Renewables industry reacts positively to details of RHI reform

Reforms announced today to the UK’s Renewable Heat Incentive (RHI) scheme, the flagship policy for the decarbonisation of the heating system, are being welcomed by the industry and trade associations.

Changes to the scheme were proposed in a public consultation in March. At that time, the renewable heat industry was deeply concerned that the revised tariffs would result in a steep fall in the deployment of many renewable heat technologies. Proposed tariff reductions of 45% for parts of the biomass heat sector, for example, were projected by the Government to lead to a 98% drop in installations.

Other technologies, such as solar thermal, were to be removed from the RHI altogether. The proposals resulted in significant outcry from sectors of the renewables industry.

The REA’s analysis of the Government’s finalised scheme, released today, indicates that the reformed Renewable Heat Incentive moves us closer to the UK meeting it’s legally binding 2020 renewable heat target. However, there will be certain key sectors which will struggle, including biogas and non-domestic biomass boilers.

Dr. Nina Skorupska, Chief Executive at the Renewable Energy Association said: “The reforms made today to the Renewable Heat Incentive are an improvement to the earlier consultation and will go some way to grow an effective renewable heat sector in some cases to 2021. As recognised in this consultation response, heat is a very complex issue and we need all technologies on board to achieve our long-term goals. Renewable gas, biomass boilers, solar thermal, heat pumps, heat networks, hydrogen and other technologies will all have a role to play.

“The next step is for Government to lay out a long-term energy strategy so industry can prepare for low-carbon heat deployment in the 2020’s and 2030’s. As of now, this policy only takes us to 2021 and there is little indication of the Government’s vision beyond.”

John Baldwin, Chair of the Renewable Energy Association’s biogas group and Managing Director of CNG Fuels said: “The biomethane tariff reset is most welcome. Government has acknowledged the strategic role biomethane can play across heat and transport and the resetting of the biomethane tariffs should enable continued deployment of the most competitive projects.

“Unfortunately, the biogas combustion tariff isn’t likely to enable many new biogas CHP projects to come forward. With the closure of the RO, and rapidly falling tariffs for the Feed-In Tariff, this sector still faces many challenges.

Key elements of the announcement include:

• Continued support for solar thermal in both the domestic and non-domestic RHI

• Increased tariffs for new heat pumps

• Biomass remains a key part for the scheme and will continue to be supported with increased support for large and industrial projects

• Introduction of tariff guarantees will be introduced for large biomass boilers; large biogas plant; ground source heat pumps; and all capacities of biomethane; biomass-CHP and deep geothermal plant.

Paul Barwell, STA Chief Executive commented: “Solar thermal is back, which is great news for businesses and families who want to bring down their energy bills and do their bit to mitigate climate change. It is to the new Energy Department’s credit that they listened to the very strong arguments we made for retaining solar thermal within the RHI.”

Isabella O’Dowd, Policy Analyst for the STA Solar Thermal Group commented: “The UK lags behind on solar thermal internationally but its potential in this country is huge. Solar thermal makes great financial sense for businesses and it is a low hassle choice for households with even limited roof space. Internationally solar thermal is used for space heating, community heating and industrial processes.

“Strategically solar thermal matters because while our homes and offices are becoming better insulated we will always need hot water and process heating. We might be a small industry with more limited applications today, but this technology has really tremendous growth potential.”

Stephanie Clark, Policy Manager at Scottish Renewables, said: “As heat accounts for more than half of all the energy used in Scotland, and 45% of energy use across the UK, it is crucial that we continue to press ahead with cutting carbon emissions from this sector if we are to meet our legally-binding climate change targets.

“The RHI has played a pivotal role in encouraging the use of renewable heat to date, and today’s announcement to continue support across the sector provides our industry with much needed certainty.

“In particular, we are pleased that government has listened to industry’s arguments to continue supporting solar thermal technologies under both domestic and non-domestic parts of the scheme.

“The UK Government still has a very long way to go if it is to have any chance of meeting its 2020 renewable energy target. Decarbonising the heat we use in our homes, businesses and industry lies at the heart of action to clean up our energy system and tackle climate change.

“We will continue to look at the detail of the government’s announcement with our members to fully assess the impact these changes will have on the future growth of Scotland’s renewable heat industry.”

Julian Morgan Jones, Chair of the Wood Heat Association and Managing Director of South East Wood Fuels said: “We welcome the increased tariffs for domestic biomass heat projects. The Government is recognising the important role that biomass projects at the household level have played, and will continue to play, in the decarbonisation of our heating system. Our hope is that these reforms will result in a surge of the growth of large biomass.

“The picture, however, for small to medium sized non-domestic projects is bleak. Small and medium sized projects, given these tariffs, will almost completely end. The most apparent losers of this policy will be rural and off-grid schools, hospitals, and council estates, which is where most of these systems have been deployed.

“This cut will cost skilled jobs, damage a supply chain and may mean that the decarbonisation of heat becomes more expensive.”

A statement released by the Ground Source Heat Pump Association, said: “The reforms make some small but significant changes that ensure all types of buildings can benefit from public funding, including a modest rise in the Domestic RHI tariff. The proven and highly successful retrofit of GSHPs into tenanted housing using micro district heating systems featuring shared ground loops will become more easily financed as the payments are deemed rather than metered – and the tariffs can be guaranteed at date of order for projects over 100kW even if the commissioning date is some way into the future. This focus on the unable-to-pay will make winters more comfortable and less worrisome for large numbers of the growing elderly community.

“However, we note some concern over the capping of payments for larger domestic systems which has been an area of strong deployment under the RHI to this point. The Association will be keeping a keen eye on the effect this has on the market place and will be engaging with BEIS as we move into 2017. Large commercial GSHP projects, including new buildings and new housing with shared ground loops, will also benefit from a guaranteed tariff and the certainty that the RHI is fully funded until Spring 2021.

“The GSHPA thanks Baroness Neville-Rolfe, and in particular the staff at BEIS, for a detailed engagement over the course of 2016. Almost seven years after Government’s first RHI Consultation, the scheme now represents a solid platform that can be used to develop the future policy framework. This will further spur GSHPA members to deliver the aggressive but sustainable growth in GSHP markets over the next decade that will be essential to help the UK meet its legally binding energy security, fuel affordability and emissions reduction targets.”