The Fate of the Renewable Heat Incentive

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The UK’s stated efforts to reduce CO2 emissions rely on replacing coal (and later, gas) with power from nuclear, wind, solar and tidal generators. These sources of power are to be linked with massive uptake of electrically-powered low carbon heating technologies (heat pumps). The renewable heat incentive (RHI) was intended as a driver toward this aim to promote the uptake of low carbon heating.

Amber Rudd, our new DECC Secretary of State has hit the ground running and is wielding a very sharp axe! With the key UN climate event in Paris looming in December you might think our government would be paying urgent attention to our commitments towards reducing CO2 emissions. The Minister’s speech acknowledges no such urgency – instead she chooses to focus on how the UK’s response to climate change somehow fits within the Chancellor’s drive for short-term and short-sighted savings. The Green Deal, feed-in-tariffs, zero-carbon homes and other recently installed measures are to be cancelled or ‘reviewed’. Although no changes have been announced, we can be confident the renewable heat incentive (RHI) will also be under review.
To date, uptake of renewable heating has progressed in a surprising direction with technology selection based on RHI income, and not sound engineering principles. Figures show that over 90% of all non-domestic RHI applications have been for biomass systems. This is clearly unsustainable. This skewed market is being addressed by recent reductions of the biomass RHI tariff allowing (ground source) heat pumps to compete.

Bearing in mind that the entire RHI budget accounts for less than 1% of DECC’s annual spending (96% goes toward nuclear decommissioning); any future reduction of the RHI would be a wholly ineffective response to Treasury pressure for cuts. However, the RHI in its current form has not achieved some of its intended aims and so it is right to consider some changes and improvements.

The RHI should be retained and improved to support an emerging, high technology engineering sector. We see a blend of ‘carrot and stick’ as being the way ahead to promote renewable technologies, meet emissions targets – and reduce cost to the Treasury.
The below should also be given due consideration:

• Addition to the RHI of an up-front payment to help with the higher capital costs associated with renewable heating systems.
• A renewable heat tariff paid over a shorter time frame. This reduces the government’s long term obligations – which is seen as a factor for opposition to FIT and RHI payments.
• Tightening of (Part L) Building Regulations and introduction of ‘Minimum Energy Efficiency Standards’ for non-domestic buildings. At no cost to the Treasury, these changes would force energy efficiency improvement of the UK’s housing and commercial building stock and promote uptake of renewable technologies.