UK Anaerobic Digestion Plant Business Rates Surge: A Threat to Green Energy Goals

Since we last posted about the enormous rise in biogas plant operator business rates, the concerns about the UK Anaerobic Digestion Plant Business Rates Surge raised in the original article (and ADBA Press Release) published on this blog in April 2021, have become reality. The fears have indeed materialized into a significant challenge for the sector.

According to a December 2022 report from Circular Online, the AD industry was facing a substantial increase in business rates, a development that has placed additional strain on an already burdened sector. That has not changed.

UK Anaerobic Digestion Plant Business Rates Changes Since Spring 2021

The UK Government, through the Valuation Office Agency (VOA), went ahead and recalculated the rates assessments for both gas-to-grid and electrical combined heat and power (CHP) AD plants.

The recalculations are based on the annual rental value of the premises, leading to an increase in business rates as high as 30% per annum for gas-to-grid plants and at least 20% for electrical CHP plants.

This adjustment follows Chancellor Jeremy Hunt's announcement that the revaluation of business rates would proceed as planned from April 2023, with the new values published after the Autumn Statement.

Other Renewables Similarly Hit by Rates Rises

This rate hike is not isolated to the AD sector but mirrors increases across other renewable energy sources, including onshore wind and solar, potentially adding tens of millions of pounds to the industry's bills.

Such financial pressure threatens to stifle much-needed investment in the sector. Chris Huhne, Chairman of the Anaerobic Digestion and Bioresources Association (ADBA), highlighted the detrimental impact of these increases on the AD industry, emphasizing the already rising costs of supply chain and feedstock.

Tax Burden Runs Opposite to Government Green Policy

He pointed out the irony in the government's approach, which, rather than supporting the production of green electricity and gas, seems to penalize it amidst an energy security and climate target context.

An illustrative case is St Nicholas Court Farms in Kent, which experienced a rateable value increase from £144,000 in 2017 to £810,000 in 2023 for its two gas-to-grid AD plants. This steep rise in property tax is perceived as a disincentive to investment in renewable energy, contradicting government claims of encouraging such initiatives.

This situation underscores a broader challenge facing the renewable energy sector in the UK, where policy and regulatory measures, such as the increase in business rates, can inadvertently hamper the growth and financial viability of renewable energy projects, including AD plants.

The industry calls for a more supportive framework that recognizes the crucial role of renewable energy in achieving energy security and climate goals.

Below is the original article about the steeply rising UK Anaerobic Digestion plant business rates, from April 2021:

UK Anaerobic Digestion Plant Business Rates – Revaluation Threatens to Close Biogas Facilities

ADBA Press Release (22 April 2021):

Business rates are an unacceptable threat for anaerobic digestion operators, say industry leaders, and will affect the UK's ability to meet its Net Zero targets

With charges escalating year on year, business rates are now a real burden for the UK anaerobic digestion (AD) industry and risk putting many plants out of business, warns the Anaerobic Digestion and Bioresources Association (ADBA) and leading renewables consultant Chris Handel. This issue is particularly critical considering the value of AD in addressing climate change and the need for the UK to decarbonise agriculture and other key sectors of its economy.

HMRC's Valuation Office Agency (VOA) has been reviewing its business rates assessments, and the change of methodology could lead to AD plants in the UK facing bills that they couldn't meet – causing the closure of their business and the loss of precious waste management and decarbonisation service for the UK.

There are currently 685 AD plants in the UK treating 46 million tonnes of organic wastes every year and recycling them into green biogas and biofertilisers for the energy, transport, heat, and farming sectors. By capturing and transforming organic matter, that would otherwise emit harmful greenhouse gas emissions (GHG) from landfill dumping or incineration,. Whereas, currently, this material goes into creating much-needed alternatives to fossil-based energy and fertiliser.

The AD industry delivers a 1% reduction in the UK's GHG emissions every year – the equivalent of taking 2.3 million cars off the road. Fully deployed, the industry could abate the UK's GHG emissions by 6% by 2030.

“Business ratepayers in England have, so far, benefitted from a generous relief scheme under the government’s transitional rates relief scheme. But many AD operators will soon be coming out of this scheme and for the first time will face the full impact of the recent rates revaluation”,

says Charlotte Morton, ADBA's Chief Executive.

“This will mean high levels of charges akin to those now levied on AD operators in Scotland, Wales and Northern Ireland. We realise that the tax has to be paid – but it must be fair and reasonable, have regard to a plant’s ability to pay and fully reflect the challenges of running an AD plant. ADBA is very concerned about the impact this tax will be having across the industry.”

The trade association [for UK Anaerobic Digestion] has been working with leading rating practitioner Chris Handel to bring the AD industry together to explore how to address the issue with the VOA and ensure that the business rates remain affordable and fair.

Chris Handel, Managing Director of Handel Rating Consultants, says:

“Government changes to the calculations used to work out business rates are likely to trigger higher payments for AD plant owners. This feels counter-intuitive at a time when we need to all green the economy.

“I’d urge any AD plant operator receiving a letter about business rates to do two things: firstly take professional advice, don’t just fill in their form. It could lead to higher tax bills. Second, have a think about joining our formal challenge to the government to seek a fairer deal for the industry.”

Charlotte Morton concludes:

“We are confident that working together, our concerted action will give us a good opportunity to reset business rate charges to more realistic levels, benefitting not only the whole industry for the life of the plant but also the UK's efforts to fulfil the country's ambition to achieve its Net Zero targets and address climate change.”

— UK Anaerobic Digestion Plant Business Rates PRESS RELEASE ENDS —

[First published 23 April 2021.]