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Barker announces changes to Renewable Heat Incentive

Greg Barker, Minister of State, DECC, has today (4 December) announced changes to the non-domestic Renewable Heat Incentive (RHI) and new details for the domestic RHI. 

DECC intends to increase the support available under the non-domestic RHI scheme for biomass Combined Heat and Power (CHP) plants (4.1p/kWh), large biomass boilers (over 1MW), deep geothermal (5.0p/kWh), ground source heat pumps, solar thermal and biogas combustion >200kWh (5.9p/kWh for 200-600kWth & 2.2p/kWh for >600kWth), subject to State Aid approval.

It will also introduce new support for air-water heat pumps, at 2.5p/kWh and commercial and industrial energy from waste (2.0p/kWh, minimum 10 per cent biogenic content), along with improvements to its budget management policy and further policy development on providing increased tariff certainty for large-scale schemes.

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Greg Barker, Minister of State for Climate Change, DECC


Unlike Biomass CHP, Biogas systems will not be subject to a CHP quality assurance requirement to obtain support under the non-domestic RHI.

DECC will replace the current banded tariffs for ground source heat pumps with a single tariff of 7.2p/kWh, which will be tiered. The first tier of 8.7p/kWh will be paid on the initial heat generated for an eligible purpose, while the tier 2 tariff of 2.6p/kWh will be paid on the remaining eligible heat generated. This is equivalent to a tariff of 10.0p/kWh renewable heat assuming an SPF of 3.6.

The tariff for solar thermal under the non-domestic RHI will rise to 10.0p/kWh and DECC has said that it will retain the current 20 year tariff period.
The eligibility date for new technologies and new technology specific tariffs is today (4 December). Any applications with a date of accreditation of 21 January 2013 or later will benefit from the tariff increases brought forward as a result of the Early Tariff Review consultation. The increase will be applied once the new tariffs come into effect, but not backdated, and will apply to ground source heat pumps (GSHP), solar thermal and biomass over 1MWth. 

DECC is also looking to introduce a form of tariff guarantee for the largest installations (those over 1MW), initially available for plants due to be commissioned by 31 March 2016. It is aiming to have this measure in place from April 2015 to March 2016.

Sustainability standards will not be grandfathered and DECC has said that to provide certainty to investors, it intends to align any future reviews of the RHI sustainability criteria with periodic reviews of the RHI scheme. It intends to implement land-use sustainability criteria by 1 April 2015.

In the Government response to a number of consultations and calls for evidence, DECC indicated that it will not be introducing support for heating only air-to-air heat pumps, biomass direct air or bioliquid CHP. In the case of the latter, DECC said that its decision had been driven by “uncertainty around whether providing RHI support for use in CHP plants might lead to competition for limited quantities of available bioenergy that might be better used for transport.” However, it will assess the case for its inclusion as part of the 2014 review of the scheme.

DECC estimates that the policy changes could incentivise around 5,000 installations and support 6.4TWh of renewable heat by the end of 2015/16, on top of the existing benefits from the non-domestic RHI. The expected cost of the policy changes announced today is expected to be £471m for installations up to the end of 2015/16.

In his announcement, Greg Barker, said: “Given low levels of uptake for some technologies in the scheme and additional evidence from stakeholders, we decided to re-examine the evidence on the assumptions and cost data used to set the level of tariffs when this world first scheme for renewable heat was launched. It is vital that we get the level of support right so that the market can invest with confidence, cost reductions can be achieved and the market can grow sustainably.”

DECC has also published further details of the domestic RHI, including a confirmation that the tariff for solar thermal will be set at 19.2p/kWh, as per its commitment when it published the domestic RHI policy in July 2013.

“The changes set out in the publications I am announcing today are summarised on GOV.UK and are subject to Parliamentary and State aid approvals. They are designed to stimulate considerable growth in the deployment of renewable heating technologies in the coming years and we expect that these tariffs will drive significant deployment so that the industry can grow and invest with confidence,” Barker said.

Dr Nina Skorupska, Chief Executive, REA, said: “We welcome these improvements to the world’s first Renewable Heat Incentive. Although the scheme has under-performed in its first two years, the Government deserves credit for listening to industry’s concerns and implementing many of the necessary changes.

“Mixed messages from Government have unnerved many in the renewables sector lately, so today’s RHI announcement gives a timely boost to the green economy. There is still room for improvement, but what the RHI needs most now is to be left alone for a while, so the market can develop without fear of further changes.

“Heating accounts for half the UK’s carbon emissions, so it’s very encouraging to see these technologies receiving the attention they deserve. Add to this the springtime launch of the domestic scheme next year and you’ve got some of the key policy ingredients for sustainable growth and green jobs in renewable heating.”

Dave Sowden, Chief Executive, MicroPower Council, said: “This is a welcome step forward, and our early analysis suggests that there is sufficient funding for substantial growth in the market over the next two years. The inclusion of air to water heat pumps in the non-domestic scheme is particularly welcome, and something we have campaigned for over the past two years and puts this technology on a fair footing with other renewable technologies.

“There is much detail to digest, and in particular it looks likely that the domestic air source heat pump market will hit its degression trigger in the first year, but overall this is very positive news for the industry”





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