The Republic of Ireland is to launch its own Renewable Heat Incentive (RHI), with minister for communications, climate action and environment Denis Naughten unveiling plans for a scheme with specific measures to avoid the mistakes made north of the border.
The non-domestic scheme will incentivise industrial and commercial heat users to switch to greener technologies that produce heat from renewable sources.
Unlike the scheme which has brought down Northern Ireland’s power-sharing institutions, the Irish RHI will have cost controls in place to keep spending under control. It will have a built-in budget management mechanism using payment degressions and a budget cap.
The tariff degressions will occur when uptake crosses a certain threshold, either overall or on a technology basis depending on the final outcome of the consultation. The document says this method has the advantage of reducing the risk to the Exchequer of over-payment.
The inclusion of a budget cap (either annually or overall) would close the scheme to new applicants, either temporarily or permanently, when the projected RHI payments reach a certain point.
Proposed payments would also be tiered based on the annual heat output per kWh, with Tier 1 payments to be given up to the first threshold value. Those with a heat output greater than that threshold receive additional payment according to the tariff for Tier 2, and so on for all higher Tiers.
Since the cost of generating renewable heat typically falls with increasing installation size, the tariff would fall from one Tier to the next meaning the more renewable heat produced the less the applicant will get paid.
This is in contrast to the failings of the Northern Irish scheme which did not impose such measures, allowing claimants to earn more subsidy payments for the more fuel burned.
The Minister said: “The overall RHI scheme will be designed so that it ensures value for money for the taxpayers who are being asked to pay the cost of the RHI subsidy. Therefore, the RHI I am proposing will have a budget cap mechanism and a mechanism to reduce the amount applicants get paid over time built in from the start – so the more you burn, the less you earn.”
The Irish RHI is being introduced to help the country reach its renewable energy targets, which require 12% of heat to be derived from renewable energy sources by 2020. In 2015, Ireland had reached just 6.5%, requiring the country to almost double its efforts in the short space of time following consultation and state aid approval.
Naughten said: “This support scheme is aimed at incentivising a switch from fossil fuel based heating systems to renewable heating solutions, which will help Ireland meet its energy and climate change obligations, simultaneously.”
He added that the scheme could benefit farmers in particular, many of whom have reportedly investigated potential market opportunities but decided against it until the market was more mature.
“As a demand side measure, the RHI will aim to give the bioenergy and biomass sector the market in renewable heat production that is needed to encourage farmers to take the next step,” Naughten said.
However, development of the Irish RHI is still at its early stages, with the consultation setting out a series of questions on the detailed design of the scheme such as timing of support; how payments should be structured; how to deal with different unit size; what sustainability and efficiency criteria to adopt; and a number of other scheme criteria.
However, the DCCAE will look to push forward the proposals with stakeholder responses to the consultation paper to be reviewed and considered prior to a final decision on the structure and design of the RHI early in 2017
The consultation will close on 3 March, with the final scheme expected to be implemented by the end of 2017, subject to government and state aid clearance.