Record low prices were once again seen in UK power markets in April. The drop came as a result of low demand due to current lockdowns and strong renewable generation, particularly from wind and solar. Volatile US oil markets added some further pressure to prices as they turned negative for the first time ever as traders paid to not take delivery in the face of full storage sites and diminishing demand. A rebound in UK power price towards the end of April indicates that we may be seeing early signs of the market recovering, however, volatility remains likely.
The governments CCA (Climate Change Agreement) scheme has been extended from March 2023 to March 2025. The 2-year extension announced in the Spring Budget will give eligible companies extra financial support. Additionally, it is now allowing new businesses to join and gain access to savings as of January 2021. Under current rules, businesses have not been able to join the scheme since October 2018. Any businesses wanting further information on the CCA scheme and how they can benefit, please get in touch.
NEW SUPPORT SCHEMES FOR GREEN GAS AND RENEWABLE HEAT
On the 28th April, the Government announced it was starting a consultation on a Green Gas Support Scheme. The Government has pledged £9 billion of support over the next ten years, which is a welcome indication of on-going support for this important sector, after the Renewable Heat Incentive (RHI) closes to new applicants in March 2021 for the non-domestic sector. The details of the support for Green Gas is to be confirmed, after the closure of the consultation on the 7th July, but is likely to be funded through a Green Gas Levy, which will be applied to the gas supply chain. The consultation documents reveal that the scheme intends to support the continuing development of new biomethane-to-grid projects, after the closure of the RHI. Biomethane produced from the processing of food waste in anaerobic digestion facilities will be supported through a payment related to the amount of green gas injected into the mains gas grid, over a period of between 5 and 15 years. This is a shorter timeframe than the current non-domestic RHI scheme, which provides payments for 20 years, but will hopefully be sufficient to stimulate new project development.
Alongside the consultation on Green Gas, the Government announced that it intends to introduce a Clean Heat Grant, as well as an extension of the domestic RHI scheme to March 2022 (previously scheduled to close to new applicants in March 2021). The Clean Heat Grant will primarily focus on support for heat pumps, in the form of a £4,000 upfront capital grant. Biomass schemes will only be eligible in restricted circumstances. There will be a capacity limit of 45kW for grant supported technologies, so it will mainly be applicable to domestic and small scale non-domestic properties.
We expect the Green Gas Support Scheme announcement to revitalise what was a subdued new project pipeline in the biomethane-to-grid sector, as these complex projects will no longer need to be commissioned by March 2021 in order to receive support. The Carter Jonas Energy team has specialist experience of the development of anaerobic digestion/biomethane-to-grid projects, so please get in touch to discuss any project proposals you may have. For more information, please contact Greg Hilton, Partner in the Energy team at Carter Jonas.