RHI has increased business take-up of low carbon heat

12th February 2016


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  • Mitigation ,
  • Renewable ,
  • Business & Industry

Author

Ray Cottam

The renewable heat incentive (RHI) has led to a surge in companies installing low carbon heating systems, government research has concluded.

Almost two-thirds (63%) of businesses that have installed renewable heat systems said that they would not have done so without the subsidy scheme, according to the study, which was carried out by consultants Natcen, Eunomia and CSE for the energy and climate change department (Decc).

More than half (58%) of the firms questioned stated that the financial support on offer was the single most important factor in their decision to install renewable heating technology. However, 23% said they would have installed the same technology without the RHI.

Applications for the RHI came mainly from the commercial and leisure sectors (more than half) and the agricultural sector (just under 30%) – a particularly large proportion considering agriculture accounts for around 5% of UK businesses, the report states. Industrial sites accounted for about 10% of the total applications, and the public sector for around 5%.

Businesses were mostly positive about renewable heat technology they had installed, with 87% reporting being very or fairly satisfied, and 88% saying they would recommend it to others.

Only 14% of non-domestic RHI applicants, excluding those with a newly built building, said that concerns about the performance of an existing heating system was the reason had opted for a low-carbon one . A further 61% were motivated by the financial support offered through the RHI; 15% felt the technology was best suited to their needs; and 6% based the decision on corporate social responsibility or reputational issues.

Upfront costs were the principle concern prior to installing a new system for 42% of non-domestic applicants, with 61% reporting using their own finance to purchase renewable heating technologies. Large biomass installations were commonly financed by loans or financial packages, the report states.

Biomass dominated installations, making up 96% of non-domestic installations and 98% of capacity. This was because businesses experienced fewer non-financial barriers with the technology, according to qualitative evidence from the biomass supply chain.

Biomass systems were perceived to be easy to install and customers tended to be familiar with the technology. It was also deemed suitable for older buildings, and tariffs were perceived to be generous.

The report expresses slight concern that renewable heat technology could be inefficient. Non-domestic applicants are paid per unit of metered heat consumption, which could incentivise people to use heat inefficiently, it notes.

There was some evidence from the biomass supply chain that this could be occurring, but the prevalence is not clear, it adds.

The research also considered take up of renewable heat technologies by home owner, which found that 42% of home owners would not have installed renewable heat technology without the RHI, and that 80% were satisfied with the installation. Biomass boilers made up 47% of domestic installations, though the figure was only 3% in social housing.

Frank Aaskov, policy analyst at the Renewable Energy Association (REA) said: ‘The reports show that consumers and businesses are in general very satisfied with their renewable heat installations.

‘There are always room for improvement, both in the RHI and within the sector, but it is clear that biomass and wood heating is a modern and mature technology that has huge potential for growth.’

Decc said that it has committed to increase funding for the RHI to £1.15 billion in 2021. But it is also aiming to save almost £700 million by the same date through reforming the scheme. A consultation on its plans is expected in the spring.

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