Despite the widespread cuts, renewable heat has emerged as one of the winners from the recently announced comprehensive spending review, with the eagerly awaited confirmation of the Renewable Heat Incentive (RHI).
The scheme aims to financially subsidise the production of renewable heat and renewable biogas in light of the powers laid out in the Energy Act 2008. According to DECC figures, heat production accounts for 49% of the final energy demand consumed in the UK. Incentivising a significant shift from carbon based to renewable sources of heat is with a view to ensuring the UK reaches its targets under the Carbon Reduction Commitment Scheme, with the RHI believed to be a world first.
The spending review announced £860 million funding for the RHI, driving a more than 1000% increase in renewable heat during the next ten years according to a recent DECC press release. This is with a view to moving renewable heat from the fringes of the energy sector towards the mainstream of energy practice.
The previous Government's plans of funding the incentive through a Renewable Heat Levy have been scrapped. With DECC budget and spending patterns to be significantly altered during the coming years it remains to be seen exactly how the details of the scheme will develop.
In essence the RHI scheme is proposed to operate similarly to the current feed-in tariff scheme for renewable electricity, whereby the owner of a generation facility will be required to register and then subsequently receive a paid tariff for the heat produced by the facility.
This positive announcement follows a period of indecision and uncertainty for the renewable heat industry relating to a distinct lack of recent policy statement on the subject. This can be explained to a degree by Chris Huhne's recent admission during questions in a September session of the House of Commons energy and climate change select committee:
“I forgot to put the RHI in the coalition negotiations,” Huhne told the committee. “So people saw these incredibly detailed documents coming out about other incentives and programmes but nothing on the RHI.”
The DECC had run a consultation on the scheme in February but progress appeared to have slowed. In light of the go-ahead announcement, the DECC has announced that it will consider further the operation of the scheme including tarriffs and the technologies supported. They are planning to engage further with stakeholders, with an announcement on the detailed design of the scheme expected before the end of the year.
One uncertainty that will require clarification is the relationship between the RHI and other schemes including Renewable Obligation Certificates. Under the certificate system, heat production is already incentivised through biomass plants receiving additional certificates for combinined heat and power facilities.
It remains to be seen exactly when the scheme will be implemented by. The previous administration set a target of April 2011, but the Treasury document announcing funding for the RHI set a more ambiguous estimate of 2011-2012. Nonetheless, it seems likely that activity in the RHI area will accelerate and intensify during the coming months following the announcement