BEIS under fire for sudden withdrawal of renewable heat support

The newly-formed Department for Business, Energy & Industrial Strategy (BEIS) is being urged to reverse a cut to renewable energy subsidy support which was initiated by its governmental predecessor the Department of Energy & Climate Change (DECC).

DECC laid an amendment to the Renewable Heat Incentive (RHI) before Parliament on 7 July, one week before the Department was abolished and replaced by BEIS. That amendment, which took effect on Monday (1 August), effectively reduces the financial support for many combined heat and power (CHP) systems throughout the UK.

Biomass CHP plants that have a power efficiency lower than 20% will see a reduction in subsidy payments through the RHI scheme, which BEIS says will “close a loophole” in existing regulations. But neither DECC nor BEIS formally consulted with the industry on this amendment, angering trade associations and other industry stakeholders.

“It is the suddenness and the lack of consultation that is the core issue here,” said the Renewable Energy Association’s (REA’s) head of policy and external affairs James Court. “More than £140m worth of investment is affected by this change, with a planned renewable energy capacity totalling 203MW heat and 20MW power.

“The industry was preparing for a new tariff structure from spring 2017, as outlined in the recent RHI consultation, but no one was warned about this change. The industry has invested in good faith in these projects, some which have been in preparation and construction for up to two years. More than £22m has been paid in non-refundable deposits.”

‘Proper consultation’

The REA surveyed 36 companies that are developing biomass CHP projects in the UK about this shock change. Twenty-five of the companies reported that the RHI amendment will have a “very negative” impact on their project, with eight other reporting a “negative impact”. Some REA member companies now facing as much as a 35% reduction in their anticipated RHI tariff, the organisation claims.

“This significantly reduces the likelihood that many companies and investors will be keen to invest in this low-carbon technology in the future,” added Court. “We are therefore calling on BEIS to withdraw the amendment until a proper consultation has been launched to examine the impact on these projects, or introduce a grace period for those who can demonstrate that they have already made a significant financial commitment.”

Under the changes, plants producing less than 20% of their fuel for electricity production (with the other 80% being used for renewable heat) will essentially be treated like standard biomass (heat-only) plants. A proportion of the heat that these plants produce will still qualify for the biomass-CHP RHI tariff, with the remainder qualifying for the relevant standard biomass tariff.

The changes only apply to CHP-producing firms with an RHI tariff start date on or after 1 August, and will not affect the level of support provided to standard biomass plants.

Closing a loophole

Explaining the reasoning behind this decision, a BEIS spokesperson told edie: “RHI subsidies are paid for by the taxpayer and it is therefore only right that they are fair and give good value for money.

“Previously, companies could get double the amount of subsidy by generating electricity as well as heat, even if the amount of electricity they were producing was very small. The changes will mean that companies will receive payments that better reflect the amount of electricity they actually produce.”

The REA, along with the National Farmers’ Union (NFU) – which has various members that are affected by these RHI changes – and the Farm Energy Centre, is now calling on BEIS to delay or withdrawal of the regulatory change, or at least conduct a full consultation to examine the impact on current CHP projects. The NFU has also raised the issue directly with Defra Secretary Andrea Leadsom and energy minister Baroness Neville-Rolfe.

The Government is currently analysing the feedback on a consultation for separate changes to the RHI scheme, after proposing a reform of the scheme which would see a 98% reduction in the deployment of non-domestic biomass boilers and an end to support for solar water heating systems.

Luke Nicholls

Action inspires action. Stay ahead of the curve with sustainability and energy newsletters from edie