The 2018 Regulations have recently received Royal Assent, and came into force on 22 May, having been laid before parliament in February of this year.

The 2018 Regulations will revoke and replace the Renewable Heat Incentive Scheme Regulations 2011 (SI 2011/2860) ("2011 Regulations") which governs the non-domestic RHI scheme and also make a few substantive amendments. This note sets out the key provisions of the most important changes, which will be already familiar to many in the renewables sector.

Tariff guarantees

Tariff guarantees will be available to the following projects:

  • biomethane injection;
  • heat generation from biomass (including biomass contained in waste) with a capacity of 1+ MWth;
  • geothermal heat generation;
  • heat generation from biogas with a capacity of 600+ kWth;
  • ground source heat pumps with a capacity of 100+ kWth;
  • new solid biomass combined heat and power (CHP) plants; and
  • shared ground loop system (two or more ground source heat pumps connected to one ground loop) with a capacity of 100+ kWth.

Previously, applicants could only "lock in" to a tariff once the facility was producing heat. With tariff guarantees, applicants are able to "lock in" to a specified RHI tariff when funds are initially committed to a project. This provides far greater foreseeability as to the revenue streams of a project when funds are invested and as such, it is expected that the introduction of tariff guarantees is expected to be of particular importance for investors in larger projects.

Terms and conditions apply to those applicants who take advantage of this scheme, particularly to evidencing that there is a credible project at the time the applicant locked into the tariff, and the tariffs are subject to a budget control mechanism.

Producing biogas for combustion or for injection into the gas as biomethane — tariffs and feedstock requirements

The subsidy levels for newly accredited biomethane production facilities and biogas combustion systems will see previous tariff degressions reversed to encourage more of these types of project.

However, the 2018 RHI Regulations will require that, on an annual basis, at least 50% of the biofeedstock used is derived from waste/residue.

Subsidy support levels will reduce where non-waste/residue feedstock exceeds the 50% threshold. Support is reduced on a sliding scale, so that a scheme with a 100% non-waste/residue menu will receive only 50% of the support available to a scheme with an even split of waste/residue and non-waste/residue feedstocks.

As compliance and payments are calculated on a retrospective basis, facility owners will need to factor this in to their cashflow projections, especially where use of waste/residue feedstocks is seasonal.

Excluded heat use

The scope of eligible heat use has been reduced – gone are the days of the RHI subsidising:

  • the drying of digestate;
  • the drying of wood fuel (except in specified circumstances);
  • the drying, cleaning or processing of industrial, commercial or municipal waste; and
  • the heating of swimming pools not used for municipal or commercial purposes.

Ground source heat pumps that share a ground loop system to multiple domestic premises

Where multiple ground source heat pumps share a ground loop system and supply heat to domestic properties, payment is permitted on the basis of estimated heat demand of each domestic property rather than requiring individual metering. A heat demand limit of 30,000 kWh per year will apply to these systems and no subsidy payment will be received for any heat produced above this amount.

Biomass CHP minimum power efficiency

The 2011 RHI Regulations had previously been amended to reduce the additional support given to biomass CHP with a low power to heat ratio.

The 2018 RHI Regulations further tighten the requirements so that a 20% threshold applies – support will be reduced to schemes with efficiency below this level.

Conclusion

The 2018 Regulations entering the statute books is a long-anticipated event for the renewables sector and is expected to be the advent of renewed activity in project development and investment. We envisage a number of projects previously placed "on hold" will now be revived and will progress through to financial close.