Payments under the Renewable Heat Incentive (RHI) will be linked to deployment levels and an overall spending cap to prevent sudden changes like those imposed on the feed-in tariff
Decc has outlined its plans to gradually lower payments under the non-domestic RHI scheme, to prevent the initiative exceeding its budget and to provide greater certainty in future subsidy levels.
Under the proposals, which will come into force on 1 June if approved by parliament, the Decc will set tariff levels for each eligible renewable technology up to March 2015. However, these tariffs will be reduced for new applicants by 5–20% each quarter if uptake exceeds trigger levels set by the energy department.
Decc will monitor the deployment of technologies each quarter and if uptake of an individual technology, for example biomass boilers, exceeds the department’s forecasts by 50% or more, the tariff for new installations of that technology will be reduced by 5%.
If deployment levels do not fall back to below the trigger level, tariffs will be reduced by up to 10% the following quarter and then 20%.
There will also be an overall trigger specified in the implementing legislation, which, if exceeded by more than 50%, will impose the same reductions across all the RHI tariffs, in addition to any cuts in individual tariffs.
If uptake of the RHI is consistently above Decc predictions, subsidies could by cut by 57% in 12 months.
Energy minister Greg Barker acknowledged the difficulties firms face in securing investment when subsidy levels for renewable technologies are subject to change.
“We recognise the potential for the prospect of tariff changes to hinder investment decisions. However this needs to be balanced against the need to act when there is persuasive evidence on the case for change,” he said.
Decc also confirmed that it will be introducing new air quality and sustainability requirements for biomass installations applying for RHI payments.
Under the planned changes, from April 2014 both new biomass installations and those already registered on the scheme will have to demonstrate they are meeting sustainability criteria related to the life-cycle greenhouse-gas emissions of fuel and land use to receive RHI payments.
RHI recipients will either have to submit reports demonstrating their fuel meets the requirements or source fuel from an “approved supplier” list.
The revised air quality controls will be implemented by the end of 2013 and will apply on to new installations. RHI applicants burning solid biomass will have to demonstrate that their installation emits no more than 30 grams of particulate matter per gigajoule of energy generated and no more than 150g/GJ of nitrogen oxides.
The air quality limits will also apply to combined heat and power installations burning biomass, and which have a thermal capacity below 20 megawatts.
