The world’s first Renewable Heat Incentive (RHI) scheme has been launched by the Department of Energy and Climate Change (DECC), with an £860m funding pot aiming to cut carbon emissions by generating domestic and commercial heat through renewable sources such as biomass and combined heat and power plants.
Industry and investors have long awaited the announcement of these details, which had been due before Christmas.
The scheme, which is expected to increase green capital investment by £4.5bn up to 2020, is being introduced in two phases, with the commercial and industrial heat users targeted first. £15m of this money will be ring-fenced for households on a renewable heat premium payment to enable the Government, manufacturers, installers and householders the opportunity to see how it works. The second phase in October 2012 will then see households shift from the premium payment to a scheme similar to that of the larger heat users.
A tariff system is being used to decide exactly what support different technologies and different- sized facilities will receive (see document on the right). It is different to the renewable electricity feed-in tariff scheme, which sells electricity back to the grid. Instead with the RHI, only organisations that utilise all the heat generated by the facility will be eligible. In addition, anyone who does decide to install a facility can expect to receive a 12% return on their investment over 20 years.
At a press briefing alongside DECC secretary Chris Huhne, minister Greg Barker said: “This is a very ambitious scheme. In a constrained world the coalition is really putting money where its mouth is. We see this being underpinned by an industrial strategy. It will draw in investment and working partnerships with British businesses and manufacturers.”
However he said regular reviews of the incentives will be needed because it is hoped that the capital cost of equipment and systems will decrease as technology improves and they become more accessible. The Government will also introduce banding because some tariffs will digress at different rates. A document setting out the proposals of automatic deployment of digression is to be published in October.
Huhne and Barker explained that, currently, more innovation was needed to ensure there would be renewable heat facilities that were small enough and affordable. They hope the RHI will drive this.
Speaking to MRW, Renewable Energy Association (REA) chief executive Gaynor Hartnell was pleased with the system. She said: “It is a really good, novel approach. Biomass boilers will be significant in this scheme. And I want to see energy from waste (EfW), the cheaper technologies, rolled out.”
The REA recently sent an open letter to the Government calling it to stop stalling on revealing details of the RHI because it was “sapping the confidence of potential investors”.
Lord Redesdale, chairman of the Anaerobic Digestion and Biogas Association, added that he felt the RHI would trigger a “huge increase in AD…The Government now needs to consider steps such as socialising the cost of the gas grid connection to encourage the best use of biogas for meeting the UK’s targets, including the huge increase in EfW through AD, which the coalition promised.”