Reformed RHI Announced

The Renewable Heat Incentive (RHI) has been an important policy for driving the increase of renewable heat across the UK.  The RHI is currently being reformed and today the UK Government have announced the details around the shape of the RHI that will apply from 1^st April 2017 through to March 2021.  This announcement is an extremely positive step for the renewable heat sector in the UK as it confirms ongoing support for the shift to low carbon heating and it ensures that biomass heat remains a vital part of the Renewable Heat Incentive.

You can read the full document here (RHI_Reform_Government_response_FINAL) but our initial thoughts on this are that the specific reforms being introduced for biomass heating will help support our business for the years ahead and help our current and new customers to make a positive business case for the switch to a more sustainable heating source.

We’ve summarised the key points impacting on biomass below and are happy to discuss the specifics of this with anyone interested:

• Biomass heat remains essential in the shift to low carbon heating
• Biomass heating support will be at the same level across all sizes of projects.  This is a rate of 2.91p per kWh (Tier 1) and 2.05p per kWh (Tier 2).  The tiering thresholds have been changed to significantly increase the amount of heat available under tier 1 (increased from 15% to 35%).
• These new RHI rates show a headline reduction for small and medium sized projects and increased support for larger projects.
• However, when we analyse the detail for the small and medium size projects the nature of the changes means that biomass heat is still going to be viable across the full range of size of projects from schools and hotels through to process steam and district heating networks.
• The move to increase the tiering levels and decrease the gap between tier 1 and tier 2 payments is positive for a number of reasons:
  • It will help ensure that projects that are genuine users of heat will still have an attractive return on investment
  • It will help ensure that biomass boilers are correctly sized for projects and optimise the interface between capital investment, running cost savings and carbon savings.  In practical terms we are likely to see biomass boilers being sized to deliver base load heating rather than peak load.
  • It will encourage the uptake of biomass heating at larger and industrial scale projects which has many benefits for businesses and communities in Scotland and across the UK
    • It will encourage low carbon investment in Scotland’s food and drink sector
    • It will encourage investment in district heating.
  • It will help ensure that our abundant biomass resource is used as efficiently as possible and in line with the carbon hierarchy.
• The ability of large scale projects to achieve advanced financial lock in is also a positive step that will help the “bankability” of schemes.
• For Biomass CHP projects the situation remains as currently and there is not yet further clarity on any potential dedicated biomass CHP electricity generating tariff to support smaller scale projects (i.e. non-CFD.)
• There will be a future review of support for new woodfuel drying projects. Dates and details to be confirmed.

To discuss this more fully please contact the office on 01397 706412 or email stuart.reid@hwenergy.co.uk