Following a long-running consultation, the Department for Business, Energy and Industrial Strategy (BEIS) has announced agreed reforms to the Renewable Heat Incentive (RHI) – which are expected to take effect from March 2017.
When the consultation was originally announced in March 2016 the renewable heat industry was deeply concerned that the proposed tariff reductions, which included cuts of as much as 45 per cent for parts of the biomass sector and the removal of support altogether for solar thermal, would result in a steep fall in the deployment of many renewable heat technologies.
Accordingly, the industry has reacted largely positively and with relief to the softening of the planned reforms, which were officially published by BEIS on 14 December 2016.
RHI tariffs for biomass installations have been reset to the levels available before biomass’ digression in late 2015. In another encouraging move, tariffs for air source and ground source technologies which have seen low levels of deployment are to increase.
The key changes to the domestic RHI tariffs are as follows:
- 02p/kwh (up from 7.51p/kwh) for new air-source heat pumps (ASHP) – a 25 per cent rise.
- 55p/kwh (up from 19.33p/kwh) for ground-source heat pumps (GSHP).
- 44p/kwh (up from 4.68p/kwh) for new biomass installations.
- Retention of the current level of 19.74p/kwh for solar thermal systems despite initial proposals to cut all support for solar thermal.
To ensure larger properties are not over-compensated, annual caps have been introduced via a ‘heat demand limit’. Generation in excess of those caps will not be eligible for RHI support.
Tariff guarantees (pre-accreditation) will be introduced for large biomass boilers (above 1MW in capacity); large biogas plants (above 600kWth); GSHPs (above 100kW including shared ground loop systems with a total installed capacity above 100kW); and all capacities of biomethane, biomass-CHP and deep geothermal plant.
This is seen as a massively positive step for capital intensive projects with long lead in times and brings the RHI in line with the Feed in Tariff.
Biogas & Biomethane
From March 2017, biogas and biomethane plants will only receive support on all heat or biomethane produced if at least 50 per cent of the biogas or biomethane is derived from wastes or residues. Where the amount of biogas generated from non-waste/residue feedstock (i.e biocrop feedstocks) exceeds the 50 per cent threshold, the excess generated above this limit would not be eligible for RHI support.
There were fears when the consultation was first announced that in order to incentivise the use of wastes and residues, biogas derived from non-wastes and residues would be penalised more heavily.
RHI tariff rates for biogas combustion will (subject to compliance with the feedstock criteria and digestate drying rules), remain at the October to December 2016 rates of:
- 43 p/kWh for plants with a thermal capacity of 200kWth or less.
- 47 p/kWh for plants with a thermal capacity of between 200kWth and 600kWth.
- 30 p/kWh for 600kWth and above.
The 25 per cent degression recently announced to take effect from 01 January 2017 will not take effect (other than for applicants that do not comply with the feedstock criteria and digestate drying rules but apply for RHI accreditation before the implementation of these rules).
For biomethane injection (gas to grid) RHI tariffs will be reset to levels applicable between April and June 2016, namely:
- 35 p/kWh (up from 3.89 p/kWh) for the first 40,000 MWh.
- 35 p/kWh (up from 3.89 p/kWh) for the next 40,000 MWh; and
- 35 p/kWh (up from 3.89 p/kWh) for generation in excess of 80,000 MWh.
An effective 35 per cent rise form the degression planned to take effect in January 2017.
John Baldwin, Chair of the Renewable Energy Association’s (REA) biogas group said: “The biomethane tariff reset is most welcome. Government has acknowledged the strategic role biomethane can play across heat and transport and the resetting of the biomethane tariffs should enable continued deployment of the most competitive projects.
“Unfortunately, the biogas combustion tariff isn’t likely to enable many new biogas CHP projects to come forward. With the closure of the RO, and rapidly falling tariffs for the Feed-In Tariff, this sector still faces many challenges.”
The three RHI tariff bands currently in place will be replaced with a single tiered tariff, with the ‘tier threshold’ at 35 per cent of plants’ capacity (effective from 14 December 2016)
The move to, ‘a single band and making the scheme more attractive to larger more strategic installations by structuring tariffs to promote higher heat load factors (HLFs)’, was outlined in the original consultation. However, it was acknowledged in the consultation response that evidence showed a ‘lower market potential’ for large biomass despite this ambition.
No further changes to biomass-CHP are proposed.
In general, BEIS’ finalised proposals to reform the RHI scheme are encouraging after a period where the reforms to, and degression of, support mechanisms have left the renewables sector reeling blow after blow. In particular the continued backing of solar thermal.
However, there will be certain key sectors which will struggle, including biogas combustion where despite the reasonably positive review of the RHI, cuts in the feed in tariff are taking their toll.
Non-domestic biomass boilers are also likely to see limited uptake despite a clear intention to incentivise.
Dr. Nina Skorupska, Chief Executive of Renewable Energy Association summarised REA’s take on the reforms: “The reforms made today to the Renewable Heat Incentive are an improvement to the earlier consultation and will go some way to grow an effective renewable heat sector in some cases to 2021.
“As recognised in this consultation response, heat is a very complex issue and we need all technologies on board to achieve our long-term goals. Renewable gas, biomass boilers, solar thermal, heat pumps, heat networks, hydrogen and other technologies will all have a role to play.”
Looking ahead, she added: “The next step is for Government to lay out a long-term energy strategy so industry can prepare for low-carbon heat deployment in the 2020’s and 2030’s. As of now, this policy only takes us to 2021 and there is little indication of the Government’s vision beyond.”
If you would like more information about the reforms to the RHI and how these may affect your projects, or renewable energy projects generally, contact Miles Dearden at email@example.com or on 01562 820181.