The government has confirmed plans to reduce the tariffs available to small and medium-sized biomass boilers under the non-domestic Renewable Hear Incentive, estimated to result in a 98% drop in installations.
In its long-awaited consultation response published on Wednesday, the Department of Business, Energy and Industrial Industry (BEIS) confirmed it is to implement proposals suggested in March that will see a single tariff band introduced for ‘small’ (less than 200kW), ‘medium’ (between 200kW and 1MW) and large (1MW+) biomass boilers.
The tariff available for Tier 1 support – assigned to an amount of heat equal to 35% of the plant’s capacity over a month – will be 2.91p/kWh while Tier 2 support will be placed at 2.05p/kWh. This is a significant reduction for small and particularly medium sized systems and is expected to result in the huge reduction in deployment predicted in March.
According to the Wood Heat Association (WHA) these systems, used widely in schools, hospitals and community centres, will struggle as tariffs remain below what industry analysis has concluded is a viable level for widespread installation.
Julian Morgan Jones, chair of the WHA and managing director of South East Wood Fuels, said: “The picture for small to medium sized non-domestic projects is bleak. Small and medium sized projects, given these tariffs will almost completely end.
“The most apparent losers of this policy will be rural and off-grid schools, hospitals, and council estates, which is where most of the systems have been deployed.”
The decision is at odds with the domestic scheme which has seen tariff rates for smaller installations increase to 6.44p/kWh and was taken as BEIS seeks to incentivise large scale biomass plants on the non-domestic scheme.
To that end, tariff guarantees will be introduced for biomass boilers above 1MW in an attempt to provide investors with certainty at an early stage. Applications for these will be made when financial close of a project is imminent and once this is completed, a guarantee on the tariff granted when the project is accepted onto the RHI will be in place.
“So far, the scheme has been dominated by spending in relation to smaller scale systems. Tariff guarantees will help address this imbalance by providing certainty to investors regarding the tariff they will receive earlier in the project lifecycle,” the document states.
“Without this reform, the risk is large-scale projects will continue to be relatively rare or will require significantly higher tariffs.”
The same system will be available to large biogas plant (above 600kW); ground source heat pumps (above 100kW, including shared ground loop systems with a total installed capacity above 100kW); and all capacities of biomethane, biomass-CHP and deep geothermal plant.
However, the Government will limit the amount of heat that will be covered by a single tariff guarantee to 250GWh per annum, or for biomethane, the equivalent volume of injection.
It also retains the ability to close the tariff guarantee process if take-up of tariff guarantees risks early closure of the RHI schemes, with spending updates to be published on a monthly basis.
Other measures confirmed by BEIS’ response include extend preliminary accreditation to air source heat pumps larger than 45kW and to ground source heat pumps larger than 100kW; retaining a tier-free tariff for biomass-CHP; and retaining solar thermal under the scheme instead of axing the technology as previously suggested.
Aside from the confirmed plans to reduce support for small and medium biomass, the Renewable Energy Association has cautiously welcomed the government response as they move the UK closer to its 2020 renewable heat targets.
Dr. Nina Skorupska CBE, chief executive at the REA, said: “The reforms made today to the Renewable Heat Incentive are an improvement to the earlier consultation and will go some way to grow an effective renewable heat sector in some cases to 2021.
“The next step is for government to lay out a long-term energy strategy so industry can prepare for low-carbon heat deployment in the 2020’s and 2030’s. As of now, this policy only takes us to 2021 and there is little indication of the government’s vision beyond.”