Industry reacts to Govt support for Renewable Heat Incentive

The renewable energy industry has given a mixed response to details of the Government’s Spending Review that included sizeable funding for the Renewable Heat Incentive.

Chancellor George Osborne used his Autumn Statement to announce that the Renewable Heat Incentive (RHI) will continued with fresh cash backing until 2020.

The RHI will provide £1.15 billion of financial support up to 2021 and will also be reformed with a focus on value for money, saving around £700 million. However, it’s not clear yet exactly where these savings come from.

There will also be budgetary caps providing a backstop on expenditure, meaning that if the forecast expenditure reaches the agreed budget, the Secretary of State will be able to take action to suspend the scheme to new applications.

Kathy McVeigh, who is on the Solar Trade Association’s Board of Directors and the Managing Director of Northern Ireland-based solar thermal business Cool Sky Ltd commented: “We welcome the fact that the Renewable Heat Incentive will remain, despite the ominous rumours before the Spending Review. Amber Rudd has done well to protect the renewable heat sector.

“However deployment to date of solar thermal under the RHI has been disappointing. We look forward to working with DECC to implement some of the measures we have recommended to increase the uptake of solar thermal, including making it eligible on new build, removing the need for a Green Deal assessment and providing support for solar space heating and hybrid PV and thermal.”

Solar thermal water heating is particularly well suited for smaller and more shaded roofs, properties off the gas grid and is also a great solution for commercial buildings like leisure centres, hotels and hospitals with big hot water requirements.

Kathy McVeigh added: “We need to make sure that plumbers and heating engineers are offering solar thermal as an add-on whenever they quote for a new boiler, and the Government needs to help get this message out far and wide.”

The British solar thermal market has suffered since 2011, due to years of delay in introducing the Renewable Heat Incentive and insufficient levels of support. The market has collapsed from 30,000 solar thermal installations in 2010 to just 6,000 so far this year.

Responding to the Spending Review and Autumn Statement, Dave Sowden, Chief Executive of the Sustainable Energy Association, commented: “It could have been worse. Having done a phone-round of a number of our senior members, there is a sigh of relief in some sectors, grounds for optimism in others, and despondency elsewhere.

“On household energy efficiency, this statement represents a considerable watering down of energy efficiency policy. Whilst the Government has properly paid attention to limiting the impact on fuel bills, it has missed an opportunity to declare Energy Efficiency as a National Infrastructure Priority, scale up ambition in this area and consider routes for funding other than on energy bills. This is a missed opportunity for millions of families to be permanently better off.

“On Heating, we broadly welcome the package of measures that were announced. In particular the uncertainty surrounding the RHI’s continuation has been removed (albeit with significantly reduced ambition), and the measures announced for heat networks are to be welcomed”

Niall Stuart, Chief Executive of Scottish Renewables, said: “We are pleased to see the continuation of the Renewable Heat Incentive, though we will need to work through the detail of the expected reforms and the intention to bring down spending by around £700m by 2020/21. Increasing the use of renewable heat is essential to meeting legally binding carbon targets.

“The Chancellor also announced changes to tax reliefs on investments in renewables, which are yet another cut in support for the sector and which lessen its attractiveness to investors.

“We did, however, see a positive development in research and development with the Department of Energy and Climate Change’s innovation programme doubling its investment to ensure it can develop low carbon and renewable energy technologies, including smart grids.

“Overall, the spending review still leaves us with no real clarity on the crucial issue of how government will support the growth of renewables beyond 2020. The Committee on Climate Change’s latest reports suggest we need to double the output of renewable power between now and 2030 if we are to meet carbon budgets, and we need to start planning how we intend to do that now.”

Leading renewable specialist, Rexel UK, has asserted that the Government must recognise that a solid environmental policy is imperative to creating stable economic growth.

As anticipated, the Statement saw Chancellor George Osborne reveal that the DECC budget will be cut by 22% over the next four years, while DEFRA’s ‘day-to-day spending’ will fall by 15%, as part of a deficit reduction drive.

