Future plan for UK’s renewable heat scheme brings new uncertainty

The UK government has announced £25 million for the second phase of its renewable heat support scheme, but is delaying the rollout of longer-term support for these technologies.

The Renewable Heat Premium Payment (RHPP) scheme gives vouchers to contribute towards the costs of installing renewable heating technologies like biomass boilers, air and ground source heat pumps, and solar thermal panels.

Phase two of the scheme will launch on April 2, with £8 million to support a competition for community groups installing these technologies and £10 million for social housing landlords.

The remaining £7 million will be focused on the four million homes in Great Britain that are not heated by gas and have to rely instead on higher carbon, more expensive fuels like heating oil or electric fires.

“The new RHPP scheme will be bigger and better than the original,” says Climate Change Minister Greg Barker. “We’re increasing the budget from £15 million to £25 million, for the first time we’re including community schemes and there’ll be more social housing schemes that can benefit.”

The Energy Saving Trust, which administers the scheme, says it has been encouraged by interest in the first phase of the scheme, particularly from social landlords.

But the announcement also said that while the Coalition remains committed to longer-term support for renewable heat technologies, such as with a feed-in tariff (FIT) similar to that for microgeneration, this will not happen until next summer at the earliest following a consultation this September.

The delay means that tariffs set out by the previous government in its consultation document dating from February 2010 “should not be used as a basis for predicting what future support may be”.

Given the furore over solar FITs – and the government’s public defeat in the courts – Barker says that it is now “prudent” to put in cost control measures for the Renewable Heat Incentive (RHI) before going any further.

“We will ask industry for its views in the summer and in the meantime will arrange for interim measures to be in place to manage the scheme’s budget,” he said in a statement.

However, he admitted that the current scheme was “unlikely” to require any such cost controlling measures in the short term.

“It is right for us to be cautious and have the ability to act should we need to,” he added.

The government says it will launch a consultation in the summer on potential policy options for controlling costs as the scheme grows, as well as a new look at air quality and sustainability issues surrounding the use of biomass.

Consultants Ernst & Young say that while the Department of Energy and Climate Change’s (DECC) decision is understandable after its experience with the FIT it is disappointing.

“It is disappointing that once again this will mean uncertainty for project developers in this area,” says Stuart Campbell. “Just at the point when developers are ready for operations they may be faced with a delay in receiving RHI payments until next year.”

Chief executive of the Renewable Energy Association (REA), Gaynor Hartnell, echoes those sentiments, saying:

“To launch an official consultation on bringing the shutters down, having only just fired the starting gun on the RHI, is premature to say the least. In our opinion this consultation on interim cost control is unnecessary and unhelpful… [But] we’re totally supportive of getting effective cost control measures in place. Done properly this will be reassuring to the industry.”

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Related stories:
UK Energy Minister hails Green Deal in run up to launch (21-Mar)
Fuel poverty serious national problem, says independent UK report (16-Mar)
Efficient hot water boilers could save UK organisations £400 million a year (1-Mar)
Renewable heat incentive pays out to first UK organisations (6-Jan)

28 March 2012