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DECC announces Renewable Heat Incentive changes and consultation

Posted by Gabby Mallett on 8 March 2016 at 12:30 pm

On 3 March DECC announced changes to the Renewable Heat Incentive. These are detailed below. They also launched a consultation to underpin the changes, and to contribute to a second round of changes likely to come in later in the year.

Changes now:

  • Amending the regulation which requires properties to be occupied for at least 183 days prior to eligibility. Now eligible new build properties will be exempt from this requirement.
  • Currently the RHI tariff is linked to Retail Prices Index (RPI). From 1 April 2016 this will now be changed to link to the Consumer Prices Index (CPI). This brings it in line with other policies within Government (though not FiTs which are still linked with RPI). Existing participants will not be affected - it won’t be changed retrospectively. 
  • Current regulations only specified the degression triggers until January this year, so the changes announce the degression assessments and potential reduction in tariff dates from 30 April right up to 2017. 
  • Changes to Land Criteria Requirements bring the RHI requirements into line with those in the Renewables Obligation. This doesn’t really affect domestic participants, but may be relevant for businesses. 
  • There were also some more minor amendments like clarifying rounding to a certain number of decimal places and clarifying references to the Microgeneration Certification Scheme, or equivalent. 

Proposed Changes:

  • The biggest may be the removal of solar thermal from the scheme.
  • Another fairly major change would be a new heat demand cap. So big heat users would have their RHI payments capped. This would apply whether they were deemed or metered. DECC proposes a level of 20,000kWh for air source heat pumps and 25,000kWh for ground source heat pumps.
  • There’s a proposal to bring in a new ‘budget mechanism’ which could mean that the scheme would close to new entrants when a certain level of spend has been reached. I think DECC may have used this method before (we know what has happened with quarterly FiTs caps).
  • There’s a proposal to review tariff levels for heat pumps. It’s not quite clear in which direction these might go for ground source heat pumps. These currently receive a rate of 19.10p/kWh and the consultation says that the most this could be increased to, if it were increased, would be 19.51p/kWh. On air to water source heat pumps it’s a little clearer as they currently receive 7.42p/kWh and the consultation says this will be expected to be set somewhere between that rate and 10p/kWh. There is also some interesting stuff on how to incentivise better in-situ performance.
  • Finally there are some interesting proposals on assignment of rights and third party finance. These would open up the incentives to schemes like the PV rent-a-roof scheme. So they would mean that a third party could pay for the system and take the incentives and the resident just benefits from the heat. Certainly worth a read in more detail.

We should mention that the overall funding for the RHI is being increased from £640m for 2016/17 to £1.15bn in 2020/21. Given the age of austerity this is definitely good news.

If you have strong thoughts on this matter, please let us know in the comments below and respond to the consultation. For more on the proposed changes, see The Renewable Heat Incentive: A reformed and refocused scheme.

Photo: J J

Also see:
3 reasons why RHI payments for new solar thermal look set to be scrapped

More information about the Renewable Heat Incentive

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