The Department of Energy & Climate Change (“DECC”), a British goverment ministry, released the Renewable Heat Incentive (“RHI”) consultation last week, which proposes a two-stage package of reforms. The first stage of reforms will be introduced on 1 April 2016 and will include:

  • A new annual budget cap mechanism whereby the Secretary of State will be able to suspend the RHI schemes to new accreditation where the Government believes the spending on the RHI is at risk of exceeding its budget cap
  • New pre-determined triggers for degression for the 2016/17 financial year
  • A change from RPI to CPI indexation
  • Aligning the sustainability criteria with the RO scheme
  • The removal of the requirement for applicants to undertake a Green Deal assessment

The second stage of reforms are proposed to be implemented in spring 2017. For the non-domestic scheme, proposals include:

  • One tariff for all new biomass boiler deployment
  • Retention of the current tariff for biomass-CHP plant, but with the introduction of tiering
  • Limiting support to new biogas and biomethane plant using crop-based feedstocks, in order to promote focus on waste-based feedstock
  • Resetting biomethane support from spring 2017 for new installations and removing support for heat used to dry digestate
  • Introducing tariff guarantees and extending the range of technologies eligible for preliminary accreditation
  • Allowing ‘reversible’ Air to Water Heat Pumps (“AWHP”) to apply for the RHI scheme
  • Removing support for solar thermal systems

Proposed amendments for the domestic scheme include the introduction of assignment of right to payments (to allow third party financing models to develop), reviewing the AWHP and the Ground Source Heat Pump (“GSHP”) tariff, introducing demand caps to limit payments to new participants and removing support for solar thermal systems. 

They are also looking at allowing shared ground loops for GSHP with payments to be made on deemed heat demand. 

DECC expects the above reforms to rebalance deployment and spending for the various technologies, to expand the range of technologies deployed under the scheme and potentially new uses of low carbon technology, and will focus on areas off the gas grid, including but not limited to rural areas. DECC will also use the consultation to gather evidence on the likely levels of deployment of each technology to update the RHI’s budget management arrangements for the years from 2017/18 onwards.  The consultation closes on 27 April 2016.