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How is the Renewable Heat Incentive scheme changing?

The Renewable Heat Incentive (RHI) scheme was primarily introduced to help the UK meet its target that 15% of energy used will come from renewable sources by 2020.  

The RHI scheme is available for both domestic and non-domestic properties but they have separate tariffs, joining conditions, rules and application processes. 

The non-domestic RHI:

  • helps businesses, public sector and non-profit organisations meet the cost of installing renewable heat technologies; and
  • participants are paid a tariff for 20 years.

The domestic RHI:

  • is targeted at, but not limited to, homes off the gas grid;
  • covers single domestic dwellings and is open to homeowners, private landlords, social landlords and self-builders. It is not open to new build properties other than self-build; and
  • participants are paid a tariff for 7 years.

The payments act as an incentive to the use of renewable sources of heat generation.  

What changes have been made to the schemes?

In February this year, several amendments were made to the legislation that governs the schemes, including: 

  • New sustainability requirements have been introduced (for both domestic and non-domestic schemes) for participants using biomass, biogas and biomethane. This is to ensure that participants use biomass, biogas or biomethane associated with limited total greenhouse gas emissions. For example biomass materials must come from sources that are not protected, and in the case of wood, sources that are properly managed. In order to give suppliers time to prepare for these requirements, they will not become mandatory until 5 October 2015.
  • The regulations provide lists of approved sustainable fuels ie those capable of complying with the regulations. There is already a list for woodfuel, which makes it simple for buyers to comply with the regulations. It is anticipated that others in the industry will set up similar lists. Any such lists would be subject to the Secretary of State's approval.
  • Participants in the domestic scheme may either purchase biomass fuel from a seller on a Biomass Suppliers List (BSL), or self-supply the biomass fuel. To meet the self-supplying criteria, the domestic participant must have the right to harvest solid biomass from land that is no more than 50 miles away from where the biomass is used.
  • Participants in the non-domestic scheme can either buy from the BSL or self-report. As part of the self-reporting process, they will have to declare that the fuel meets the land use criteria.

The non-domestic regulations were also amended so that:

  • A tiered tariff structure for biomethane injection to grid tariff has been introduced. The new tiered structure will have temporary protection from degression between the introduction of the tariff and the end of June 2015. No degression will apply to the new tariffs on 1 April 2015. Any additional capacity that is added to an existing plant registered to the scheme will receive the tariff at the time the additional capacity is registered.
  • More flexibility has been introduced into the rules regarding combined heat and power systems.
  • Instead of having to deduct all of the heat originally used by the plant (whether or not for an eligible RHI heat purpose), participants will be able to calculate the amount that was used for an eligible RHI purpose and deduct this.
  • Additional sanctions have been introduced and there are greater compliance obligations on participants. For example, participants must retain a copy of all documents or information relating to accreditation or registration or which evidences how their installation met all eligibility criteria and continues to meet their ongoing obligations.
  • The regulations have also been amended to refer to the new Microgeneration Certification Scheme Standards.

The domestic regulations have also been amended so that:

  • Registered providers can apply for the domestic RHI without having a Green Deal Assessment.
  • Cooker stoves are now eligible for the RHI. Cooker stoves are biomass stoves that are predominantly designed for space and hot water heating, but can also be used for cooking. Other cookers, the main use of which is cooking, have not become eligible under the RHI.
  • High temperature heat pumps are now eligible for the domestic RHI.
  • The regulations have been simplified to clarify that a heating system that provides heat to properties with more than one building may, in certain circumstances, be eligible.
  • The regulations have also been amended to refer to the new Microgeneration Certification Scheme Standards.

Will the changes affect uptake of the schemes?

It is hoped that the changes will boost the uptake of the schemes, whilst ensuring that it remains financially viable for the government.

Are any further changes expected?

The amendments made to the Energy Act 2008 by the Infrastructure Act 2015, allow for the assignment of payments under RHI schemes. If such regulations are passed, it will mean that the payment of the tariffs could be made directly to a lender. This is different to the current process, where they are paid to the owner who then has to pass any payments under any loan scheme to the lender. It is hoped that the new process will increase the availability of finance for the installation of RHI eligible technologies.

It is possible that tariff guarantees will be introduced, under the non-domestic scheme, for projects with long lead-in times. It has also been suggested that guarantees be available for all combined heat and power, deep geothermal and biomethane installations, large biomass (over 1MWth) and large biomass (over 600kWth). The deadline for responses to these proposals was 20 January 2015, so the sector is still awaiting the government's decision on the issue.

Contributor: Alexandra Holsgrove Jones

Originally published on LexisNexis, 12 March 2015

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at March 2015. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.

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