Government proposes expanding RHI to cover a broader range of energy from waste technologies

Across three consultations published by the Department for Energy and Climate Change (DECC), the Government proposes extending the scheme to cover heat generated using air source heat pumps and a broader range of energy from waste (EfW) technologies. A further consultation sets out plans to extend the scheme to domestic users.

Energy Minister Greg Barker said that the proposals aimed to encourage the uptake of environmentally friendly heating technology among commercial, industrial and community projects.

"We need to revolutionise the way we heat our homes and businesses and move away from expensive fossil fuels, not only to cut carbon but to help meet our renewables targets and save money on bills," he said. "Our proposals aim to encourage even more update of clean green heating in industry and in our businesses."

Under the RHI long-term financial incentives and support are available to successful applicants that use eligible and qualifying renewable technologies - such as heat pumps, biomass boilers and solar thermal panels - to generate heat. The first phase, which was introduced for non-domestic users in November 2011, will make payments on a quarterly basis over a 20-year period.

Almost half the energy consumed in the UK is used to generate heat for buildings and water, in cooking food and the manufacture of goods, according to Government analysis. The majority of this energy currently comes from burning fossil fuels. Earlier this year the Government published its Heat Strategy (120-page / 4.3MB PDF), setting out its plans to cut the emissions caused by heating homes, buildings and offices entirely by 2050.

Energy law expert Eluned Watson of Pinsent Masons, the law firm behind Out-Law.com, said that the consultations showed that the Government was "committed" to increased uptake of the programme.

"Air source heat pumps were excluded from the first phase of the scheme due to insufficient data on the associated costs and consequent inability to set an accurate tariff, so the proposed tariff is a significant move forward," she explained. "The Government also proposes to extend the RHI to the burning of a wider range of waste feedstocks including commercial and industrial waste – this will provide greater investor certainty and be welcomed by those operating within the waste sector."

The consultation proposes that heating-only air to air heat pumps receive a tariff of 0.97p per kilowatt hour (kWh) generated, whatever the size of the installation, while air to water heat pumps will receive a proposed 1.7p/kWh for all sizes of installation. Biomass direct air heaters are also included for the first time, with a proposed tariff of 2.1p/kWh for units under 1MW capacity and 1p/kWh over 1MW.

Biogas combustion tariffs would be extended to installations over 200kW, while a new tariff at a proposed rate of 4.1p/kWh would be introduced for heat from biomass combined heat and power (CHP). The consultation also introduces a new bioliquid CHP tariff of 4.1p/kWh and an increase in the tariff for deep geothermal installations.

Watson said that the incorporation of a broader range of EfW technologies in the Government's proposals was an important step that would encourage investment in these technologies.

"Currently, RHI can only be claimed on the incineration of municipal solid waste, or MSW," she said. "The Government recognises that this has been a significant barrier to companies investing in EfW plants as it is rarely viable to run a plant on MSW alone. There is also a need for the RHI for EfW to be consistent with the support provided under the Renewables Obligation."

According to the consultations, the Government aims to introduce extended RHI support by the summer of 2013. Watson said that it was important this timetable was achieved to "enable the diversification of renewable heat technologies and to provide the green heat market with much-needed financial certainty".

"However, further changes to the RHI are expected going forward as the Government proposes to review the RHI in 2014 with the outcome of the review expected in 2015," she said. According to DECC's announcement, the final details of the scheme including tariff levels are likely to change depending on the evidence received during the consultation period.

The domestic RHI, which the Government also proposes will launch in summer 2013, will support the installation of ground and air source heat pumps, biomass boilers and solar thermal panels. Qualifying technologies must have been installed since 15 July 2009. Although the payments are intended to pay for 20 years worth of generated heat, they will be made over a seven-year period.