The Government has announced that the Renewable Heat Incentive (RHI) will go ahead and will be funded from the Department of Energy and Climate Change's annually managed expenditure.

The announcement was made last week in the Spending Review. It also stated that the RHI "will ensure the UK meets its 2020 renewable energy targets while making efficiency savings of 20 per cent, or £105 million a year, by 2014-15 compared with the previous government's plans" – which suggests lower tariffs than originally proposed. The RHI's introduction is still planned for 2011/12, but the exact timing of its introduction remains unclear.

The Spending Review also announced that the "efficiency" of Feed-in Tariffs (FITs) will be improved. The Government proposes to rebalance the FITs in favour of more cost effective carbon abatement technologies, with a projected saving of £40 million in 2014-15. Support for lower value innovation and technology projects will be reduced, with a projected saving of £70 million a year on average during the Spending Review period. However, the changes will not (as some feared) be made in 2011, and will not be retrospective. The changes will be made at the next formal review of the tariffs in 2013.