The Renewable Heat Incentive (RHI) supports the deployment of renewable and low-carbon heating technologies. The scheme helps to bridge the gap between the cost of renewable heating systems and the conventional alternatives. The Non-Domestic RHI opened in November 2011. It supports the installation of renewable heating by businesses, charities and in the public sector, and systems supplying heat to more than one domestic property. The Domestic RHI, which provides support to individual households, opened in April 2014.
In November 2015, the Government renewed its commitment to the transition to a low carbon economy by confirming a continued budget for the RHI out to 2020/21. In December 2016, the Government set out its proposals for the reform of the RHI schemes which will take effect in the spring of 2017.
Overall, the reforms are intended to improve the scheme to ensure it:
- Focusses on long-term decarbonisation by ensuring the RHI contributes to both the decarbonisation targets and to the UK’s renewable energy target;
- Offers better value for money and protects consumers;
- Supports supply chain growth and challenges the market to deliver by driving cost reductions and innovation that provide quality to consumers and are sustainable without Government support in future.
The production of heat from solid biomass combined heat and power (‘biomass-CHP’) plant has been eligible for support under the Non-Domestic RHI. When the scheme launched in 2011, heat produced by biomass-CHP plant was eligible for the same tariff as heat from solid biomass plant producing only heat (biomass heat-only plant). In December 2012 the Government introduced a specific tariff in support of biomass CHP plant which was significantly higher than the tariff available for biomass heat-only plant larger than 1 megawatt in capacity. This higher tariff reflected the potentially higher costs faced by biomass-CHP plant compared with biomass heat-only plant and recognised the benefits in terms of efficient use of biomass resources it delivers.
In late 2015 it became apparent that a high proportion of plant applying for the Non-Domestic RHI under the biomass-CHP tariff were plant which produced a relatively low level of electricity compared to heat output. Such plant do not necessarily face the significantly higher capital costs or deliver the comparatively efficient use of biomass the tariff reflects.
In response, the Government introduced changes in the support arrangements for new biomass-CHP adding a new requirement for these plant to achieve a minimum power efficiency in order to fully qualify for the biomass-CHP tariff for all eligible heat use. The threshold is currently 10%. For plant with a power efficiency of below 10% the level of heat receiving the biomass-CHP tariff reduces proportionately. The remaining heat receives the biomass heat-only tariff for a plant of the same thermal capacity.
The Government is now proposing to limit access to the biomass-CHP tariff for some biomass-CHP plant which produce only a small amount of power on the basis that such plant do not necessarily deliver the benefits in terms of efficient use of fuel, compared with separate generation of heat and power, which the tariff was intended to promote. To achieve this, the Government proposes to retain the principle of a power efficiency threshold but to increase it to 20%. A biomass-CHP plant’s power efficiency would be evidenced via its CHPQA certificate.
The Government is seeking opinions on the following questions:
- Is it appropriate to limit access to the biomass-CHP tariff for plant which produce only low levels of power?
- Is the use of a power efficiency threshold is the best way to determine the extent to which a plant’s heat output is paid for under the biomass-CHP tariff?
- Is the power efficiency threshold of 20% is appropriate?
The consultation closes on 13th March 2017. We are formulating our response to the consultation and would welcome your feedback to incorporate into this. To have your say, please email the compliance team at compliance@carbon2018.com or alternatively complete the contact form. To discuss this further please call Melanie Kendall-Reid on 01252 87 87 22.