Find out about the Green Gas Levy and its implications for businesses. Get a clear understanding of its impact in our informative guide.
Decarbonising our energy use is one of the biggest challenges that we face if we’re to find a sustainable way to live before it becomes too late to do so, and one of the policies that has been introduced to deal with this is the Green Gas Levy (GGL) which, in junction with the Green Gas Support Scheme (GGSS) of which is to reduce our dependence on fossil fuels by applying a charge to any gas suppliers who rely on natural gas. This came into effect in November 2021 and all businesses should be aware that since 2022 this levy will be included in bills.
The GGL is administered by the government body Ofgem by a quarterly levy on natural gas used. It is applied at meter supply point level and is charged per meter point used. For subsequent scheme years, the levy rate will be announced by the Department for Business, Energy & Industrial Strategy (BEIS) by the 31st of December at the end of the preceding year. The scheme will initially run for four years.
The GGL applies to all licensed fossil fuel gas suppliers in the United Kingdom and came into effect on the 30th of November 2021. This charge is automatically charged to the bill of all business suppliers.
The levy was set up to support the cost of administration and enforcement of a new scheme called The Green Gas Support Scheme (GGSS) which offers financial incentives for the creation or running of new anaerobic digestion biomethane plants to increase the percentage of green gas in the grid. The GGL is calculated taking into account the subsidies needed to incentivise the production and supply of renewable gas through this scheme.
The underlying variables which affect the levy amount announced by BEIS include an adjustment factor, projected scheme expenditure, any forecast scheme year-end surplus, Ofgem’s total forecasted administration costs, a quarterly lag uplift and headroom, or in other words, giving the scheme space to grow a little, should the need arise.
The GGL levy rate for the 2023/2024 scheme year (1 April 2023 to 31 March 2024) is 0.122p per meter per day, or the equivalent of 45p per meter over the period concerned.
The government’s own impact report stated that the introduction of this levy was unlikely to impact international trade and investment. Your energy prices will have risen slightly as a result of this, but the GGL also presents opportunities through the simultaneous creation of the GGSS.
A change in the levy calculation could affect your business. Despite the reasonably clear outlook for charges under a per meter point design, the relative impact on business consumer bills could change significantly following a switch to a volumetric levy, which BEIS views as a fairer way to collect costs as charges would be more closely aligned to actual gas consumption.
The switch to volumetric was indicated for 2024/25, but it remains unclear if or when this will happen. Following this transition, p/kWh charges are likely to be the same across all user types, with the total costs per year increasing for users that use a greater share of overall gas consumption.
All gas suppliers will have to pay the GGS, regardless of company size. There are no exemptions for small businesses
Exemptions are available to energy suppliers whose total gas supply for the duration of a scheme year comprises at least 95% certified biomethane. There are no exemptions for there will be no exemptions for suppliers which offset their carbon footprints. Suppliers seeking this exemption must prove their biomethane supply levels using retired green gas certificates.
The following biomethane certification schemes are approved for the Green Gas Levy exemption mechanism:
the Green Gas Certification Scheme, run by Renewable Energy Assurance Ltd
the Biomethane Certification Scheme, run by Green Gas Trading Ltd
To find out more about how a biomethane certification scheme can be approved for the Green Gas Levy exemption, BEIS give a contact email address but no further information: the contact email address is email@example.com.
There are certainly ways in which your company can adapt to the GGL. The most obvious way is to reduce your energy use and, if at all possible, to switch to renewable forms of energy. Complete an energy audit to identify in full to identify how you can make savings and then act upon them.
Investing in eco-friendly technology such as heat pumps will have an upfront cost, but will save money in the long term, and there may be grants or highly competitively-priced loans available to fund this sort of investment. Reducing your carbon footprint should be an aim for every business and it can be achieved, but it requires your buy-in to reap the rewards that come with it.
These benefits aren’t limited to reducing your energy bills. Reputationally, you can grow your customer base by showing demonstrable commitment to sustainable practices, and with regulations over the use of fossil fuels only likely to get tighter, it also helps to futureproof your business.
The Green Gas Levy would be just another tax without the Green Gas Support Scheme. Biomethane is indistinguishable from natural gas and can therefore be used without a need for any changes in infrastructure or end-user equipment, and is fully compatible for use in natural gas vehicles. The scheme, which is open to applicants based in England, Scotland and Wales, is administered by Ofgem, which publishes full guidance notes.
For now, the GGL is charged per meter, but it will likely become volumetric in the future, meaning that companies which use more natural gas will end up paying more than others who use less. This is just another reason, on top of the financial rewards, the reputational enhancement, and the small matter of ensuring that the planet remains livable, why it pays to consider switching to a more sustainable form of energy.
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If you’re running a business but want to change your gas supplier you can find the best business energy suppliers with the lowest quotes by reading on.
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