Date added: 28 March 2012
DECC has published on a number of announcements concerning the UK’s Renewable Heat Incentive (RHI).
Across the UK, thousands of consumers and a great many companies have been awaiting details on RHI Phase 2 which they hope will provide financial support for domestic properties wishing to install renewable heating systems and the inclusion of further technologies within the commercial scale scheme. Many are likely to be disappointed with today’s announcements which state that proposals on RHI Phase 2 (including the addition of further commercial technologies such as Air to Water Heat Pumps) will not be consulted upon until September 2012, with proposals for the scheme to be up and running by Summer 2013.
The new estimated timescale represents substantial slippage on the original intention for RHI Phase 2 to be up and running by October 2012. One possible upside of this announcement is that commentators have forecast slippage for a number of months so confirmation of this and some commitment to a revised timetable may provide greater certainty for industry.
The announcements do provide welcome additional stop-gap funding for domestic renewable, through a continuation of the RHPP scheme, and significant policy developments for those wishing to participate in the commercial scale RHI. Details on this are set out below.
The RHPP scheme provides small one-off payments to individual domestic customers and social housing providers who wish to install renewable heating systems. The original scheme was introduced as bridge funding for small scale Renewable between the announcement of RHI Phase 1 (which domestic consumers cannot access) and the introduction of RHI Phase 2. The original scheme, which is due to close on 31st March 2012, has substantially under-spent.
A series of workshops were held with companies and trade associations to determine an appropriate way forward for the RHPP. Today’s announcements reflect the conclusions made within Government following those discussions, and are summarised as follows:
DECC has also published proposals (for consultation closing 23 April) for an interim budget control mechanism for the RHI Phase 1 covering commercial technologies. The key aspect of DECC’s proposal is that:
‘The RHI would be suspended until the next financial year should estimated spending – based on applications and accreditations - reach a level where the budget could be breached’
This move may have been prompted by concerns to avoid a repeat of the Feed in Tariff scheme where Government intervened twice to reduce tariffs – a move which ended up with DECC being defeated in court on this issue.
Introducing this interim cost control mechanism is an interesting step as evidence to date suggests that uptake so far is below Government expectations. In reality, a solar PV type run on the budget is much less likely for the RHI due to a number of structural factors in the market, including the reality that the cost of renewable heat systems is much less dependent on a single commodity price (i.e. silicon) and also a much more intrusive and complex installation process for the consumer and installer.
Other key points to note:
|Financial Year||Budget (GBPmillion)|
DECC state that the budgets set out above are not flexible and thus spending less than the allocated budget in one year does not permit that under spend to be transferred to future years.
This cost control proposal is a short-term solution. Over the summer DECC plan to consult on a longer-term flexible digression-based cost control mechanism which would automatically reduce tariffs should spending against the overall budget or deployment of certain technologies exceed forecasts.