Landfill Gas ROC Removals: The Impact
 Topic: Landfill gas projects |  Read Time: 8 mins |
 Landowner type: Institutional landowners |  Energy: Landfill gas |
3rd January 2025If you’re a landowner wondering how landfill gas ROC removals might affect you, I’m here to clue you in on the key things you need to know.
Operating a landfill gas project has been an attractive method of extracting value from brownfield land for decades. So it’s no surprise that landowners have been benefiting from these capped sites for several decades.
However, many landowners aren’t aware of exactly how their site operator makes their money. Renewable Obligation Certificates (ROCs) have been subsidising income from landfill gas projects since 2002. However, the government is phasing out the scheme and replacing it entirely by 2027.
If you’re a landowner with a landfill gas operation, you may well be wondering how ROC removals will affect your future income. In this article, I’ll guide you through everything you need to know.
What Are ROCs (Renewable Obligation Certificates)?
The UK Government introduced the Renewables Obligation Scheme (RO) in 2002 as part of its initiative to incentivise the large-scale use of renewable electricity.
Under the scheme, Renewable Energy Operators (AKA: the companies that produce renewable energy) report the amount of electricity they produce to Ofgem.
The central regulator rewards the operator with Renewable Obligation Certificates, which are essentially green subsidies. They’ve been incredibly important since their introduction in 2002, providing financial stability for most renewable energy projects.
Each year, the nation’s energy suppliers must present Ofgem with enough ROCs to prove that they’ve fulfilled their obligation to purchase renewable electricity. So, when an energy supplier purchases renewable electricity from the operator of your landfill gas site, they’re paying a premium to both obtain the electricity and the associated ROCs.
Why Were ROCs So Good for Landfill Gas Projects?
Of course, this additional premium dramatically increases the profit margin of a landfill gas project. In fact, it’s estimated that ROCs account for around 40 to 50 per cent of the total income of these sites. Impressively, ROCs alone generated around £1 billion a year around 2010, showing just how valuable they are for renewable energy projects.
As a landowner, you will have a contract with the renewable energy operator that manages the landfill gas at your site. They’ll be paying you a rental income that allows them to produce electricity on your land.
As the operator receives a premium on the energy they sell to the Grid (thanks to the ROCs), they’ll naturally pass some of that bonus onto you. This, however, doesn’t apply if you’re dealing with a fixed payment arrangement.
What’s Happening With ROC Removals?
The government has been winding down the ROC scheme for a while. It closed to applications from new sites on 31 March 2017.
However, any project that began before this date can still take advantage of ROCs for a predetermined period of time. If you have a landfill gas project currently operating on your land, ROC removals will affect you when it comes to the end of your current contract with the operator – possibly earlier.
Support for capacity accredited under the RO at that date is retained at existing support levels (a policy called grandfathering of support) and receives its full lifetime of support […]
As ROCs cannot be issued on generation after March 2037, capacity with an effective date of accreditation after 31 March 2017 will not receive the full 20 years of support.
This means that your 20-year contract that started before 31 March 2017 will benefit from ROCs for the duration. Any projects that received ROC accreditation prior to 2017 will continue to receive ROCs for 20 years from their accreditation date, or until 31 March 2027, whichever is later.
Although the ROC scheme closed in 2017, terms had already become progressively worse for landfill gas projects for several years prior. When the government introduced the RO scheme in 2002, they awarded operators one ROC per megawatt hour (MWh) of renewable energy produced, regardless of energy source.
This changed in 2009, and the government downgraded landfill gas to 0.25 ROC per MWh produced. By 2013, this had dropped to 0.2 ROC per MWh, which severely impacted sites around the country. This means that, since 2009, new landfill gas projects have been earning fewer ROCs and therefore less income for each unit of renewable electricity generated.
What does this mean for landfill gas operators and landowners?
The ROC scheme winding down signals a major shift for landfill gas operators and landowners in the UK. If you’re concerned about how this might affect your income and the viability of your site, you’re not alone. Dive deeper into how you can prepare and protect your landfill gas investment in our ebook about the future of landfill gas sites.
Want to Stay Ahead of the Curve on Landfill Gas Opportunities?
Our essential guide breaks down what the end of ROCs means for landowners.
Whether you’re already hosting landfill gas infrastructure or exploring the opportunity, this guide will help you understand:
- How Contracts for Difference (CfDs) really work.
- What you need to know about strike prices, auction rounds, and revenue certainty.
- The pros and cons of entering a CfD agreement.
Get the guide now and make informed decisions about the future of your site.
As a Landowner, How Will My Project Be Affected By ROC Removals?
As I explained above, every landfill gas project contract between a landowner and a renewable energy operator that benefits from ROCs will expire before 2037, and most will expire on 31 March 2027. So when it’s time to negotiate a new lease with an operator and repower your site, you may find there’s less money offered.
How much less? Going forward, the suppliers will generally pay the operators less for their electricity. Under the ROC system, operators were getting paid market price for the electricity they supplied plus a bonus of up to 50 per cent from the associated ROCs.
Remove that 50 per cent bonus, and the profit on the sale price halves. So ROC removals will lead to a cut in operating income of around £50 per MWh.
