Spending review: what it means for home owners
Posted by Cathy Debenham on 20 October 2010 at 4:27 pm
Given the dread with which most of the renewables world has anticipated the comprehensive spending review, it has been quite a good day. The Chancellor confirmed that there will be a renewable heat incentive and that he (probably) won't be tinkering with the feed-in tariff before the first scheduled review.
Renewable heat incentive
The chancellor announced £860 million funding for the Renewable Heat Incentive which will be introduced from 2011-12. This is 20% less than Labour's proposals. DECC says this will drive a more-than-tenfold increase of renewable heat over the coming decade, "shifting renewable heat from a fringe industry firmly into the mainstream".
The renewable heat incentive will be funded from DECC's budget, and not through the levy on energy companies that Labour proposed. However, DECC doesn't say whether it will adopt the proposals Labour consulted on earlier this year, or plans to rejig things. So, while breathing a big sigh of relief that the government sees renewable heat as important, I'd want to see more detail of the plans before going ahead with an installation at home. A policy statement is expected at the end of November.
Happily, all the speculation and rumours in the media about reduction in the feed-in tariff have come to nothing, and the Goverment will not be tinkering with the feed-in tariff before the first scheduled review (changes arising from the review will be implemented in 2013). DECC does give itself a get-out-of-jail free card with the rider that "the changes will be implemented at the first scheduled review of tariffs unless higher than expected deployment requires an early review".
In this review the feed-in tariff will be "refocused on the most cost-effective carbon abatement technologies saving £40 million in 2014-15" whatever that means. Interestingly DECC's press release drops "carbon abatement", and only says "cost effective", so again, it's a matter of wait and see for what the impact of that is.
In the meantime though, this is good news for people who are thinking of investing in microgeneration, such as solar PV panels, a wind turbine or a micro hydro scheme. The feed-in tariff will continue to offer 6-8% returns on investment for the next couple of years at least, and the industry has some stability.
The Green Deal
The spending review didn't give us any more information about the Green Deal, which is the Government's flagship programme to improve the energy efficiency of the existing housing stock. It will allows people to borrow money for insulation measures and pay it back through savings on their energy bills. An Energy Security and Green Economy Bill will be introduced this autumn, and the Green Deal is expected to start in late 2012.
Between now and then, DECC will fund a pared-down (and more targeted) Warm Front programme for people in fuel poverty and on low incomes. From 2013, support for heating and insulation for the most vulnerable will be delivered through the Green Deal and a new obligation on energy companies. At the same time, from April 2011, energy suppliers will provide greater help with the financial costs of energy bills to more of the most vulnerable fuel poor households, through Social Price Support.
So what does this all mean for consumers? Is it safe to invest in microgeneration and / or renewable heat? I'd say yes to the former - as the feed-in tariff seems pretty safe, especially over the next year. But just to be sure you get the best rates, if you're thinking of investing in microgeneration, then I'd get on and do it sooner rather than later. Once you've got the good rate, you should keep it for the whole 20 (25 for solar) years of the feed-in tariff.
It's still wait and see on the renewable heat. There's no detail available on the heat incentive - and whether or not the rumours that they might drop it for the domestic market are true. So my advice would be to wait for the government's response to the consultation before making any firm decisions - so that's everyone still in limbo.
Photo by Alan Dean
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