Why the Renewable Heat Incentive is Critical to UK Decarbonisation

Why the Renewable Heat Incentive is Critical to UK Decarbonisation

  • 15 Feb 0

The UK’s Renewable Heat Incentive (RHI) is the world’s first long-term financial support programme for renewable heat. The RHI pays participants of the scheme that generate and use renewable energy to heat their buildings. By increasing the generation of heat from renewable energy sources instead of fossil fuels, the RHI is helping the UK reduce greenhouse gas emissions and meet targets for reducing the effects of climate change. There are two parts to the RHI; the domestic RHI which was launched on 9th April 2014 and is open to homeowners, private landlords, social landlords and self-builders and the non-domestic RHI, launched in November 2011 which provides payments to industry, businesses and public sector organisations.

The Department of Energy and Climate Change (DECC) has issued several reports detailing its findings on the effectiveness of the RHI which is a key scheme in the Government’s heat strategy and critical to decarbonising the UK’s heat sector. The reports have evaluated both the domestic and non-domestic RHI schemes, heat pumps in district heating, combined heat and power (CHP) and district heating and cooling in the UK. DECC has also examined the drivers of growth and cost changes in European renewable heat technologies, the Renewable Heat Premium Payment scheme and the scope for cost reductions. The reports conclude that more than 800MW of additional capacity could potentially be added each year and encourages the government to support decarbonisation of the heating sector by introducing new technologies.

The RHI scheme also provides a 20-year subsidy to eligible, non-domestic renewable heat generators and producers of biomethane for injection based in Britain. By providing a long-term financial incentive, the objective of the non-domestic RHI is to significantly increase the proportion of heat generated from renewable sources.

Some of the key findings are:

  • 63% of non-domestic applicants would not have installed a renewable heat technology if not for the RHI;
  • The majority of applicants (87%) were satisfied with the operation of their installation;
  • 88% of applicants would recommend their renewable heat technology to others;
  • The European biomass heat market is moving to a more competitive phase with a wider range of boiler suppliers available than ever before;
  • The reducing costs of biomass represent an opportunity for the UK to import the technologies from Europe; therefore adopting late mover advantage.

During the Autumn Statement and Spending Review in November 2015, the Chancellor announced that the RHI would have its funding increased to £1.15 billion in 2021 to ensure that the UK continues to make progress towards its climate goals. However, this actually means that spending on the RHI scheme will be around £690 million lower than what was originally forecast by the Office for Budget Responsibility. The UK still needs 20TWh more renewable heat by 2020, to meet the government’s 12% target.

There is a need for improvement both in the RHI and within the sector if this target is to be met. It is clear however that biomass and wood heating is a modern and mature technology that has huge potential for growth. As capacity grows, the reports suggest that costs to introduce new innovations would tumble. The reports identify the potential to see a reduction in installation costs of 9-11% if the Government backs mass-market development.

The RHI scheme is essential for reaching the UK’s target of producing 12% of the country’s heating from renewable sources by 2020. The Government is due to release a consultation in the first quarter of 2016 looking at the proposed developments of the scheme taking into account the reduced funding that will be made available in 2021 however no details have been released as yet. What is clear is that it is vital that the findings of these reports are taken into consideration in the reform of the RHI and more needs to be done towards the development of new technologies if the UK is to meet its carbon targets for 2020 and beyond.


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