NAO: Renewable Heat Incentive has not achieved value for money
The UK Government's Renewable Heat Incentive (RHI) scheme has "not achieved value for money", according to the National Audit Office (NAO).
The RHI was set up in 2011 to encourage businesses and more recently homes to switch from fossil fuel heating systems to renewable and low-carbon alternatives such as biomass boilers and heat pumps.
It provides an incentive in the form of a tariff over a 20-year period for each unit of heat produced from renewable sources.
But research from the NAO has claimed that take-up of the scheme has been much lower than originally anticipated.
Just under 80,000 new installations had been delivered by the scheme as of December 2017, and based on current uptake, it is estimated that around 111,000 new installations will be completed by March 2021. This equates to just 22% of the original expectations of 513,000 new installations by 2020.
The scheme's value for money is also under scrutiny. While around 4.5 million tonnes of CO2 equivalent were saved in 2017-18, total payments between November 2011 and August 2017 amounted to £1.4bn, and it is expected that outgoings to new participants could reach £23bn by 2040-41.
Regulator Ofgem has estimated that 4.4% of non-domestic schemes were non-compliant during 2016-17, with around £3m in estimated overpayments to RHI participants.
BEIS does not have a reliable estimate of the amount it has overpaid to these participants, the NAO claims, nor the impact of participants gaming them, which could accumulate to “significantly reduce” the scheme’s value.
Nevertheless, the Government has been praised for displaying flexibility in the rollout out scheme, a move which the NAO said has helped to control the scheme’s cost and enabled it to avoid budget control problems that occurred on a similar scheme in Northern Ireland.
Responding to the findings, a Government spokesperson said: “The RHI is playing a crucial role in reducing carbon emissions from heat and helping to make progress towards our legally binding renewable energy and carbon targets with UK investment producing the fastest emissions reduction on a per person basis than any other G7 nation.
“We have already taken major steps to prevent people from cheating the system and we now welcome this further advice from the NAO to stamp out these practices.”
Energy and Climate Intelligence Unity director Richard Black said the NAO’s research is reminiscent of the Green Deal – an “overly complex” policy which places too much emphasis on consumer incentives to drive change.
“The problem is that where our homes are concerned, people don’t behave like automata driven by economic information – we respond as people, and changing your heating system, like having your house insulated, is a major upheaval,” he said.