Finally, after months of anticipation, the UK Government has revealed what the Renewable Heat Incentive (RHI) will look like. After waiting on tenterhooks all morning, the country’s renewable energy industry will now know what kind of payment can be received for generating environmentally-friendly heat.

The Government has set aside £860 million for the scheme, which is expected to increase green capital investment by £4.5 billion by 2020. This investment will go towards increasing the number of industrial, commercial and public sector installations by 2020, with the full system of RHI payments for residential installations available from October 2012. More than a quarter of the first year’s budget will be set aside for a guaranteed 25,000 household installations through what’s been named the ‘RHI Premium Payment’. Additionally, 150,000 existing manufacturing, supply chain and installer jobs will be supported.
Energy Secretary Chris Huhne has revealed the RHI, claiming that it will support emerging technologies and businesses in the UK, strengthening security of supply by reducing dependence on fossil fuel heating and emissions — which currently stand at around 50%. The RHI is expected to reduce these emissions by 44 million tonnes by 2020, equivalent to the annual carbon emitted by 20 typical new gas power stations.

The new policy is aimed at encouraging the installation of equipment such as renewable heat pumps, biomass boilers and solar thermal panels, in order to reduce emissions and support the existing 150,000 jobs in the heating industry. This will in turn reduce the country’s current dependence on fossil fuel heat, which is currently more than 95%.

“Renewable heat is a largely untapped resource and an important new green industry of the future. 

“This incentive is the first of its kind in the world.  It’ll help the UK shift away from fossil fuel, reducing carbon emissions and encouraging innovation, jobs and growth in new advanced technologies,” announced Huhne.

The RHI, which will now need to go through Parliamentary approval, will stand alongside the current feed-in tariff (FiT) and Renewables Obligation (RO). The DECC hopes that the latest renewables incentive will generate 13,000 new installations in industry and 110,000 in the commercial and public sector by 2020. This, the Department claims, is seven times the number expected by 2014.

All industry, commercial and public sectors will be eligible for the incentive, including public houses, schools and power plants. Technologies that will be supported include biomass boilers, heat pumps and solar thermal. Community projects will also be eligible, provided a single installation is providing heat to more than one house. The tariffs (outlined below) will be paid for 20 years to eligible technologies that have installed since 15th July 2009 with payments being made for each kilowatt hour (kWh) of renewable heat produced.

Once a system is receiving payments from the scheme, the level of support an installation will receive is fixed and adjusted annually with inflation. However, as we have already learned with feed in tariffs, the levels of support available for new entrants to the RHI scheme will decrease over time as the costs of the equipment and installation reduce through economies of scale – or if a review is implemented.

For households, the RHI payments will begin alongside the Green Deal in 2012. However, up to 25,000 installations from July will be supported by a “RHI Premium Payment” to help people cover the purchase price of green heating systems. Those taking up the Premium will then be eligible for a RHI tariff from October 2012 when the Green Deal begins, as will anyone else who has had eligible equipment installed from July 2009.

The “RHI Premium Payment” will be worth approximately £15 million and will ensure there is a fair spread of technologies across all regions of the UK. The installed technologies will be monitored to enable Government, manufacturers, installers and consumers to better understand how to make sure householders get the most out of them. 

As with anything, there will be clear eligibility criteria in order to qualify for a Premium payment, including:

  • A well insulated home based on its energy performance certificate;
  • Agreeing to give feedback on how the equipment performs.

To begin with, a key focus of this initial phase will be on people living off the gas grid, where fossil fuels are both more expensive and have higher carbon content. The DECC plans to publish details of the “RHI Premium Payment” and how this will apply in May 2011. The DECC is yet consult on the RHI tariffs that will apply from October 2012, so we only have tariff levels for the industry, commercial and public sectors. Residential tariff levels are expected later in the year.