Press release

Government confirms way forward on renewable heat scheme improvements

A long term plan to ensure the government’s renewable heat scheme for commercial, industrial and community organisations stays within budget has been set out today

• From: Department of Energy & Climate Change and The Rt Hon Gregory Barker
• Published: 27 February 2013

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Press notice: 13/019

A long term plan to ensure the government’s renewable heat scheme for commercial, industrial and community organisations stays within budget has been set out today by the Department of Energy and Climate Change (DECC). DECC is also making a number of other improvements to the scheme following consultation in July last year.

The Renewable Heat Incentive (RHI) is a world first and is designed to revolutionise the way homes and businesses across the nation are heated, cut carbon emissions and help the UK meet its renewables targets. The scheme was launched for the non-domestic sector in November 2011 and over 1300 applications have been received to date, with around £24million worth of RHI payments expected to be paid out in this financial year.

Energy and Climate Change Minister Greg Barker said:

“I am fully committed to ensuring our Renewable Heat Incentive helps as many organisations as possible get on board with a range of exciting sources of renewable heat, and at the same time stays within its means. That’s why we are introducing a new, flexible way to control spending, alongside some further improvements to the scheme.

“This is however just the first step on our journey to safeguard longevity, provide certainty to industry and sustain growth under this scheme.

“We are also continuing to explore whether the tariffs we offer are set at the best levels to encourage further uptake, looking at how we can open up the scheme to new technologies, and considering the right approach to encourage householders to invest in renewable heat.

“We are continuing to work with industry and others on our plans and will be making announcements about our proposals for support as soon as possible.”

The main updates to the non domestic RHI are outlined below:

Budget management

There is a fixed annual budget for each year of the RHI and it is essential that appropriate controls are in place to ensure the scheme remains financially sustainable and offers good value for money for the tax payer. DECC intends to introduce a degression based approach similar to the regime adopted for the Feed-in Tariffs scheme. This will involve tariffs available to new applicants being gradually reduced if uptake of the technologies supported under the RHI is greater than forecast. This will be done by monitoring uptake on a quarterly basis against a series of ‘triggers’. Monthly updates on progress towards triggers will be published online and one month’s notice will be given before any reductions are made to the tariffs for new applicants.

Tariff reviews

The new policy published today confirms DECC’s commitment to provide certainty for investment through scheduled reviews of the non-domestic RHI , currently proposed for 2014 and 2017. It also sets out the conditions under which an earlier review would be undertaken and confirms that DECC is planning to consult in the Spring on changes to some of the tariffs and will provide an update shortly on which tariffs will be included. This follows work carried out by the Sweett Group for DECC on the initial assumptions and data used to set the current tariffs under the RHI non domestic scheme. This planned early review is intended to drive increased uptake and ensure the scheme continues to provide value for money. It is DECC’s intention that where tariffs increase as a result of the current review, installations accredited from 21 January 2013 (the date the possibility of review was published) would benefit from that increase once the new tariffs come in to force.

Biomass sustainability

Sustainability requirements will be introduced for all existing and new installations using solid biomass as a feedstock. This means that from April 2014, in order to be eligible for the RHI, biomass installations will be required to demonstrate, either through reporting or sourcing from an approved supplier, that their biomass meets a greenhouse gas lifecycle emissions limit target and (from no later than April 2015) land criteria. DECC will work with industry through the course of 2013 to promote early reporting on a voluntary basis and to develop the “approved suppliers” approach.

Air quality requirements

Air quality requirements will form part of the RHI for all solid biomass installations including CHP installations which burn biomass and this will apply to all new installations only.

Metering

Metering requirements will be simplified to reflect feedback received from participants and to reduce burdens on industry.

The changes to both air quality and metering will be in place no later than the end of 2013 subject to parliamentary approval and will apply to all new installations only.

Notes for editors

1. The Government response to the RHI non domestic consultation.

2. The RHI was launched for the non domestic sector in November 2011 and is designed to help the UK cut carbon and meet its legally binding renewables targets.

3. The non-domestic RHI scheme supports heat from sources defined as renewable in the EU’s Renewable Energy Directive (RED). These are: * biomass boilers, including combined heat and power (CHP) biomass boilers * ground source heat pumps * water source heat pumps * deep geothermal heat pumps * all solar thermal collectors * biomethane and biogas

4. The conditions under which tariffs can be reduced under degression will be set out in the Renewable Heat Incentive Scheme (Amendment) Regulations 2013. As prescribed by the Energy Act 2008, draft regulations will be laid for approval before both Houses.

5. Under the new RHI budget management regime trigger points for most RHI technologies will be set at 150% of DECC’s expected levels of uptake. Therefore if uptake exceeds forecasts by 50% or more, the tariff can be reduced. The triggers for solar thermal and large Ground Source Heat Pumps are set differently, at a level 5% of the value of the total trigger due to forecasted uptake. The first time a technology trigger is hit, tariffs can be reduced by 5%, with subsequent reduction increasing to 10% and 20% if uptake continues to rise beyond estimated levels. There will also be an overall trigger point for the non domestic scheme, which if hit, will result in a further tariff reduction of 5%. The purpose of the overall trigger is to ensure the budget is protected. Subject to Parliamentary approval, DECC expects the new budget management regime will be in place by summer 2013.

6. Enhanced preliminary accreditation will not be implemented at this time. DECC will however monitor deployment and continue to work with stakeholders on measures to improve certainty for investors.

7. It is DECC’s intention for the RHI to remain open to new applicants until 2020.

8. The Government’s Heat Strategy was published in March 2012.

Published 27 February 2013