So when you negotiate your new landfill gas contract with a renewable energy operator, their offer may be much less lucrative than it was two decades ago.
That’s if they make an offer at all, as the thinner margins post-ROC removal might not be attractive to your current operator. Remember, a landfill gas project also loses roughly 8 per cent of the available natural gas a year. This means that your site will already be less profitable than when your contract started.
How Can I Mitigate This?
Realistically, there’s no way to completely combat the loss in revenue from landfill gas ROC removals.
The government has replaced the RO scheme with an initiative called Contracts for Difference (CfD). However, CfDs are long-term obligations and landfill gas site production declines over time. As a result, most sites may not generate enough natural gas to qualify.
Also, it’s highly likely that sites that do qualify will receive a lower sales price for their electricity under the CfD compared to what is previously received under the ROC scheme.
This is partly because natural gas is no longer as attractive to policymakers as, say, solar or wind energy. Natural gas is simply an older and less efficient way to produce renewable energy, and is unlikely to see new incentives in the future.
This doesn’t, however, mean that all hope is lost. With a bit of planning and some help from my list below, landfill site owners can take several steps to mitigate the financial hit from ROC removals.
Examine your landfill gas contract thoroughly
I firmly believe that having the right knowledge can make all the difference, particularly when you have ample time before your current landfill gas contract ends.
Some contracts contain clauses that allow operators to terminate if their project is no longer economically viable. When ROC support drops off, the operator may well want to walk away at short notice.
It’s imperative that you’re aware of and prepared for this risk. Due to environmental risks, landfill sites must be carefully managed over several decades. You could quickly find yourself on the hook for this if your operator leaves at short notice. So it’s wise to check your contractual rights and to put in place a contingency plan for this eventuality.
I’ve also seen clauses that could be triggered by landfill gas ROC removals. Some landfill gas contracts specify that if there’s a material change in the compensation ROCs, the contract may be renegotiated.
You may find yourself with an opportunity to renegotiate the rent you charge the operator. You can also discuss a shift in other terms to ensure the site remains profitable for all parties.
Microturbines
It’s likely your current landfill gas contract is with a large-scale energy operator. These were the main operators until recently.
However, some alternative technologies have now come to market. Take NewEnCo, for example. It’s advertising microturbines that are more efficient, require less maintenance and produce less emissions than typical gas turbines. Companies that operate these microturbines may be willing to accept and profitably operate landfill sites with a small gas yield. They would also need to compensate landfill site owners with the same or a higher share of the project’s income.
With lower overheads, running costs and capacities, operators may be better positioned to offer landfill site owners favourable rental terms. This is particularly true in the later years of the landfill site’s gas reserves.
These types of projects have also benefited from rising energy costs and are now increasingly viable for landfill site owners, according to NewEnCo:
Until recently, when export prices were low, these small-scale ‘microgen’ projects were only viable if they benefited from ROCs. However, as power prices have soared, schemes are now viable without ROCs, deriving income from a combination of offset import costs and export.
So, if an operator is claiming that their projects are commercially viable even post-ROC removal, it’s worth listening to them and approaching a microgenerator for a comparative offer.
Solar projects on landfill sites
Reduced to its simplest form, a capped landfill is a standard brownfield site, with relatively few options for the redevelopment of the land.
One option that’s appeared recently is the potential to build solar projects on top of capped landfills. If your landfill site is no longer producing significant quantities of landfill gas, pivoting to solar energy production might be the smartest way to continue to earn income from your landfill site.
Take this large-scale deal recently signed between SITA UK and British Solar Renewables as an example. SITA tendered the rights to set up solar fields on its closed landfill sites, and BSR signed on to make it happen. So all is not necessarily lost by any stretch of the imagination.
Corporate power purchase agreement
Is your landfill site near any local businesses that consume significant amounts of electricity? If so, you may want to see if they’ll consider a corporate power purchase agreement.
Say your site is close to a large distribution warehouse for a supermarket chain, and this warehouse pays £150 (or more) per unit to the Grid for its electricity. You could approach them with a deal to supply its electricity directly for a lower cost. This could be around £120 per unit.
If they agree, this saves the supermarket chain money and it gets you a better price for your electricity than selling via the normal wholesale electricity market.
Reduce the scale of operations
As your gas supply shrinks and ROC removals eat into your profits, it may be wise to downsize your operation.
You can do this by:
- Reducing the capacity of the machinery
- Scaling down the overall operation and associated overheads
- Getting a microgenerator
Both of these things can help maintain profitability at a lower scale.
Final Thoughts
The imminent loss of ROC subsidy on landfill gas projects isn’t exactly a positive step forward. However, there is still time left for you to safeguard your future income.
When your current landfill gas project comes to an end, all hope is not lost. As I explained above, there are multiple ways to help you continue to earn a profit from your landfill site. Solar panels are potentially a good way to occupy brownfield land. But they’ll also help you maximise revenue from the remaining natural gas on your landfill site.
If you’re concerned about ROC removal and how it’ll affect your landfill site, feel free to get in touch. We’re more than happy to talk you through the process and help you mitigate the impact of this policy change.
Take control of your landfill gas site — and increase your income.
See how we helped Blaenau Gwent County Borough Council maximise the value of their project by successfully transferring ROC Certificates.
