Support payments for renewable heat will be subject to tighter budgetary and environmental controls under plans announced by the government.

From this summer the Department of Energy and Climate Change will introduce a system of tariff cuts for non-domestic Renewable Heat Incentive payments, similar to that applied to Feed-in Tariffs. This means RHI rates for new claimants will be reduced by at least 5% if uptake exceeds a set level, although cuts could be up to 20%.

For most technologies the trigger for tariff cuts will be if uptake is 50% or more above DECC’s target deployment, although for others (solar thermal and ground-source heat pumps) it is 5% above. DECC will publish monthly figures on its website to help people gauge whether a tariff cut is likely, although uptake to date has been well below any such trigger.

In addition, there will be regular reviews of the scheme to ensure technologies are adequately supported and the budget is not exceeded. The first review is due earlier than planned this spring in light of “uptake to date and the new evidence on costs and performance of renewable heating technologies”.

DECC rejected proposals to introduce a “pre-accreditation” system that would have allowed potential RHI claimants to lock into the tariff rate available at the time of application.

“The proposals remove some of the uncertainty that surrounded future tariff levels, but it is unfortunate there are no plans to provide any certainty as to tariff levels for a project before any capital expenditure is committed,” commented Shirley Mathieson, head of renewables at Saffery Champness.

New sustainability rules

Another change is the introduction of two sustainability standards for new and existing solid biomass and biogas heating installations.

All systems will have to meet “lifecycle greenhouse gas emissions targets” and land criteria in order to receive payments.

The GHG target requires solid biomass or biogas/biomethane to give at least a 60% GHG saving compared to fossil fuels (waste-based feedstocks are exempt). The land criteria requires woodfuel to come from a sustainable source and other feedstocks such as energy crops will have to meet the same land criteria as set out in the EU’s Renewable Energy Directive. This protects land with high biodiversity or high carbon stock value, such as primary forest, peatland or wetland.

People buying-in woodfuel will be able to prove RHI sustainability compliance by using an approved supplier and keeping a record of any purchases. DECC hopes to have completed a list of approved suppliers by the end of this year.

Farms or businesses with installations under 1MWth capacity that are using wood or energy crops from their own land will be able to continue doing so under the new rules. Perennial energy crops meeting Energy Crops Scheme for England, or its equivalent, sustainability standards will automatically meet RHI land criteria.

The other option for demonstrating compliance is to submit regular reports to Ofgem showing fuel complies with sustainability criteria.

Summary of RHI changes     
 Change  What is it?  Effective from
 Tariff digression  Future RHI payments could be reduced by 5%+ uptake exceeds a certain level. Degression announcements made quarterly with one month’s notice of any change.  1 June 2013 (subject to parliamentary approval)
 Tariff reviews Scheduled RHI reviews to maintain uptake and keep the scheme within budget.  Scheduled reviews in 2014 and 2017, but early review this spring
 Biomass sustainability All installations will have to meet new emissions and land criteria to receive RHI payments.  Emissions criteria – 1 April 2014, land – between 1 April 2014- 1 April 2015
 Air quality limit  Limits for particulate matter and NOx will be introduced for new solid biomass installations.  Autumn/ winter 2013
 Simpler metering   Fewer installations could need multiple meters.  Autumn/ winter 2013

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