Future Renewable Heat Incentive uptake depends on new financing models, says expert

The statement came as part of feedback to its March consultation on the future of the scheme, though which households and businesses that use eligible and qualifying renewable technologies to generate heat can receive long-term financial incentives and support. The response confirms that the government will continue to support all four of the current qualifying technologies from next year, despite its proposal to end support for solar thermal.

In its response, the government said that it intended to allow households to assign their rights to RHI payments to third parties in the future, as this would "make way for new financing models to develop". For example, households that would not otherwise be able to afford the technology could in future receive a free or substantially reduced cost heating system from a third party, in return for a guarantee of future payments under the scheme.

"Some of the news confirms rumours heard to date, such as the increase to 10.02 for the ASHP [air source heat pump] tariff," said energy law expert Nick Shenken of Pinsent Masons, the law firm behind Out-Law.com. "This will come as welcome news to some in the industry."

"However, my feeling is that real volumes will only likely be seen once the scheme better supports third party financing models which will facilitate low cost or free installations. Development of the scheme along those lines has been deferred until a later date," he said.

In her foreword to the consultation response, energy minister Baroness Neville-Rolfe, confirmed the importance to the government of incentivising low-carbon heat generation. Heat production accounts for almost half of UK energy use and a third of the country's carbon emissions, she said.

"But it is vital that the scheme delivers value for money for taxpayers and supports the development of technologies that will be important for the long term," she said. "That is why we will be reforming the scheme to ensure it focusses on long-term decarbonisation, promotes technologies with a credible role to play in that transition, and offers better value for money."

The government has increased tariff payments for three of the eligible renewable heating technology types supported by the domestic RHI scheme in response to consultation feedback. These are ASHP, ground source heat pump (GSHP) and biomass. There are no changes to tariff rates for solar thermal systems. The new rates will come into effect automatically from the date that amended regulations come into force, which is expected in spring 2017.

The new regulations will introduce 'heat demand limits' for domestic RHI ASHP, GSHP and biomass systems, which will limit the financial support that scheme participants can receive for their annual heat use.  There will be no heat demand limit for solar thermal. Once the regulations are in force, all new accredited heat pumps will be required to install one of three electricity metering arrangements alongside their heating system.

The government intends to reset the 'degression' mechanism, which automatically lowers tariff rates for new applications when uptake of the scheme is higher than anticipated. New rules will ensure that growth must always be taken into account, so degressions will no longer be triggered when the number of accreditations for a particular technology has slowed down.

Tariff guarantees will be introduced for certain non-domestic schemes: large biomass boilers, large biogas plant, large GSHPs, biomethane, biomass-CHP [combined heat and power] and deep geothermal plant. These will give investors "greater certainty regarding their tariffs earlier in the project cycle". The government will limit the amount of heat that can be covered by a single tariff guarantee, and will reserve the right to end the guarantee scheme if take-up is higher than expected.