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Energy explained

Three ways to improve the Green Gas Levy

Heat pump being installed

The government is looking at a new way to fund green gas in the UK, which will increase gas bills. In this post, we share our ideas for improving the proposals.

We’re big fans of green gas, and increasing the amount that’s produced in the UK is an important part of reaching net zero heating by 2050. The Government has plans to help build green gas plants in the UK by raising funds with a Green Gas Levy. The levy will increase gas bills by £1.40 a year in 2020, up to £6.90 a year in 2028. We think green gas is important, but we don’t think the current plans will meaningfully and fairly help us on the way to net zero. There are three reasons for this:

We need an electrification plan alongside the green gas levy

We’re big fans of green gas - last year we bought more of the stuff than any other supplier. But the Government should prioritise policies that encourage the electrification of heat, as gas becomes an increasingly small part of heating between now and 2050. We have two ideas for how Government can do that:

  1. By taxing carbon emissions from heating. Ideally, by expanding the UK Emissions Trading Scheme and carbon floor price to include natural gas for heating. 

  2. By taking policy costs off electricity bills. Support for renewables should be moved to general taxation, or on to the gas bill to more accurately reflect environmental impact. This would make electricity cheaper compared to gas, so more people could afford electric heating solutions, like heat pumps.

The levy rate should take gas usage into account

The government has proposed a ‘flat levy rate’, which means consumers pay the same amount extra on their gas bills no matter how much gas they use. In other words, someone living in a one bedroom flat would pay the same levy rate as a big supermarket. We think the levy design needs to be changed to take into account the actual amount of gas used. This will help incentivise people to use less gas, and reduce carbon emissions.

We’d like to see more ambitious support for green gas plants from the Government 

Cutting CO2 emissions caused by the gas we use to heat our homes is central to reaching net zero, but the Government’s plans will only add another 2.9TWh of green gas to the grid over the next decade. This amount of new green gas is too small to have a meaningful impact on reaching our net zero target by 2050. 2.9TWh is less green gas than we already have in the UK grid today, which only meets 1% of UK gas demand. And suppliers are already struggling to increase the amount of green gas they can provide in their tariff. 

We’d like to see support for green gas plants closer to the UK’s potential to produce 20TWh by 2030. This will help increase the amount of green gas that energy suppliers can provide to UK homes - a critical part of making 2,000 homes carbon neutral every day between now and 2050. 

A photo of a green gas production site
The Government’s plans will add another 2.9TWh of green gas to the grid over the next decade, which we think is too small to meaningfully help us on the way to net zero.

What we said in the consultation on the levy

We'd love there to be more green gas in the UK's gas grid. So, we'd accept these proposals from BEIS over nothing at all. But we think there's a lot of room for improvement. We asked that they change the levy's design to achieve the following:

  • The levy only applies for the amount of natural, i.e. ‘non-green’, gas supplied. At Bulb, we supplied 4% green gas last year. So we should only pay the green gas levy on 96% of the gas we supplied to our members. This ensures suppliers don’t pay for green gas twice.

  • The levy takes into account the value a supplier has provided to green gas generators to date. The current proposals mean energy suppliers pay the same levy rate regardless of whether they have supplied green gas or not. We’d like to see a discounted levy rate for suppliers who have provided, or continue to provide, direct value to green gas plants. This could be calculated by a 3-year rolling average, for example. We think it’s right to encourage suppliers who’ve been greening up their gas supply.

  • There’s greater ambition on the amount of biomethane produced. Today, there is 3.3TWh of green gas in the UK. The Government’s plan sets out another 2.9TWh of renewable heating by 2030. But the UK has potential to produce 20TWh by 2030 – we’d love to see plans for that level of output

  • The levy design is changed to take into account actual gas usage. Consumers should only pay more for gas they actually use. This ensures the most vulnerable are protected, whilst being incentivised to use less gas, helping to lower bills and CO2 emissions.

  • Ofgem regulates green gas in the same way as electricity. Today, suppliers aren’t required to report on their gas fuel mix. At Bulb, we do this voluntarily each year. But the proposed levy will apply to all gas suppliers except those providing 100% green gas. This means suppliers will need a way to prove how much green gas they supply. So, we think it’s important that all suppliers are required to publicly report on their gas fuel mix

Read more about the proposals on the website.

We’d love to hear your views. Join the conversation in the Community.