Good News for commercial heat pump installations

The government has today launched a consultation on proposed changes to the Renewable Heat Incentive (RHI) scheme for businesses, which as expected would result in higher levels of support for biomass, ground source heat pump, and solar thermal technologies.

The consultation outlines plans to double the tariff available for large biomass boilers with over 1MW of capacity to 2.0p/Kwh, increase support for ground source heat pumps from 3.5-4.8p/Kwh to 7.2-8.2p/Kwh, and raise incentives for solar thermal installations from 9.2p/Kwh to 10.0-11.3p/Kwh.

The consultation will now run until June 28 and if approved the increases in support are likely to come into effect for 2014/15.

The Department of Energy and Climate Change (DECC) undertook a review of the scheme earlier this year and concluded that an increase in RHI tariffs was justified.
“Over 1,300 innovative renewable heat technologies have already been installed under this scheme and are generating cash for the heat they produce,” said Energy and Climate Change Minister Greg Barker in a statement. “The Renewable Heat Incentive has been running for nearly eighteen months, so now is a timely moment to look again at the tariffs. We need to make sure they are set at the right level to continue bringing forward investment and growth and at the same time keep costs to the taxpayer to a minimum. That’s what our proposals set out today are designed to do.”

However, while some areas of the renewable heat market have struggled to take off and are likely to see incentives increased as a result, other areas have seen relatively high levels of adoption and as a result will now see modest cuts to the tariffs they are eligible for.

As a result, DECC also confirmed today that medium-sized biomass systems with 200kW to 1MW of capacity have seen sufficient levels of deployment to trigger the scheme’s so-called “degression mechanism”. As a result RHI tariffs for the technology will now be cut from 2.2-5.3p/Kwh to 2.1p-5.0p/Kwh, with effect from July 1.
The move is the first time the RHI scheme’s degression mechanism has been enacted and further cuts could be imposed quarterly based on the level of adoption of RHI-approved technologies. The automatic cuts are modelled on those imposed to the feed-in tariff renewable electricity incentive scheme and are designed to stop a surge in installations burning through the budget for the two schemes.
The latest proposed increase in tariffs is likely to be broadly welcomed by the Renewable Heat industry, which has been frustrated in recent months by further delays to the planned domestic RHI scheme that mean it will not be launched until next year.