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Renewable Heat Incentive launched to reduce emissions

The government has launched a £860m scheme to encourage £4.5bn green capital investment up to 2020, by stimulating a new market in renewable heat. industrial, commercial, public sector and domestic installations will be eligible, and 150,000 existing manufacturing, supply chain and installer jobs are expected to be supported.

The Department for Energy & Climate Change has said the “Renewable Heat Incentive (RHI) will support emerging technologies and businesses in the UK, strengthening security of supply by reducing dependence on fossil fuel heating and emissions”.

Click here for the full statement by Energy Secretary Chris Huhne. Currently around half of the UK’s carbon emissions come from the energy used to produce heat – more than from generating electricity. The RHI will reduce emissions by 44 million tonnes of carbon to 2020, equivalent to the annual carbon emitted by 20 typical new gas power stations. Over 95% of heat in the UK is currently produced by burning fossil fuel but with North Sea supplies now in decline leading to an increase in imports, low carbon alternatives are needed.

The new financial incentive should encourage installation of equipment like renewable heat pumps, biomass boilers and solar thermal panels to reduce emissions and support the existing 150,000 jobs in the heating industry. Energy Secretary Chris Huhne said: “Renewable heat is a largely untapped resource and an important new green industry of the future. “This incentive is the first of its kind in the world. It’ll help the UK shift away from fossil fuel, reducing carbon emissions and encouraging innovation, jobs and growth in new advanced technologies.” Commenting on the Renewable Heat Incentive announcement, David Bilclough, chairman of Sol2o, a UK Micro Certification Scheme (MCS) accredited renewable energy consultancy based in the North East, said: “The announcement of the RHI scheme is welcomed by the industry as we have been waiting a while for this.

While the announcement on the tariff for commercial properties is promising, it is disappointing that no tariff will be in place for domestic customers until October 2012. “We hope that the RHI, a guaranteed ‘cash back’ scheme, will unlock significant commercial investments in our system and encourage commercial property and home owners to adopt a greener approach to their energy consumption.”

The RHI tariff scheme, which is aimed at the industry, commercial and public sector, which Parliament is being asked to approve, will stand alongside the Renewables Obligation and Feed in Tariff scheme. By 2020 the DECC estimates that the renewable heat sector will have grown to include around 13,000 installations in industry, and 110,000 installations in the commercial and public sector, supplying 25% of the heat demand in these sectors. Anything from a pub to a public library, a school to a power plant will be eligible under the RHI to install technologies like biomass boilers, heat pumps and solar thermal. Community projects will also be eligible, provided a single installation is providing heat to more than one house.

The tariffs will be paid for 20 years to eligible technologies that have installed since 15th July 2009 with payments being made for each kWh of renewable heat which is produced. RHI premium payment for households will start for homes alongside the Green Deal from 2012 to allow a more whole-house approach to heat production and energy saving. In the meantime, up to 25,000 installations from July will be supported by a ‘RHI Premium Payment’ to help people cover the purchase price of green heating systems. Those taking up the Premium will then be eligible for a RHI tariff from October next year when the Green Deal begins, as will anyone else who has had eligible equipment installed from July 2009.

There will be clear eligibility criteria in order to qualify for a Premium payment, including having a well-insulated home based on its energy performance certificate, and agreeing to give feedback on how the equipment performs. A key focus of this initial phase will be on people living off the gas grid, where fossil fuels like heating oil are both more expensive and have a higher carbon content. We plan to publish details of the “RHI Premium Payment” and how this will apply in May this year. We will consult on the RHI tariffs that will apply from October 2012 later in the year.