With gas oil rule changes scheduled to be in place next year, Niki Holt, Head of Commercial, at Certas Energy, is asking if you and your plant are ready?
As of 1 April 2022, many sectors and applications will lose their entitlement to use red diesel/gas oil and rebated biodiesel. These regulatory changes are intended to reduce the commercial use of gas oil, as part of the government’s mandate to achieve net-zero carbon emissions by 2050.
While this is great news for the environment, many businesses are still unsure as to what the changes mean and how to navigate the shifting regulatory landscape. So, how can you demonstrate compliance and successfully transition your energy mix?
What is changing for the construction industry?
While various sectors are affected construction will feel the impact more than most. Heavy plant and equipment of all kinds will no longer be permitted to run on gas oil when used for construction purposes. Using gas oil for heating and power generation on-site in a construction environment will also be prohibited.
Red diesel permissions apply only to the way in which equipment is used, not to the type of equipment itself. For contractors with equipment that can be used in both an agricultural and construction setting, red diesel can still be used only in the agricultural setting – with no traces present when a tank is refilled for use on a construction site.
What is the impact?
Gas oil currently receives a rebate of 46.81 pence per litre (ppl) and has an effective duty rate of 11.14ppl. Unmarked white diesel/DERV, however, has a duty rate of 57.95ppl. Making a direct switch from red diesel to its undyed equivalent incurs an additional cost of 46.81 pence per litre, or five times as much duty as before. This is a major financial impact, with potentially significant consequences.
Additional activities must also be considered to ensure compliance, each with potential costs. These include removing or running down red diesel, purchasing additional fuel storage tanks, vehicles or equipment, sourcing reliable alternative fuels and more.
What can you do?
To avoid heavy fines, construction professionals are recommended to plan their actions and consider their options now. Understanding government guidelines on red diesel tax rebate changes, and regularly checking for further updates, is a good place to start.
Existing stocks need to be run down in advance of 1 April 2022. Removing every trace through tank flushing is unnecessary, but you must be able to prove that gas oil has not been purchased after the deadline, or shortly before it in higher than usual volumes for stocking up. All purchasing and delivery documentation should be retained, enabling a clear audit trail for HMRC inspections.
Furthermore, considering the high numbers of vehicles and large stores of fuel at construction sites, the construction industry overall is particularly vulnerable to fuel theft. Exploring smart tanks and fuel management systems, as well as improved site security, should also be considered. A tank telemetry system monitors fuel levels in real time and detects any unusual fuel usage pattern, signalling both potential leaks or theft.
Fuelling your construction plant, the right way
The range of drop-in, cleaner burning alternative fuels available continues to grow, so transitioning your energy mix does not have to be a complex process. Accessible alternatives include:
GTL Fuel (Gas-to-Liquid)
Helping to reduce local emissions of pollutants like nitrogen oxide and particulate matter, this cleaner-burning FAME-free solution also works to improve cold starts and reduce clogged filters. It offers a long shelf life for use in back-up power generators, and for final fill before winter begins.
Hydrotreated vegetable oil (HVO)
Produced from vegetable fats and oils, HVO offers improved burn efficiency and reduced carbon emissions count. Its hydrogen catalyst means that HVO is cleaner-burning, with a longer shelf life than standard biodiesel. The HVO supply chain is currently under close scrutiny, with the aim of ensuring consistent high-quality and ethically produced, sustainable supply.
Industrial heating oil – Therma35
Industrial heating oil, like Therma35, is ideal for use in commercial boilers, heaters, driers and furnaces, as well as temporary heating applications such as cabins and drying rooms on construction sites. It not only burns more slowly than gas oil or kerosene but also offers long-term storage stability, reducing risk of spoilage, interruption or waxing.
Kerosene
Also referred to as paraffin, kero or 28-second oil, kerosene is a low viscosity oil which is suitable for the same heating applications as industrial heating oil, although it burns more quickly. It offers a lower freezing point and higher flash point than gas oil.
We’re ready – are you?
On the journey to net-zero emissions, Certas Energy is fuelling futures the right way, from red diesel and beyond. Our construction industry experts are here to help you face any challenges as you transition to a new energy mix.
