers comes from gas sales and government support.

 

Role of RGGOs in un-subsidised production of biomethane

RGGOs issued for biomethane produced without subsidy at the point of injection will be labelled as “Production Support – No”.  

Projects with no subsidy

If projects are built where no government subsidy is paid to the producer (and no RTFCs are claimed), the role of the RGGO is likely to be essential in supporting the income model of that producer and it is likely that those projects will have secured long term off take agreements where the RGGO is utilised as a key link between producer and consumer. Consumers will need to discuss with relevant producers the nature of their relationship and what claims of “additionality” may be appropriate.

Projects with “partial subsidy”

There may be producers where part of their production is subsidised while other production volumes are not. For example if the producer breaches their “crop cap” (https://www.greengas.org.uk/certificates) or produces more than their NDRHI or GGSS accreditation allows for.

This is a complex area as government support will have enabled the development of the plant but a consumer purchasing RGGOs may be enabling additional marginal production. Consumers will need to discuss with relevant producers the nature of their relationship and what claims of “additionality” may be appropriate.

 

The Renewable Transport Fuel Obligation (RTFO)

Biomethane, and other eligible green gases, may be produced unsubsidised at the point of production/injection (and RGGOs would therefore be labelled as Production Support – No) and then subsequently used in the transport sector. If relevant criteria withing the RTFO are met, then the supplier of that gas to a transport use will receive a Renewable Transport Fuel Certificate (RTFC), which has a value within the RTFO framework and the compliance structures within it.

In these types of supply chain the purchaser of the RGGOs is part of the value chain where income streams for the biomethane producer would typically be:

• Share in an income stream generated by RTFC sales
• Sale of gas
• any value derived from the processing of wastes, sale of digestate and captured carbon dioxide.

There may be some limited income from sale of RGGOs, noting that the value of the RGGO in an RTFC value chain has not been assessed as this is not an active market and that the RGGO must be delivered by the producer to the fuel supplier who is in the RTFC value chain.

While we are not aware of significant value being given to RGGO sales in an RTFC value chain, what is clear is that a consumer of green gas in a transport use is an essential part of the RTFC claim in this production model, so beyond simply buying the RGGO the consumer is playing a key role in encouraging additional biomethane production.

 

Summary

There is no legal or regulatory definition of “additionality” to which consumers of RGGOs can be said to have met or not.  

However, the above information gives RGGO consumers information about the context of their involvement in the biomethane production model in the UK when they purchase RGGOs.

The key points are as follows:

• RGGOs have always had a value that contributed a significant income to a biomethane producer e.g. £10,000/year+.
• That income has grown as a proportion of total income (estimated at between 5-20% by the GGCS) and it is therefore integral to the biomethane production model in the UK today.
• RGGO income is now explicitly recognised in the way the UK government supports new production facilities under the Green Gas Support Scheme.

We therefore believe that there is an emerging case that the RGGO market is encouraging additional biomethane production and that while maintaining a conservative approach consumers may wish to develop a nuanced claim of additionality based on the type of production model their RGGOs relate to and their conversations with biomethane producers.

They should;

• consider the particular production models related to the RGGOs they are buying e.g. subsidised vs unsubsidised, NDRHI vs GGSS subsidies.
• discuss any claims of additionality with relevant stakeholders
• any such claims should be described transparently.

We welcome further research and discussion on the most effective way industry, government and consumers, can encourage additional biomethane production.