Renewable Heat Incentive Consultation
Following the initial consultation guidance on the Renewable Heat Incentive announced earlier in the year, the government published its response on 14th December 2016 with some encouraging signs that the government will maintain its commitment to decarbonise the heating sector in the UK, whilst ensuring value for money for consumers.
Pledges within the consultation focus on incentives to stimulate long-term decarbonisation through the deployment of the right technologies, cost controls to offer better value for money and protects consumer, and a system that will support supply chain growth and challenge the market to deliver.
This is an encouraging redress of budget for the sector which, up until now, has favoured the allocation of funds to sub 1MW biomass schemes.
But what does this mean in practice from an industry perspective?
The new guidance, which sets out changes that will mostly come into effect from spring 2017 and will govern the administration of the RHI up to 2020/2021, contains some encouraging signals for the industry that the government hopes will ease the process of securing development capital for larger scale sites.
Biomethane and biogas installations are set to benefit with tariffs increasing by 38% and 33% respectively, with the biomethane tariff being reset to the April-June 2016 rate and the biogas tariff being revised to the current rate, should any degression occur before spring 2017.
For biogas and biomethane sites, new sustainability criteria will be introduced meaning that 50% of all biogas must be generated for waste or residue sources. For schemes over 1MW, annual independent sustainability audits will be required to ensure compliance. Any excess biogas generated over this level will be ineligible to receive support.
Eligible heat use criteria will also be tighten meaning that drying of digestate will no longer be considered as a qualifying use of heat for new participants.
Tariff guarantees will be introduced for biomass over 1MW, biogas over 600kWth, Ground Sourced Heat Pumps over 100kW and biomethane, biogas CHP and deep geothermal at all capacities. Applicants are able to apply for a guarantee once planning permission is granted and will then have three weeks to reach financial close in order to secure the prevailing tariff at the time of the application and then meet a pre-nominated commissioning date. It is hoped such guarantees will allow investment in larger scale schemes to come forward, however, close monitoring of budgets will be required to avoid overspends the overall RHI budget and early closure of the scheme. Individual tariff guarantees will be limited to a maximum of 250 GWh heat or biomethane equivalent.
In a move to encourage the development of larger scale schemes, tariff banding for biomass installations will be removed with all capacities receiving the same tiered rate based on a 35% of an installations total installed capacity. The hope being that this will have greater significance in the Governments decarbonisation efforts.
Planned removals of support for Solar thermal and a reduction in the tariff for deep geothermal will now not be implemented, with heat pumps also continuing to receive support. Proposed tiering for the Biomas CHP tariff will also not be implemented.
Finally, the budget cap and degression mechanisms will be maintained to avoid potential overspends in the budget up to 2020/2021.
Whilst much needed reforms are welcome, only time will tell if these measures will be sufficient in transforming the UK into a decarbonised economy. The Secretary of State maintains the power to close the scheme at short notice using the budget cap mechanism, and this, in the shorter term, may have an effect on new tariff guarantees for larger installations and the availability of support for smaller farm based installations.
Senior Energy Specialist
Peter is a Senior Energy Specialist and is based in our Harrogate office....