While the additional support
available through FITs dries up for some sectors of the renewable
energy market, a new source of support may finally be coming on
stream for others through the Renewable Heat Incentive (RHI). DECC
revealed the details of the scheme in March, alongside draft
Regulations.
The RHI was proposed, but not implemented, by the previous
Government. The Coalition Government decided to revise the scheme
and has made a number of changes. Firstly, the scheme will be paid
for out of taxation, rather than a levy on fuel bills, which this
government felt was an unfair burden. Secondly, the incentive will
only be made available to businesses initially. Householders will
be able to take advantage of a slightly different scheme, called
Renewable Heat Premium Payments, though the RHI may be extended to
householders at the end of 2012. Further details on the Renewable
Heat Premium Payments will be published soon, but it appears that
this will be used to trial and monitor less established
technologies – with householders agreeing to record and
monitor performance as a condition of receiving the payment.
By contrast, RHI will only be available to established
technologies which are considered to meet the definition of
generating heat energy from renewable sources under the Renewable
Energy Directive 2009/28/EC. The summary document published by DECC
explains that "The primary objective of the Renewable Heat
Incentive (RHI) is to encourage the installation of renewable
heating equipment and generation of renewable heat in order to meet
the UK's share of the EU 2020 renewable energy
target". The summary goes on to state: "The
renewable energy target is extremely challenging and, given the
funding and time limitations, the RHI needs to focus on the
technologies which can be counted to meet that target".
While any support for renewable energy is of course welcome, it
seems slightly myopic to accept this logic for the RHI but,
effectively, reject it at the very same time by withdrawing FIT
support for large scale solar farms, which also have an important
part to play in meeting that target.
One change to the RHI which will be particularly welcome to many
of our readers is that the RHI will be made available to equipment
that burns Municipal Solid Waste (MSW) or fuel derived from MSW.
There are plans to reconsider other types of waste fuel as the
scheme progresses. Like FITs, the tariff will be adjusted for
inflation and will last for 20 years. The rate is higher than that
available through FITs and is designed to give a 12% rate of
return. However, tariff levels will be reviewed in 2012 and, as has
happened with PV, if a particular technology is taking off
commercially one can predict that its tariff will be cut sooner. If
you are planning to take advantage of the RHI then we advise that
you should not delay. The example of FITs suggests that those who
want to secure the best rates of return need to act fast.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.