DECC reveals plans for Domestic RHI

The Department for Energy and Climate Change (DECC) has finally revealed its plans for the future of the domestic Renewable Heat Incentive (RHI) after initially announcing the scheme in 2009 and introducing commercial RHI support in November last year.

Government is proposing that the Domestic RHI will support the installation of ground and air source heat pumps, biomass boilers and solar thermal panels. The RHI scheme will work in the same manner as the existing commercial RHI as well as the more popular Feed-in Tariff (FiT) scheme, whereby subsidy is provided through tariff based payments for every unit of renewable heat generated.

DECC states that the domestic RHI is aimed at any householder looking to replace their current heating with renewable heating kit as well as supporting any householders who have installed an RHI-eligible technology since July 15, 2009.

DECC is proposing that the new Domestic RHI payments will be paid over a seven year period. However, the proposed seven year payment period is designed to pay for 20 years’ worth of heat generated. DECC believes that paying the tariff over a shorter period will help investors realise their investment in a timely manner. The department does recognise that it will face challenges over ensuring the assumed levels of heat are actually generated.  

The eligible tariff rate will vary per technology and DECC is proposing the following levels of initial support:

However, DECC are keen to stress that it will be “going through a period of refining, updating and verifying our evidence during the autumn including the incorporation of evidence that we gather from this consultation and the most up to date data from the RHPP scheme and other government calls for evidence. This means that the final tariff rates will almost certainly be different to those set out in this consultation.”

The Department is also proposing to introduce a budget management system for the domestic RHI, similar to the one consulted on for the commercial RHI. The budget management system would be almost identical to the current model employed for solar FiT payments, where degression would occur when certain trigger points are hit by industry. DECC maintains that a trigger mechanism is necessary to protect the budget of the scheme and ensure that it can keep running.

Commenting on the proposals, Energy and Climate Change Minister Greg Barker said: We need to revolutionise the way we heat our homes and businesses and move away from expensive fossil fuels, not only to cut carbon but to help meet our renewables targets and save money on bills.

“Our proposals aim to encourage even more uptake of clean green heating in industry and in our businesses. We have also set out our views on long term support for those who invest in low carbon kit in their homes and we look forward to hearing your thoughts.”

DECC has announced that Ofgem will be the interim delivery partner for the Domestic RHI scheme. The department is hoping to ready the announced scheme for summer 2013.

REA Head of Policy Paul Thompson, who was speaking this morning alongside officials from DECC and Ofgem at an REA seminar on sustainability under the RHI, said: “Renewable heat has been the sleeping giant of UK renewable energy policy. Renewable heat technologies are often very cost-effective, and have a major role to play in reducing our carbon emissions, improving our energy security, and revitalising our economy.

“We are delighted that the Government has published these proposals on time and we are looking forward to engaging further with DECC on the details to make the RHI work.”

Rob Gardiner of Myriad added: “Government’s Renewable Heat Incentive (RHI) has the ability to make the renewable energy sector take off – but skilled workers will be lost if it fails to deliver due to a lack of clarity.

“The main concern is that, if the RHI is not promoted correctly and user-friendly for designers, installers and the end user, then this badly-needed support will not occur and a significant number of skilled people will be lost from this specialised industry. This is a real and present danger.

“There is a genuine fear within the sector that, if RHI support doesn’t take hold, this will happen and it would be massively damaging. A number of manufacturers have geared up quite heavily to cater for the demand expected to be driven by RHI.

“If it is delivered correctly, the RHI will provide fantastic opportunities for the sector but for that to happen it is vital that the Coalition follows through on its promises and ends the uncertainty surrounding the financial support for the scheme.

“An important part of that is fulfilling the pledge to allow homeowners to take advantage of payments next year – enabling GHSP to take its place alongside other renewables as a mainstream technology.”

The closing date for this consultation is December 7, 2012 and the full document can be read here.