RHI update: February 2013

For those of you that don’t already know, The Renewable Heat Incentive (or RHI as it is more commonly known) is a government incentive which pays the owner of eligible renewable installation (heat pump, biomass or solar thermal) over time for the heat that is produced. The RHI is run by Ofgem who manage the application process and also make the payments (from a pool of funds allocated by the treasury).

It was introduced in order to increase the number of renewable heat installations in the UK and so help the country to achieve its carbon reduction target for 2020.

The RHI was preceded a similar scheme called the Feed in Tariff, which incentivised the installation of renewable power generation. The scheme has been a huge success and resulted in over 260,000 installations of solar PV.

However, the success of the scheme gave the newly elected coalition a fright when they realised that there were no safeguards in place to monitor and adjust the payments as the cost of solar PV installations fell. This meant that the scheme had become too generous and was not providing good value for money.

In an effort to tackle the problem the government announced huge cuts to the tariffs. In November 2011, when the tariffs cuts were announced, the tariff for a typical 4kWp solar PV installation was 43.3p p/kWh; by August 2012 this had been cut to 15.44p p/kWh- a fall of almost 65% in less than a year.

All this was extremely damaging to the burgeoning renewable power industry and damaged confidence in the scheme. The industry was in uproar and the fiasco enjoyed widespread coverage in the UK mainstream media.

Unfortunately, November 2011 was also the month that Phase one of the Renewable Heat Incentive also opened. The opening became an almost inaudible whimper against the battle that was raging over the Feed in Tariff cuts.

Fifteen months on and the RHI is still struggling to achieve the uptake that was predicted. The government started a consultation last year to investigate the reasons for the lower than expected uptake. The results of the consultation were released on 27th February and the main updates to the non-domestic RHI include:

  1. To ensure that the scheme is financially sustainable and operates within the allocated budgets until 2020 (and to avoid a similar situation as the Feed in Tariff debacle…) the government has set ‘triggers’ for uptake. If the uptake of one renewable heat technology reaches this trigger point the tariff will likely be cut to lower uptake.
  2. Technologies which lagging behind e.g. heat pumps are likely to have their tariff increased. Installations accredited from 21 January 2013 will benefit from the increase once the new tariffs come in to force.
  3. Sustainability requirements will be introduced for all existing and new installations using solid biomass as a feedstock.
  4. 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.
  5. Metering requirements will be simplified to reflect feedback received from participants and to reduce burdens on industry.

The government also reconfirmed their intention to extend the RHI to cover single domestic properties – known as phase two – and also include air source heat pumps (for both phases of the RHI).

The domestic RHI is expected to open for applications in October 2013. The key proposals in the consultation are:

  • Indicative tariff ranges for air source heat pumps (6.9-11.5p/kWh), biomass boilers (5.2-8.7p/kWh), ground source heat pumps (12.5-17.3p/kWh) and solar thermal technologies (17.3p/kWh) that are MCS certified and meet relevant required standards, including specific emission limits for biomass systems.
  • Payments for householders over seven years for each kWh of heat produced for the expected lifetime of the renewable technology and based on deemed heat usage.
  • Tariff levels set to provide a better return for householders living off the gas grid.
  • Minimum energy efficiency requirements based on Green Deal assessments.