In November 2015, the Department of Energy and Climate Change (DECC) set out its priorities during this Parliament. DECC acknowledged that the challenge it faces is how to make sure that energy remains as the backbone of the economy during the transformation to a low carbon system and ensure that ways are found to achieve an energy system that is secure affordable and clean. Heating constitutes a major part of the challenge accounting for almost half of UK energy use and a third of UK carbon emissions. It is vital homes and businesses have access to affordable and reliable sources of heat. A stronger, long-term plan is required to meet climate change commitments and a move to low carbon heating. The UK must make the transition to cleaner heating technologies in a manner that is affordable as a whole without significantly impacting consumer’s energy bills.
The Renewable Heat Incentive (RHI) was introduced to support households, businesses, public bodies and charities in moving from conventional forms of heating to renewable, low carbon sources of heat. The RHI is central to the Government’s plans to help develop secure, affordable and clean energy. The mass roll out of low carbon heating technology is required from the 2020s onwards in order to meet decarbonisation targets. The RHI also aims to contribute to renewable energy generation in order to help the UK meet its 2020 target for sourcing 15% of energy demand from renewables.
The Government confirmed its continuing commitment to support the transition to low carbon heating by announcing an increase in spending on the Renewable Heat Incentive (RHI) schemes from £430 million in 2015/16 to £1.15 billion by 2020/21. The Government intends to reform the scheme to ensure it meets its objectives in a manner which promotes widespread access, is affordable, provides support to technologies which are likely to be strategically important, contributes to development of sustainable markets and incorporates robust scheme design.
Up until now, the Non-Domestic scheme has supported widespread deployment of smaller scale biomass systems, particularly in sectors such as agriculture and leisure. Similarly, in the Domestic scheme, deployment has also been dominated by biomass, mostly in generally larger houses with relatively high heat demands. Some forms of support for biomass offer a relatively stronger value for money route to delivering renewable heat generation however, the schemes must also support the long-term decarbonisation of heating in the UK. This means giving appropriate support to other technologies which Government expects to have an important role in that transition. Under the proposed package of reforms, deployment to still expected to be focussed on areas off the gas grid, including, but not limited to, rural areas. The reforms are intended to drive greater uptake of a wider range of technologies and potentially also new uses of low carbon heat including the use of larger-scale biomass fired heat in energy intensive industries and process-heating, the more widespread use of heat pumps in providing heat to homes and commercial buildings, the use of wastes in biogas production and higher uptake amongst those living in fuel poverty or in smaller properties with lower heat demands. The consultation therefore seeks views on proposals to deliver this rebalanced deployment.
The Government is proposing to introduce reforms in two stages. The first stage will be introduced from 1st April 2016 and will include changes to how the RHI’s budget is managed with a new budget cap mechanism. The aim of the budget cap is to ensure the ongoing affordability and will allow the Secretary of State to suspend the schemes if spending on the RHI is at risk of exceeding its budget cap.
This consultation also outlines and seeks views on Government’s proposals for the second stage of reforms, which will be implemented from Spring 2017.
For the Domestic scheme, reform proposals include:
- Improving access for those less able to pay allowing new 3rd party financing models to develop;
- consulting on options to drive deployment of heat pumps with shared ground loops
- Promoting deployment of those technologies which are likely to be strategically important in the longer-term,
- driving up the performance of heat pumps installed under the RHI; and
- Promoting affordability by introducing heat demand caps to limit payments to new participants.
For the Non-Domestic scheme, reform proposals include:
- ensuring the affordability by moving to one tariff for all new biomass boiler deployment;
- driving deployment of larger systems and of biomass-fired process- and district-heating;
- retaining the current tariff for biomass-CHP plant;
- resetting bio-methane support from spring 2017 for new installations;
- ending support for heat used to dry digestate;
- introducing tariff guarantees and extending the range of technologies eligible for preliminary accreditation to drive deployment of cost effective larger scale plant; and
- the removal of support for new solar thermal systems under both RHI schemes.
In addition, the Government is seeking responses to the following questions.
- The intention of this consultation to gather evidence on the likely levels of deployment of each of the technologies which will be used to update the RHI’s budget management arrangements for the years from 2017/18 onwards.
- How should the Government manage the budget cap and how much notice should be given prior to a potential closure to new participants?
- Are there any potential heat uses which the Government should consider not supporting for new applicants to the scheme?
- What are the main financial and non-financial barriers to the deployment of heat pumps and how can they best be overcome?
- Is there a way to link payments to actual performance which balances consumer confidence with incentives for higher performing systems?
- Do you agree that support should be withdrawn for new solar thermal systems from 2017?
Comments relating to any aspect of the RHI are also invited. The deadline for response is 27th April 2016. 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.