The AD Market in the UK

2. Copyright © NNFCC 2023 A specialist business consultancy with over 19 years of bioeconomy experience We view bio-based technologies as key components of the low carbon economy delivering economic, social and environmental benefits.

3. Copyright © NNFCC 2023 biogas upgrading unit boiler or heat & power (CHP) feedstock pretreatment & anaerobic digester biogas biomethane CO2 digestate gas grid other gas distribution (virtual pipeline) exhaust CO2 for commercial use feedstock external heat & power Transport Fuels products & co-products agricultural residues processing residues waste AD Process Overview heat power

4. Copyright © NNFCC 2023 UK AD Market analysis Source: NNFCC (2022) AD deployment in the UK, annual report (https://www.nnfcc.co.uk/publications/report-anaerobic-digestion-deployment-in-the-uk) CHP Biomethane injection Biogas production capacity 2.8GW Number of plants 663 Energy contribution 1.6GWeeq

6. Copyright © NNFCC 2023 Feedstock Use Feedstock capacity of operational AD facilities in the UK = 17 million tonnes per annum 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Manure or Slurry Crops Food Waste Crop Waste Other

8. Copyright © NNFCC 2023 AD Development Pipeline There are currently 244 projects in the development pipeline in the UK, having secured planning consent or applied for consent: • 168 are farm-fed (cumulative installed capacity of 79.2 MWe); • 76 waste-fed (cumulative installed capacity of 94.3 MWe). ** Most CHP facilities not expected to go ahead without support ** 0 10 20 30 40 50 60 70 80 90 100 Plant Numbers Small-scale Medium-scale Large-scale BtG

9. Copyright © NNFCC 2023 UK AD Deployment Report Extensive market data and analysis on current and future development trends for anaerobic digestion and composting Detailed sector commentary and comprehensive overview of policy and incentives affecting the anaerobic digestion development landscape. Comprehensive excel database of more than 1000 planned and operational Anaerobic Digestion facilities in the UK. Includes site name and location; feedstock type, source and volumes; energy output type and capacity; and development status. Current data on UK biomethane refueling station network, including operational and planned sites. See more information at: https://www.nnfcc.co.uk/publications/report- anaerobic-digestion-deployment-in-the-uk-23

11. Copyright © NNFCC 2023 The Role of AD in the UK’s Net Zero Strategy AD has been supported by a range of incentives over the years resulting in increased deployment CHP plants currently widely outnumber biomethane plants However, new incentives favour biomethane over biogas combustion, with a view of promoting a more flexible product that can be injected into the national grid: • Better aligned with the current policy intent; decarbonisation of the heat and transport sectors (via grid), energy security and Net Zero • Greater efficiencies can be achieved, especially where CHPs are unable to use heat • Markets may be more attractive and/or more flexible, giving optionality around supply for heat or transport fuel use When converting or adding to capacity: • CHPs are ageing, and the cost of replacement can be significant • Deliver more without facing current market constraints; feedstock, land, funding, planning, permitting, etc

12. Copyright © NNFCC 2023 Overarching Policies & Regulations EU Directives and Regulations underpin many of the rules and support mechanisms in the UK market The most important are: • Renewable Energy Directive (RED/REDII) • REDII entered into force in 2018 as an update to the original RED; • Underpins many of the UK’s AD financial support mechanisms; • Outlines feedstock categories, sustainability criteria & GHG emissions criteria. • Waste Framework Directive (WFD) • Underpins rules for using and generating wastes in an AD process • Sets out the Waste Hierarchy • Animal By-Product Regulations (ABPR) • Outlines rules for processing wastes that may have been in contact with animal by-products. Despite leaving the EU, the UK will uphold its commitments to these overarching Directives/Regulations.

13. Copyright © NNFCC 2023 UK Policies & Regulations A number of support mechanisms have been developed in the UK to incentivise the uptake of renewable energy technologies like AD. Example policies related to the AD sector include: • Renewables Obligation – large-scale electricity generation (CLOSED) • Feed In Tariff Scheme – small-scale electricity generation (CLOSED) • Smart Export Guarantee – small-scale electricity generation (OPEN) • Contracts for Difference – all-scale electricity generation (OPEN) • Renewable Heat Incentive – all-scale heat generation/biomethane grid injection (CLOSED) • Green Gas Support Scheme - all-scale biomethane grid injection (OPEN) • Renewable Transport Fuel Obligation – all-scale biofuel production (OPEN) The goal of these mechanisms is to help achieve Net Zero by 2050, as set out under the 2019 amendment to the UK’s Climate Change Act. Although some of these schemes are now closed, many AD plants currently operational in the UK may still be supported by one, or a combination, of these mechanisms.

14. Copyright © NNFCC 2023 Green Gas Support Scheme (GGSS) (OPEN) – all-scale biomethane grid injection Following the closure of the RHI to new applications, the UK Government introduced the GGSS in Autumn 2021. The GGSS supports biomethane injected into the grid that is produced via new anaerobic digestion facilities. The GGSS operates in a similar way to the NDRHI for biomethane injection facilities, and it is currently set to run until Autumn 2025. Sustainability criteria and feedstock restrictions apply Tariffs are fixed from the point of application for 15 years. Tariff rates are: • Tier 1: 5.51 p/kWh, for the first 60,000MWh of biomethane injected to the grid, • Tier 2: 3.53 p/kWh, for the next 40,000MWh of biomethane, • Tier 3: 1.56 p/kWh, for any additional gas injected, above 100,000MWh. An annual tariff review will take place, using industry cost/revenue data to set tariff levels from 01 October each year. A mid-scheme review is imminent, considering the eligibility criteria, feedstock limits, closure date, etc.

15. Copyright © NNFCC 2023 Renewable Transport Fuel Obligation (RTFO) (OPEN) – Biofuel production The RTFO is the UK Government’s principal policy for reducing greenhouse gas emissions from fuel used in road vehicles In October 2007, Parliament approved the RTFO, mandating all suppliers of road transport fuels at volumes of 450,000 litres per year or above to incorporate a proportion of biofuel in petrol or diesel. RTFO is a certificate-based mechanism under which obligated suppliers can either: a) Supply biofuel and earn certificates which can then be traded with other fuel suppliers and users; • 1.9 certificates per kg biomethane • 3.8 certificates per kg biomethane when waste-derived b) Buy certificates from others who have supplied the fuel, to offset against their supply if they fail to meet their obligation; or c) Pay the “buy-out” price, currently 50 pence/litre, for failing to meet their obligation. The biomethane producer sells fuel to a fuel supplier; the fuel supplier receives and trades the RTFCs and passes some of the value back down to the producer, split typically based on level of investment made by each party. Similar to other UK renewable energy schemes, fuels supplied under the RTFO must meet mandatory sustainability criteria.

16. Copyright © NNFCC 2023 AD Market - Summary Opportunities Challenges Strong market with significant growth potential Additional food waste expected to come to market Livestock waste remains largely untapped Carbon capture and use or storage Performance improvements Higher value markets for biogas Narrow scope of current policy support Short policy cycle and lack of long-term visibility Feedstock availability and stability Supply chain issues Regulatory delays Price volatility The AD industry remains active and vibrant, but future development will be heavily influenced by feedstock availability and accessibility.

The AD Market in the UK

The AD Market in the UK

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The AD Market in the UK