Green gas blending obligation

The green gas blending obligation is a proposed statutory scheme that will require energy suppliers to supply an increasing proportion of green gas to their customers each year. The aim is to gradually replace the use of fossil natural gas with sustainably produced green gas, thereby reducing CO₂ emissions.

Although the intended start date is 1 January 2027, no final political decision has yet been taken on this matter. It was expected that the Spring Memorandum would provide further clarity on this matter, but this has not materialised. To enable implementation from 1 January 2027, the legislation must be passed by both the House of Representatives and the Senate before 1 October 2026. Consequently, there is a real possibility that implementation will be postponed once again.

Green gas is chemically identical to natural gas. The source is different, however. It comes from bio-based raw materials such as manure, organic waste and agricultural by-products, which are fermented to produce biogas.

That biogas is not yet a usable product. It is full of CO₂ and impurities. Only after it has been upgraded to natural gas quality can it be fed into the grid.

Once the scheme is introduced, energy suppliers must purchase sufficient green gas or green gas certificates to meet their obligation. If they are unable to do so, they may make use of the so-called buy-out scheme. Under this scheme, suppliers pay a buy-out price set by the government for each unit of green gas they are short of. This buy-out price therefore effectively sets an upper limit on the costs of the blending obligation. Suppliers who procure green gas in a timely and efficient manner may be able to keep costs for their customers below this level.

The way in which energy suppliers fulfil the blending obligation varies considerably. Some suppliers have already largely secured their green gas positions and are able to quote prices or hedge, whilst others are still awaiting final political decisions.