In support of the reformed RHI

With the RHI covering a number of widely-varying renewable technologies, it’s not surprising that not all are as happy as others regarding the recent reforms.  The Renewable Energy Association (REA) is a broad church, and broadly speaking its biogas, solar thermal and heat pump members are content with most of the reforms.  But biomass heat developers are far from happy.

The REA led the lobby for the introduction of the RHI (and the feed-In tariff) and was delighted at their introduction.  The RHI, in not being a capital grant scheme but an ongoing payment for useful renewable heat output, was unique. The contribution from renewables towards meeting the UK’s heat needs rose from 1% in 2010 to 5.64% in 2015.  Given the novelty of the RHI, we anticipated a significant amount of learning and evolution to improve the scheme. 

The RHI began in 2011, just covering non-domestic installations and opened out to householders in 2014.  There have been many other refinements since its introduction, but perhaps the most controversial aspect has been had by the manner in which budget management has been implemented.  It is very difficult for the government to accurately and consistently know how the cost of heat generation was falling across a range of technologies. The degressions introduced are effective in that they are able to control the overall spend under the RHI, but they do not necessarily reflect the level of advancement of each technology.

The logic of having rules determining degression, rather than repeated data gathering exercises to look at falling costs or periodic and possibly unpredictable ministerial decisions, was that the scheme would be less prone to political interference.  However, the decision on how much of the budget to allocate to each different technology band seemed arbitrary to many. There are still differing views as to whether the overall budget should have been allocated into different technology pots.

The budget management mechanism of the RHI results in technologies with very healthy deployment, like biomass and biomethane, has become a victim of their own success.  The predicted spend on biomass heat installations in one quarter so exceeded DECC’s expectation, that it triggered repeated degressions in the subsequent 6 quarters, even though deployment had by then all but ceased. 

The changes to the degression mechanism don’t live up to their billing of being “designed to simplify the rules and improve transparency”; although it is fair to say that they are a step in the right direction.  They are still fearsomely complicated but will prevent the scenario experienced by biomass heat described above from ever occurring again.

It’s easy to see why biomethane injection companies are relatively content.  The government recognised that degression had been too rapid to sustain deployment and is resetting the tariff levels back up to what they were in April 2016, as well as introducing tariff guarantees.  Deployment should now resume.

The “energy crop cap” is a change that is not particularly welcomed by biogas members, although I’d say they are resigned to it.  Given this is a solar publication, and to end on a high note, it is good news that government decided against its proposal to remove solar thermal from the RHI altogether, although along with heat pumps, the RHI is only one part of the answer. A genuine Zero Carbon Homes policy would stimulate these markets more effectively, and must be something we continue to push for.