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Delay to RHI

DECC delays RHI to avoid repeat of solar subsidy shambles

Communities and social landlords to benefit from £10m RHPP boost, but full-scale domestic Renewable Heat Incentive on hold until mid-2013

The government has launched proposals to carefully manage the budget of its Renewable Heat Incentive (RHI) for businesses seeking to install green heating systems such as biomass boilers, but confirmed homeowners would be unable to take advantage of payments for another year.

The Department of Energy and Climate Change (DECC) yesterday published a short consultation proposing to introduce a temporary measure to prevent the £860m incentive scheme exceeding its budget.

The department wants to suspend registrations at one month’s notice once 80 per cent of the budget has been allocated. This measure is expected to be introduced in the summer.

DECC said it would then launch proposals to introduce a permanent cost-control mechanism by the end of the financial year, which could see tariffs fall in line with increased uptake.

Climate Minister Greg Barker said the measure is designed to avoid a repeat of the much-criticised solar electricity feed-in tariff situation, which saw DECC attempt to rush through deep cuts to the scheme when it came close to exceeding its budgetary limit.

The cuts were widely blamed for damaging investor confidence in the solar industry, as well as leading to bankruptcies and redundancies.

“Putting in place cost control measures for the Renewable Heat Incentive is the prudent thing to do, given this is millions of pounds of taxpayers’ money at stake and taking on board the lessons learned from the feed-in tariff scheme,” said Barker.

According to the latest figures from Ofgem, just 15 businesses have secured the RHI, but around 300 have applied. Barker said the government was unlikely to use the short-term spending cap, but was keen to take a cautious approach.

“Renewable heat is a largely untapped resource and an important new green industry of the future,” he said. “It will help the UK shift away from fossil fuel, reducing carbon emissions and encouraging innovation, jobs and growth in new advanced technologies.”

The government also confirmed it will delay the full-scale domestic RHI until summer 2013, and would instead inject an extra £10m into the budget for the Renewable Heat Premium Payment scheme (RHPP), taking it up to £25m. The scheme offers one-off payments for homeowners wishing to install green heating systems and is designed as a precursor to the full-scale domestic RHI.

DECC had been expected to launch the domestic RHI in October this year alongside the Green Deal loan scheme, but will now consult on new tariff rates in September, with a view to rolling it out  from summer 2013.

A spokeswoman for DECC told BusinessGreen it was keen to ensure the domestic RHI was managed successfully, with the appropriate tariff levels in place.

She also downplayed concerns that a delay would put the brakes on the nascent market.

“The message we’re getting from the industry is that they just want us to set out the timetable for our plans. The support is there in the interim through the RHPP and the industry knows we are committed to the domestic renewable heat market.”

However, Adrian Pike, chief executive of green energy installer Anesco, warned the delay could derail the nascent market said urged the government to launch the domestic RHI for biomass boilers.

“We have installed a few domestic ground source heat pumps but they have been quite problematic, so I do think that is a concern,” he told BusinessGreen. “But biomass boilers are a good replacement for oil and so I think that delay is a disappointing move.”

DECC said the second phase of the RHPP would be launched on 2 April after the first £15m phase ends on 31 March.

For the first time, communities seeking to install renewable heating systems will be able to take advantage of the scheme, with around £8m of the budget set aside for local projects.

DECC has also earmarked £10m for social landlords to upgrade heating systems, after last year’s social landlord competition received such a strong interest that DECC increased the initial £3m budget to £4m.

Barker said the new RHPP would be “bigger and better” than the original.

“We’re increasing the budget from £15m to £25m, for the first time we’re including community schemes and there’ll be more social housing schemes that can benefit,” he said.

“Generating heat from renewables will not just cut carbon emissions, it will also help create a market in developing, selling and installing kit like solar thermal panels or heat pumps.”

Under the first phase of the RHPP, 6,412 vouchers had been issued to households with £4.8m cashed in, while 37 social housing schemes also registered to the competition.

However, Gaynor Hartnell, chief executive of the Renewable Energy Association accused the government of rushing to limit the market before it had taken off.

“To launch an official consultation on bringing the shutters down, having only just fired the starting gun on the RHI, is premature to say the least,” she said. “The renewable heat market isn’t going to flare up like solar did. If anything were concerned about an underspend.

“We’re totally supportive of getting effective cost control measures in place. Done properly this will be reassuring to the industry.

“In our opinion this consultation on interim cost control is unnecessary and unhelpful, but it’s certainly not a reason for lenders to become alarmed – particularly as Government intends to remove this power when longer-term control measures are in place.”