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The RHI to be ‘reformed and refocused’

By Dave Elliott

The UK’s Renewable Heat Incentive (RHI) was introduced to support households, businesses, public bodies and charities in moving from conventional forms of heating to renewable, low carbon sources of heat. It has escaped cuts so far, indeed it is set to expand, but the government wants to restructure it to keep energy costs down for consumers and get better value for money. It expects spending on the RHI to rise from £430m in 2015/16 to £1.15bn in 2020/21, but says it wants to promote wider access and make project more affordable, ‘by firmly controlling costs’.

The RHI consultation document also says the government wants to promote ‘those technologies which are likely to be strategically important in the longer-term’. It notes that ‘some forms of support for biomass offer a relatively stronger value for money route to delivering renewable heat generation and contribution to the UK’s 2020 renewable energy target. However, the schemes must also support the long-term decarbonisation of heating in the UK. This means giving appropriate support to other technologies which Government expects to have an important role in that transition’.

Under its proposed reform package, domestic deployment would still be focused on areas off the gas grid, including, but not limited to, rural areas. But it says ‘we also expect these reforms to drive greater uptake of a wider range of technologies and potentially also new uses of low carbon heat. This might include, for example, the use of larger-scale biomass fired heat in energy intensive industries and process-heating; the more widespread use of heat pumps in providing heat to homes and commercial buildings; the use of wastes in biogas production, and higher uptake amongst those living in fuel poverty or in smaller properties with lower heat demands.’           

Specifically, in addition to its drive to promote the most appropriate type of heat pumps in the domestic sector (some of which it admits have not performed well in tests), it wants to support the use of food and farm waste-based biomass feedstock rather than crop-based feedstocks for biogas production in Anaerobic Digestion (AD) plants. It says its policy is that ‘the primary purpose of agricultural land should be for growing food. However, growing deployment of AD on farms has caused a significant increase in the use of crops for AD. In 2014, maize grown for AD made up 19% of the total maize area in England and 0.7% of England’s total arable are a significant portion of planned plants whose operations are geared towards high crop use. In particular, the Government has specific concerns about the impact of late harvested crops such as maize on soil and water quality’.

Nevertheless it ‘recognises that there may be circumstances where developers find it preferable to use crops’ including higher consistency and calorific value of feedstock, or when crops can’t be sold to the food market. So ‘it may not be appropriate to ban crops from AD plants’. However ‘it is not Government’s intention to drive an industry which has a high dependency on crops’. It notes that biogas derived from crops tends to be at the top end of the price range, whereas the use of waste can offer extra advantages: ‘Where food waste cannot be prevented, AD is the best available treatment option. AD can reduce emissions on farms where it is used to treat manures and slurries, as well improving the management of on- farm nutrients and providing a route for farm diversification’.

Perhaps more tellingly, it also notes that the ‘forecast spend for the biomethane tariff has exceeded expectations’. So something has to give! Though solid biomass-fired Combined Heat and Power (CHP) plants would continue to be backed, possibly given the role CHP may play in heat networks, which the government is now backing.  However, the whole thing will be limited.  There would be a new budget cap. The Secretary of State could suspend the new accreditation if spending on the RHI looks likely to be too high. This is in addition to the current budget management price ‘degression’ mechanism, which reduces tariffs available to new applicants when forecast spending commitments meet pre-set triggers.  Other changes include the streamlining of the Domestic RHI scheme by removing the requirement for applicants to undertake a Green Deal assessment, inevitable given the demise of the Green Deal energy-saving loan scheme.

Overall, the Government says: ‘We estimate the scheme will support 23TWh of renewable heat generation in 20/21’. It will be interesting to see the responses to the consultation. The cut proposed in support for solar heating, seen as ‘mature’ and so not good value for more taxpayer help, certainly didn’t go down well with the Solar Trade Association.  A sacrificial lamb? But deep geothermal projects will continue to be supported in the non-domestic RHI.  So, along with the switch from energy crops to waste AD, but continued CHP support, there are some winners and some losers.

What does all this mean in terms UK meeting its renewable targets? As things stand, with relatively slow progress on green heat and transport fuels, the UK may miss the EU imposed 15%-by-2020 renewable energy target, even given its attempts to compensate by expanding renewable electricity. The cut backs to support for onshore wind and PV solar  won’t have helped, and, although welcome, the revamped RHI won’t add that much to the heat part.  A gap seems to be likely-see Fact Check’s analysis: Though of course, for good or ill, by 2020 the UK may not be in the EU, so it could then ignore the Renewable Directive targets!

However, the UK backed the global climate agreement reached at COP21 in Paris last year. And Energy minister Andrea Leadsom has said ‘the government believes that we will need to take the step of enshrining the Paris goal for net zero emissions in UK law. The question is not whether but how we do it.’ Although the COP21 agreement does not have specific renewables targets, globally or nationally, the UK would need to push ahead with renewables on all fronts, heat, power and vehicle fuels, in order to meet it climate/emission commitments. Especially if the Hinkley nuclear project collapses, as looks increasingly likely. Some big issues there!

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