Steve Everard at Rexel UK commented: “Although the green cuts aren’t as great as initially feared, it is still disappointing to see the Government pull back on investment in energy policy and propelling a low carbon economy.

“While we, of course, recognise that there are other social and economic concerns which must be addressed, as Osborne noted in the Statement ‘there is no more important infrastructure than energy’; it is the only way forward if we are to lessen our reliance on foreign oil suppliers, take control of our energy needs and safeguard our future.”

He added: “With the Paris summit just around the corner and our 2020 carbon reduction targets imminent, we just hope that the cuts that are needed in Government spending do not affect our collective ambition to be leaders in the energy revolution that is required in our changing world. We look forward to hearing more of the Government’s environmental strategy as details emerge.”

Phil Hurley, managing director at NIBE, sees the outcome of the review as positive for the heat pump industry – hailing it as an opportunity to ignite future market growth.

He commented: “The spending review has provided all-important clarity on two points: firstly, that the RHI will continue for the remainder of this parliament, and secondly, that the budget for it will be a significant £1.15 billion.

“While there’s no denying that a £700 million reduction in support for the scheme is a substantial cutback, all is certainly not lost for renewable heat in the UK. At NIBE, we take the review as reassurance that the government not only believes in the capability of the scheme to drive widespread investment in renewable heat, but also remains committed to meeting its 2020 carbon reduction targets.

“Although we don’t know at this stage exactly what the reforms will look like, or how they will affect RHI tariffs for heat pumps, we’re optimistic that this injection of confidence will have a positive impact on market growth.

“For installers, it provides the necessary ammunition to continue communicating the benefits of the technologies – and the financial incentives that back them – to their customers. For consumers, it reinforces the message that renewables are here to stay and that now is the right time to invest.

“And for manufacturers and other industry stakeholders, it presents a fresh opportunity to work alongside policymakers to ensure that heat pumps and other renewable heating solutions remain an integral part of the UK’s future energy mix.

“As part of future reforms, at NIBE we would like to see the MCS process simplified and made more cost-effective. Removing some of the red tape around accreditation is the most effective way to make the renewables opportunity more attractive and accessible for installers – which is a vital ingredient to the successful rollout of renewable heat on a national scale.”

OFTEC director general Jeremy Hawksley commented: “OFTEC welcomes the Chancellor’s announcement that reforms will be made to the domestic Renewable Heat Incentive (RHI) scheme to deliver better value for money.

“Unless radical changes are made to the domestic RHI, the scheme will continue to only benefit the wealthy few. We are concerned to see DECC ploughing a further £1.1 billion of taxpayers money over the next five years into this floundering initiative.

“Only 43,000 accreditations to the scheme have been made since it started in April 2014 compared to the 180,000 + that DECC had anticipated.

“OFTEC questions whether spending £1.1 billion of taxpayers money on the domestic RHI is right when energy efficiency schemes are being cut.

“An incentive to replace the 600,000 standard efficiency oil boilers in GB with modern condensing versions would appeal more to home owners and could deliver significant GHG savings. For an average four bedroom home, this move would reduce annual fuel consumption by up to 24% (- 784 litres p.a.) and cut CO2 emissions by 33% (- 2418 kg p.a.).

“In contrast renewable heat technologies like heat pumps are expensive to install and often impose a big upheaval on domestic homes which are unpopular. This is why the RHI, in its current form, has failed to be taken up or to deliver the promised carbon savings.

“Government needs to urgently re-think its low carbon heat strategy and focus on incentivising solutions that are simple, affordable to install, impose limited disruption on the home owner and offer competitive running costs.

“This is even more apparent given the latest figures which show the number of excess winter deaths last year reached a 15 year high. Too many people are living in cold homes which they can’t afford to adequately heat. These are the very people government needs to help most but through schemes such as the current domestic RHI, they are being left out in the cold.”