The government announced significant changes to the Renewable Heat Incentive (RHI) yesterday.
The overall message coming out is 'improving support, increasing uptake and is looking very positive for anyone considering the purchase of a biomass boiler or anyone who already owns one.
Commercial RHI tariffs expected to rise
The changes include a possible increase in the payments per kilowatt hour (kWh) for biomass boilers of all sizes. This is planned because renewable heat uptake for the RHI amounts to just over 3,000 installations, accounting for 1.2 TerraWatt hours of heat. This is only a third of that expected when the commercial RHI was launched in November 2011.
Ninety seven percent of applications to date are for biomass heating. Uptake of small and medium scale biomass has been much higher than anticipated but this is more than offset by a very low uptake in large scale biomass. Recognising the need to continue to grow the rate of uptake of renewable heat and to support large scale biomass, the large scale biomass tariff is to be increased from the current 1 to 2p/kWh.
The RHI’s rates of payment for renewable heating are reviewed annually based on the Retail Price Index (RPI), which is the official measure of inflation. Based on the current RPI increase of 2.8% a rise in tariffs is due to become effective from April 1st 2014. This will be confirmed when the RPI increase for 2013 becomes official on 31st December and we will give an update on how this affects payments when the changes come into effect.
Trigger for degression to be uplifted
In addition, trigger budgets for any digression in small and medium scale biomass tariffs have been uplifted. What is digression? Essentially it means that when RHI payments reach a certain pre-defined level that the rates of payment per kWh may drop. This measure is in place to prevent an over spend.
A proposed uplift in the trigger budgets for digression means that the current rates of RHI are unlikely to reduce for some time. This is good news as it gives existing and prospective biomass boiler owners some certainty over their return on investment by moving to biomass heating. It is very positive step in the right direction to generate sustainable expansion and growth in the deployment of renewable heating.
These measures are expected to bring an additional 5,000 commercial installations, equating to 6.4TWh by the end of 2015/16.
Domestic RHI on track for launch in spring 2014
The government also confirmed that the Domestic version of the RHI remained on track for introduction to new applicants in Spring 2014. A phased opening of the scheme to Renewable Heat Premium Payment installations is also proposed.
Overall this represents a significant re-affirmation of commitment to the RHI and the introduction renewable heat. The RHI is expected to deliver 14,000 industrial installations, and 112,000 commercial, business and public sector installations by 2020. With the domestic RHI, this is expected to deliver 12% of the UK’s heating from renewable energy.