Government proposes major RHI reform with removal of support for solar thermal

The new consultation document, released yesterday (3 March) by the Department of Energy & Climate Change (DECC), proposes significant reductions in financial incentives provided through the RHI scheme, which supports growth in the biomass heat industry and has helped to deliver the majority of the UK’s legally-binding renewable heat target to date.

— edie explains: Renewable Heat Incentive —

Reductions to the RHI were announced by Chancellor George Osborne in last year’s Autumn Spending Review, but no indications were made that this kind of reformation was planned

Specifically, DECC is proposing to reduce RHI tariffs for biomass systems by up to 61%, which the Department believes will reduce annual installations of non-domestic biomass boilers from 3,023 installations in 2015 to just 65 installations by 2021 – a 97.9% drop in deployment. The number of installations of domestic boilers will drop by 78.8% over that same period, the consultation document states.

DECC says this RHI reform would in fact maximise the contribution the RHI will make to the UK’s target of 12% of all heating coming from renewable sources by 2020 – a target the nation is currently off-track to meeting.

‘Value for money’

In her ministerial foreword, Energy Secretary Amber Rudd said: “The proposed reforms aim to rebalance the scheme and ensure it delivers its objectives in a manner which is affordable and offers value for money. The reforms also aim to make the scheme accessible to a wider range of consumers including those less able to pay, help build sustainable markets and support the right renewable heating technologies for the right uses.”

These out-of-the-blue proposals have been met by fierce criticism from the renewable energy industry, with the Renewable Energy Association’s (REA) chief executive Nina Skorupska lambasting “yet another series of sudden and severe changes to the UK’s energy sector”.

“Consultations such as this make apparent that the Government’s own energy policy is short-sighted,” Skorupska said. “The Energy and Climate Change Committee this week said that such changes have “marred the UK’s reputation for stable and predictable policy development,” and we couldn’t agree more.”

Solar thermal

The Government’s new proposals also include the complete removal of support for solar thermal hot water heating through the RHI next year. This is in spite of solar thermal technology being one of the most established and accessible renewable energy technologies in the world, with over 350GW of global capacity – considerably more than the global capacity for solar PV.

Solar thermal’s applications have expanded into space heating, community heating, district heating, hotels, hospitals and industrial processes, but DECC says its removal from the RHI scheme from 2017 “will promote value for money”.

“This proposal simply doesn’t make sense,” said the Solar Trade Association’s (STA) chief executive Paul Barwell. “The Government acknowledges the many benefits of solar thermal, yet proposes singling it out for the removal of financial support. With UK renewable heat deployment falling desperately behind target, Government should be full square behind this technology as part of a strategic plan to permanently bring down heating costs for British families.”

Another significant change proposed by DECC is the reduction or removal of support for energy crops used in anaerobic digestion (AD) – another measure that will deliver better value for money, according to the Department.

But again, the industry is concerned by these proposals. Anaerobic Digestion & Biogas Resources Association (ADBA) chief executive Charlotte Morton said: “We believe that all feedstocks can and should play a part in a sustainable, growing AD sector, providing cost-effective green gas and heat at scale. ADBA looks forward to working with our members to put together a strong case for biomethane and biogas support under the RHI.”

Investor confidence

The consultation announcement follows stern warnings from the Committee on Climate Change that greater effort is needed on renewable heat. In 2014, green sources provided only 4.8% of the UK’s heat, which puts the UK way behind its self-imposed target of 12% renewable heat by 2020.

It also comes in the same week that the Energy and Climate Change Committee released a major report into investor confidence in the UK energy sector. That report concluded that the Government’s energy policy lacked long-term vision and had “clearly had an impact on the confidence of many investors”.

DECC is asking for all responses to this consultation into RHI reforms to be submitted by 27 April, 2016.

Luke Nicholls