Renewables industry "delighted" as Energy Minister boosts RHI scheme

by Search Gate staff. Published Wed 04 Dec 2013 15:10, Last updated: 2013-12-04
Government reveals improvements to RHI scheme

Energy Minister Greg Barker has set out a series of plans to improve and increase support for the Renewable Heat Incentive (RHI).

In a statement to Parliament, Mr Barker said the Government intended to boost the levels of support for the non-domestic RHI to create a step-change in the uptake of renewable heat technologies, helping to increase renewable heat from its current deployment level of around 2% to 12%.

And he described how the improved programme will now allow industry to grow and invest in confidence and is “designed to stimulate considerable growth in the deployment of renewable heating technologies in the coming years”.

The non-domestic RHI scheme has been open to commercial, industrial, public sector, not for profit and community generators of renewable heat since November 2011.

The scheme is designed to bridge the gap between the cost of fossil fuel heat sources and renewable heat alternatives through financial support for owners of participating installations.

Key points of today's announcement, include:

* A new tariff for deep geothermal heat at 5p/kWh. Deep geothermal heat will be defined as heat coming from a drilling depth of a minimum of 500m

* Subject to State Aid approval, tariffs will be set at 5.9p/kWh for biogas installations with a thermal capacity of between 200 to 600kWth and 2.2p/kWh for those greater than 600kWth

* A specific tariff for biomass CHP of 4.1p/kWh of eligible heat produced

* Support set at 2.5p/kWh for air to water heat pumps (AWHP) and 2.0p/kWh for the biogenic proportion of energy from waste (commercial and industrial)

* Increased tariff support for solar thermal, ground source heat pumps and large biomass

* There will be no tariff support for bioliquid CHP technology, heating-only air to air heat pumps (AAHPs) and biomass direct air heating.

In his statement, Mr Barker told MPs: “Given low levels of uptake for some technologies in the scheme and additional evidence from stakeholders, we decided to re-examine the evidence on the assumptions and cost data used to set the level of tariffs when this world first scheme for renewable heat was launched.

“It is vital that we get the level of support right so that the market can invest with confidence, cost reductions can be achieved and the market can grow sustainably.

“We gathered new data on the assumptions used to set tariffs and used this in conjunction with evidence from the industry to calibrate new tariff levels. Subject to State Aid approval, we intend to increase the support available for renewable Combined Heat and Power (CHP) plants, large biomass boilers (over 1MW), deep geothermal, ground source heat pumps, solar thermal and biogas combustion >200kWth.

“We are also introducing new support for air-water heat pumps and commercial and industrial energy from waste, along with improvements to our budget management policy and further policy development on providing increased tariff certainty for large-scale schemes.”

Welcoming the announcement that support will be available through the RHI for heat use from biogas projects over 200 kWth, Charlotte Morton, chief executive of trade association ADBA, said: "We are delighted that DECC has finally confirmed support under the Renewable Heat Incentive (RHI) for heat use from biogas projects with a thermal capacity over 200 kW.

"This is something we have long called for. AD projects using CHP have the potential to deliver heat to a wide range of potential users, including industrial processes at sites like distilleries and factories, farming processes and community or domestic buildings.

"Biogas is an extremely low-carbon energy source, and this support will help meet the infrastructure costs to make good use of heat. Although we are disappointed that support will not be available to existing plants which only use some of the heat they currently generate, it is good that those which do not make use of heat at all should now be supported."

And Dave Sowden, Micropower Council chief executive, added: “This is a welcome step forward, and our early analysis suggests that there is sufficient funding for substantial growth in the market over the next two years.

"The inclusion of air to water heat pumps in the non-domestic scheme is particularly welcome, and something we have campaigned for over the past two years and puts this technology on a fair footing with other renewable technologies.

“There is much detail to digest, and in particular it looks likely that the domestic air source heat pump market will hit its degression trigger in the first year, but overall this is very positive news for the industry.”

John Felgate, head of technical at heat pump manufacturer Stiebel Eltron UK, said: “This announcement is good news for manufacturers and installers alike – there has been much lobbying to include Air/Water source heat pumps as part of the commercial RHI and the industry will be happy that DECC has listened to our advice.

“The tariff itself of 2.5p is pitched very well to give businesses the right kind of return that they need.

“Up to now only ground source heat pumps have been incentivised and we have certainly seen an increase in take-up – we hope to see a similar rise in demand for Air/Water heat pumps now that consumer confidence will grow and a return on investment is guaranteed.

“At Stiebel Eltron UK we have continually called for stronger support from the government and this is another step forward to assist the renewable energy sector. We are also currently lobbying to get DHW heat pumps for commercial projects listed on the Enhanced Capital Allowance (ECA) Scheme, as this will be a further incentive for businesses to go green.”

Energy expert Lu Rahman, editor of Energy & Efficiency magazine, also welcomed today’s announcement.

“The announcement of the tariffs offers those in the commercial sector the opportunity to generate renewable heat with confidence," she said. "It has come at a time when the industry needs a boost and will hopefully provide the means for those operating in the renewable heat sector to maximise on the opportunities ahead. The industry has been operating under some uncertainty of late. I hope the announcement will negate some of that anxiety."

Also published today are further details of the domestic RHI, related to budget management policy, phasing of legacy applications and treatment of some types of subsidy, as well as confirming the tariff for solar thermal at 19.2p/kWh, following the Government's commitment when publishing the domestic RHI policy in July 2013.

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