THE RTFO – AN OPPORTUNITY FOR LFG?

Gaynor Hartnell

How does it differ from the other financial instruments?

• Certificates are internationally-traded

• There is no fixed price

• Not a bankable income stream

• The cost is not part of the Levy Control Framework – nor is it taxpayers’ money

What qualifies?

• “The total volume of a wholly renewable fuel, the portion of a partially renewable biofuel that is derived from biomass feedstocks, and the portion of a part RFNBO*, part non-RFNBO fuel that is derived from (non-bioenergy) renewable energy sources.”

• Biodiesel • Bioethanol • Biomethanol / propanol • Biomethane from AD • Biomethane from ACT • Development fuels • Hydrogen and other RFNBOs

• (Most) wastes are double counted • Methane gets 1.9 certificates / Kg • Development fuels have sub target and

higher buy-out price

RFNBO = Renewable Fuel of Non-Biological Origin

Why get involved?

• “renewable fuel volume targets are set out to 2032 and beyond” with no budgetary-controlled degression

• Contrast this with other financial instruments • The FIT is virtually inaccessible

• The RO is now closed to new entrants

• The RHI is budget-limited

• CfDs not ideal and BEIS questioning its support for power from ACT’s

• Because it’s financially attractive

The Renewable Transport Fuel Obligation - overview

• Introduced in 2008 • Suppliers of transport and non-road mobile machinery must show

that a percentage of the fuel they supply comes from renewable sources

• The obligation is on fuel suppliers supplying >450,000 litres to UK • Obligation currently accounts for 4.75% of total supply – it will

almost double from mid April onwards • The obligation is set in volume not energy terms • RTFCs generated by anyone supplying biofuels into the UK market • Certificates may be sold on directly, or traded on open market • Suppliers can either hold and redeem certificates, or pay an opt-out

fee (30p/litre) • Up to 25% of any annual obligation can be banked for following

year

RTFO eligibility

• Landfill gas is eligible • Certificates equate to:

– One litre of biofuel = 1 RTFC – One kg of biopropane or

biobutane = 1.75 RTFC – One kg of biomethane = 1.9 RTFC

• Biomethane as a vehicle fuel earns 3.8 RTFCs per kg where the feedstock used is 100% waste

• And 1.9 RTFCs /kg for non-waste

RTFO about to become more interesting…

• New legislation going through parliament at present

• Higher obligation levels, and various other changes are due to take place mid-April 2018

• New special target to encourage “development fuels”. Biomethane from gasification BioSNG is eligible, but that from AD and LFG is not)

Overview of changes

• Increased obligation levels (overall total) • Implements the ILUC directive (new GHG savings thresholds,

definitions of wastes, residues and dedicated energy crops) • Limits on crop-based biofuels starting at 4%, reducing gradually

down to 2% by 2032 • Development fuels sub-target applies from Jan 2019 • Overall mandate will increase to 12.4% by 2032, and remain at that

level thereafter • Aviation fuel, renewable fuels of non biological origin and hydrogen

are now eligible for the RTFO

Why biogas plants are now starting to look at the RTFO

• Send first tranche (40,000 MWh gas) to RHI for Tier 1 payment • Thereafter claim RTFCs • This has not been tested before, but an application will go in this Q1 • BEIS has concerns about the potential risk of overcompensation,

but notes Ofgem is responsible for administration of the RHI scheme and any potential claims under both schemes would be taken on a case-by-case basis

• In REA’s view this is desirable as – Tax payers money is saved / the RHI budget goes further – Gas-fired (HGVs) are encouraged (environmentally-beneficial) – Waste over energy crop incentivised (Govt. policy)

Why are biogas plants now starting to look at the RTFO

RTFO

• No end date

• ~ 5p/kWh + brown value of the gas

• Gas needs clean up prior to grid injection

• New equipment needed

RO

• 2027

• ~ 10p/kWh, but you have to generate the electricity

https://www.youtube.com/watch?v=L7J0qFvaT20&feature=youtu.be