Is your company missing out on landfill gas revenues?
By Accounting for Energy – (2 min read)
Landfill gas is the smaller cousin to the more glamorous players in the renewables sector. Even so, in 2017, landfill gas sites added £400 million to the economy. They produced 4.07 TWh of electricity, which is enough to power every household in Northern Ireland for a year. So, are landfill site owners benefiting fully from the technology, or are they losing out when it comes to renewable energy payments?
It is estimated that the UK’s top 30 energy producing sites received a share of £145 million in revenue from their landfill gas extraction during 2017.
With significant sums at risk, it is important that those who invest in renewables are confident that they are receiving full and accurate returns from the green energy produced. At Accounting for Energy, across hundreds of royalty audits, we have identified underpayments in 75% of our reviews. There are 452 accredited landfill gas sites in the UK, with 388 producing energy. Potentially, the owners of 291 of these sites may be eligible for back payments, and the figure could be higher still.
There are many ways that under-payment can happen, and it is rarely – if ever – due to subterfuge or ineptitude. In some cases, engines may start operating before royalty payment mechanisms are in place, or royalties may not be updated to reflect changes in the site operators’ power purchase agreements.
In one case, we discovered an anomaly in the lease agreement of a large landowning client which resulted in six years’ worth of back payments. The discrepancy was missed by legal and accounting teams, which had no experience of other royalty lease agreements. It also came as a surprise to the energy company, which immediately agreed to make back payments. As a result, the site rent was subsequently doubled for the next 12 years.
Underpayments are not restricted to large or small players. Any company, public or private body – such as a waste management firm, government body, local authority or community fund – may be eligible for a back payment or adjustment.
It is not surprising that payments are so often at odds with the real figures – few companies have the in-house expertise to accurately assess the figures, and we only spot anomalies thanks to seeing hundreds of royalty lease agreements. However, it is important to ensure that everyone benefits properly from renewable energy investments.
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