A single budget cap is to be introduced across both Renewable Heat Incentive schemes on April 1, with DECC looking at plans to close the non-domestic scheme if spending forecasts exceed the budget.
New degression triggers will be introduced to control spending over 2016/17 and stop the domestic and non-domestic schemes from breaching the total budget of £690 million in the coming financial year.
Under wide-ranging reforms to the RHI outlined in a consultation launched yesterday, the cap is intended to allow the Department of Energy and Climate Change (DECC) to trigger the closure of the schemes to new deployment if leaving them open presents a spending risk.
A DECC spokesperson told Clean Energy News earlier today: “The budget cap is in place from 2016. If we assess that it is likely to be hit then we could close it although the chances of that are judged to be very small.”
Annual caps were published as part of November’s Autumn Statement, rising to £1.15 billion by 2021.
The calculation methodology for progress towards the cap will not be published. Despite acknowledging that this will lead to increased uncertainty within the industry, DECC claims it is “imperative” that it retains the ability to use market intelligence information and judgement in reaching this decision.
The department has also suggested that the 21 day notice period usually used to provide a short period of notice to industry may be waived and closure could be announced on the day. In addition, preliminary accreditation will not protect systems under the non-domestic scheme, with DECC seemingly looking to push domestic deployment.
The proposals for closing the non-domestic scheme will be implemented from 2017/18 onwards, pending the outcome of the consultation. As DECC points out in the document, high levels of committed spend occur chiefly in the non-domestic scheme which the government is attempting to shift away from in favour of the domestic market, specifically fuel poor homes.
Another knock for solar
The consultation also includes proposals to cut solar thermal systems from the RHI scheme altogether in 2017 in the latest knock to the UK’s solar industry.
The decision has been made to improve the value of the scheme, as solar thermal has the highest tariff across both schemes but suffers from low deployment. While pointing out that the technology has the lowest upfront costs from consumers and can be widely deployed, DECC claims these benefits are not enough to save the technology from being culled.
Latest projections show committed budget of £690,000 for solar thermal under the RHI.
Following cuts to solar PV announced in December, the latest withdrawal of support has sent new shockwaves through the solar sector.
Paul Barwell, chief executive of the Solar Trade Association, said: “This proposal simply doesn’t make sense. The government acknowledges the many benefits of solar thermal, yet proposes singling it out for the removal of financial support.
“Discriminating against this globally important technology in the UK would send a terrible message to householders, and it would have very serious ramifications for the British solar thermal sector. Manufacturers of solar thermal equipment, including cylinder manufacturers as well as installers, risk a full scale winding-up of their sector. We are urging government to think again, particularly since sales enquiries are on the rise.”
The knock to public perception and the sense that the technology has continued to be singled out was also raised by Mark Krull, director at Logic Certification.
Speaking to Clean Energy News this morning, he said: “When the government singles out one technology for removal and ‘special treatment’ it causes doubt in everyone’s mind – including the public – as to whether or not it’s a good technology to be using.
“It seems non-sensical to remove support now and send out that message. It’s still a technology that works, its operating efficiencies are exceptionally high, it’s predictable and it integrates with other technologies.”
Shifting the technological focus
The reformed RHI will seek to deploy greater levels of heat pumps in the domestic market. Increased tariffs will be offered for air and ground source systems, while the link between performance and payments will be removed for increase deployment further.
Heat pumps under the non-domestic scheme will not receive higher tariffs but will be investigating ways to increase take-up – including allowing air-water systems to be deployed with some systems eligible for pre-accreditations.
Biomass boilers off all sizes are to receive a single tariff within the non-domestic scheme of between 2.03 and 2.90p/kWh, which would mark a significant reduction for small and particularly medium sized systems – currently 3.76 and 5.18 respectively. This is intended to incentivise deployment of large scale biomass systems and process – and district-heating systems
Biomass tariffs for the domestic scheme will remain unchanged.
According to the Renewable Energy Association REA, the changes would result in a 98% and 78% reduction in the deployment of biomass boilers by 2021. If enacted, the REA argues that this would collapse an industry that the government has invested in for over five years and side-track progress on meeting our renewable heat targets.
DECC expects that changes to non-domestic biomass support will reduce annual installations from 7,132 systems in 2014, and 3,023 in 2015, to only 65 systems by 2021. This represents a reduction the installation of biomass boilers of 99.1% and 97.9% compared to 2014 and 2015 respectively.
The proposals foresee the installation of 1,000 domestic biomass boilers per year by 2021, compared to 4,721 in 2015, a fall of 78.8%.
Dr. Nina Skorupska CBE, chief executive of the REA said: “The REA has a long-term vision for an affordable, secure, and low-carbon future energy system. Consultations such as this however make apparent that the Government’s own energy policy is short-sighted.”
“We are also disappointed to see solar thermal being singled out and removed from the RHI. We need the entire spectrum of renewable heating to fully decarbonise,” she added.
This consultation proses yet another series of sudden and severe changes to the UK’s energy sector.
All of these proposals are intended to maximise the contribution of the RHI to the decarbonisation of heating in the UK and to the 2020 renewable energy target. The scheme is estimated to support 23TWh of renewable heat generation in 2020/21 at the following levels.
A DECC spokesperson said: “Reforming how we use energy for heating is critical to providing affordable, secure and clean energy for families and businesses across the UK, which is why we’re proposing to focus future renewable heat payments on energy sources that can deliver low carbon energy at scale.”
The consultation will remain open until 27 April, with the annual budget cap for the coming financial year and new degression triggers commencing on 1 April.
This story has been amended since its original release to include comment from the REA.