The UK government is promoting the reduction of carbon emissions in the energy sector. One of the key approaches involves the implementation of strategic levies aimed at stimulating eco-friendly investments in energy efficiency.
In this piece, we delve into the Green Gas Levy, a fee imposed on gas suppliers that depend on natural gas, a non-renewable fossil fuel. We’ll dissect the green levy, rates and provide answers to commonly asked questions.
The Green Gas Levy is designed to make energy efficiency schemes encourage the generation of eco-friendly gas. It mandates gas suppliers to purchase a specific quantity of green gas and imposes a levy on those who fail to meet this requirement.
This levy is a vital component of the government’s initiatives to diminish greenhouse gas emissions and shift toward a low-carbon, renewable energy, system. The revenue generated from the levy goes to support the production of green gas, particularly biomethane from sustainable sources, through grants provided by the Green Gas Support Scheme (GGSS).
The funds collected through the Green Gas Levy are disbursed to GGSS participants based on the amount of eligible biomethane they introduce into the gas network. Additionally, the levy covers Ofgem’s administrative expenses associated with managing the scheme.
The annual levy rate is determined by the Secretary of State for Business, Energy, and Industrial Strategy, and the scheme’s operational year extends from April 1 to March 31.
The Green Gas Levy was established on November 30, 2021, and it serves as the funding source for the GGSS.
The Green Gas Levy is covered by business gas suppliers, but this applies only if they do not already procure green gas supplies.
The Green Gas Levy rate for the 2023-2024 scheme year, spanning from April 1, 2023, to March 31, 2024, has been disclosed by the BEIS (Department for Business, Energy & Industrial Strategy) at 0.122p per meter per day, is equivalent to 45p per meter over the year.
In the UK, the Green Gas Levy rates are determined by the BEIS and are based on the expenses associated with energy costs and with supporting the production of renewable natural gas.
The calculation of the cost of the levy takes into account the subsidies required to encourage the production and distribution of renewable gas, encompassing administrative and enforcement costs associated with the program.
Annually, the rate is subject to a review and adjustment to accommodate alterations in these expenses.
The Green Gas Levy is computed using the following formula:
Maximum Projected GGSS annual expenditure / Projected total meter points in the market for that rate year * 365 = Price per meter (in pence)
No, consumers are not directly responsible for the Green Gas Levy. The Green Gas Levy is borne by the gas supplier and does not directly affect consumers.
Nevertheless, in practice, business energy suppliers often transfer their underlying expenses to customers, although this is not typically delineated as a separate charge on gas rates or electricity bills, for both residential and business customers.
The Green Gas Levy was instituted with the primary objective of bolstering the GGSS. The proceeds derived from the Green Gas Levy are earmarked for the GGSS, which is specifically designed to offer financial incentives for the production and integration of biomethane, also known as green gas, into the gas distribution network.
Heating residential households and commercial properties accounts for a substantial portion of the United Kingdom’s total greenhouse gas emissions. By augmenting the injection of green gas into the grid, we can effectively curtail our carbon emissions, contributing to a reduction in the environmental impact of heating systems.
The Green Gas Levy rates are announced by the Department for Business, Energy, and Industrial Strategy (BEIS). In the past, it was the government that made these rate announcements. However, starting from the 2023/2024 period and beyond, BEIS will communicate these rates by December 31 of the year preceding the scheme year.
Indeed, there are exemptions applicable to the GGL. Suppliers are eligible for an exemption if at least 95% of their gas supply during a scheme year consists of certified biomethane.
To obtain this exemption, those interested must provide evidence demonstrating the proportion of biomethane within their gas supply.
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