Important RHI Changes

In November, OFGEM announced that there will be reforms to the Domestic and Non-Domestic Renewable Heat Incentive (RHI) to improve value for money.

The Department of Energy & Climate Change (DECC) recently released a consultation document detailing significant future changes to the RHI.

It is important to note that the current RHI scheme will end in spring 2017. From here on, new changes will take effect.

The consultation document highlights many changes. Here are the most significant ones with our take on it!

DECC proposed changes from now until April 2017

  • Budget Cap

A budget cap mechanism has been proposed that would allow the Minister at DECC to close applications to the RHI scheme if the overall RHI budget was likely to be breached.  This could happen at relatively short notice.  At current deployment rates it seems very unlikely that this would occur as most technologies are below budget.

 Further, the medium biomass tariff is unlikely to be degressed despite the budget cap because the demand is still comfortably below the trigger level.

DECC proposed changes after April 2017

  • Biomass tariff reduction

DECC has proposed a unified tariff structure meaning that the current medium scale tariff could reduce by as much as 60%. DECC has indicated that it wants to focus on large scale biomass installations over 2 MW, which they claim offers better value for money.

“Current proposals mean effectively the end of small and medium biomass, or certainly until oil prices rise substantially.  We are lobbying against this and hope for change, but the position really is … if you want to install biomass you have until early 2017 - thereafter it's too late. Now is the last opportunity to secure a 20 year revenue stream,” said David Hugh-Smith, Managing Director, Dunster Biomass Heating.

The biomass industry is trying to persuade DECC to increase tariff rates so that biomass installations for small and medium schemes remain viable.

 “We believe that the schemes for systems between 200 kW and 1MW are very attractive, and will benefit users significantly, especially when the oil prices rise in the future. The incentives should not be significantly reduced,” added David Hugh-Smith.

Consultation

There will be an 8 -10 week consultation period closing on 27th April 2016. It is possible that there may be adjustments made to the reforms after the consultation period. Authorities aim to finalise the details of the scheme in September, with the scheme to be in operation by spring 2017.

Once in operation the scheme will only impact new members and new accreditations.

It is important to note that in the meantime the current scheme will continue as is until Spring 2017 with little change. To find out more about the RHI and its benefits please click here.

 

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