The continuing need for the Renewable Heat Incentive
Published: 03 March, 2016
The Renewable Heat Incentive scheme is crucial to the UK’s long-term decarbonisation efforts, believes Justine Grant of Team.
The RHI is still with us, but expect changes.The Government announced plans to increase funding for the Renewable Heat Incentive from 2016 to 2017. By 2021 an additional £1.15 billion will have been spent on the RHI, but changes to the scheme are expected to save money.
Announcing the plans in the Autumn Statement & Spending Review, Chancellor George Osborne said the increase in funding would ensure that the UK continues to progress towards its climate goals while reforming the scheme to improve value for money, delivering savings of almost £700 million by 2020/21.
Whilst most are optimistic about the news on increased funding, many are keen to learn more on plans to reform the scheme and what it will actually mean.
The renewable-heat sector, which includes ground- and air-source heat pumps, biomass boilers, biogas combustion and solar-thermal technologies, is currently supported by the taxpayer-funded RHI. £860 million was made available from central Government funding to support the RHI over the period from 2011 to 2015.
The RHI provides a continuous income stream for 20 years to any organisation that installs an eligible renewable-heating system, ensuring that renewable heat is commercially attractive when compared to fossil-fuel alternatives. The scheme is important because it helps significantly increase the level of renewable heat produced in the UK, which is key to the UK meeting its renewable-energy targets, reducing carbon emissions, ensuring energy security and helping to build a low carbon economy.
By 2020, it’s estimated that RHI support levels are expected to bring forwards around:
• 14 000 installations in industry and
• 112 000 installations in the commercial and public sector.
These installations are expected to generate 57 TWh of renewable heat.
Renewable heat is crucial to the UK’s long-term decarbonisation efforts, but the Government’s decision to slash electrical renewable power subsidies has left solar PV firms facing an uncertain future and has, understandably, left many renewable-heat developers feeling anxious about what’s in store for them.
Despite the cuts, Energy Secretary Amber Rudd has said she believes the solar industry will ‘continue to thrive’. The Government believes the technology is almost ready to stand on its own two feet without subsidy; but can the same be expected for biomass boilers, biogas combustion, ground source heat pumps etc.?
The lack of insight is already hitting UK businesses, with some delaying decisions about capital investment until there is further certainty on its future.
Many businesses turn to the RHI to generate income from renewable energy sources; without it the Government could struggle to meet its 2020 low-carbon targets.
The RHI budget runs out in April 2016. Consultation on changes to the scheme are expected to happen over the coming weeks with an aim to implement changes in 2017. Affected businesses need to respond to consultations to have any chance of influencing policy.
A recent document by the Department of Energy & Climate Change (DECC) warns of the need for ‘bold’ decisions to ensure that the RHI is delivering ‘the best results for the taxpayer, the climate, and for the future decarbonisation of heat’. Exactly how this will be done remains to be seen, but with such forceful wording, we should expect some pretty far-reaching reforms.
Heat is one of three sectors that make up the UK’s binding commitment to decarbonise the energy industry by 2020. The target is for 12% of the UK’s heat to come from low-carbon or renewable sources. If this is unmet, the other two sectors, transport and electricity, must contribute more to meet the overall target.
Current DECC projections suggest that the RHI will not succeed in delivering the desired share of at least 12% for renewable heat. Based on March 2015 Eurostat data, the UK is now further behind its renewable-energy targets than any other EU state. The UK needs a growth rate of over 16% per year in order to achieve its 2020 targets.
It is evident that changes to the RHI scheme need to be addressed if we are to have any chance of hitting the 2020 targets — but uncertainty from the UK Government has been going on for far too long now, and it’s time to provide greater clarity for the industry so that we can start planning for the future.
Justine Grant is a senior energy consultant with Team. She is the lead author of the Building Engineering Services Association ‘Guide to good practice: heat metering for the RHI’, which has recently been updated.
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