Subsidies for solar thermal and biomass under threat

4th March 2016


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  • Mitigation ,
  • Renewable ,
  • Business & Industry

Author

William Pickett

Financial support for solar thermal under the Renewable Heat Incentive (RHI) could be removed next year, while support for biomass may be dramatically slashed.

The energy and climate department (Decc) published a consultation on reforms to the RHI yesterday. In November, the government confirmed spending on the RHI schemes would rise from £430m in 2015/16 to £1.15bn in 2020/21, but warned that it needed to reform the scheme to ensure it provided best value for money.

The non-domestic RHI was launched in November 2011, with the domestic scheme starting in April 2014. According to Decc, 45,111 domestic renewable heat projects and 13,850 non-domestic ones had been accredited by the end of 2015.

The department plans to introduce an interim budget cap for all renewable heat technologies from April 2016, and a permanent cap from April 2017, the detail of which it is consulting on. If the cap is exceeded, the scheme will be closed for the rest of that year, Decc said.

It does not plan to set out exactly how it will calculate when the cap is exceeded as it says ministers should retain discretion over when the scheme is closed, however, it will publish a monthly update of numbers, the consultation document states.

The current tariff for domestic solar thermal is 19.51p/kWh, which is the highest for all technologies. However, deployment has been low, with solar thermal accounting for 17% of total accreditations, but just 2% of heat produced.

In the non-domestic scheme, the tariff for solar thermal is 10.16p/kWh, but the technology accounts for less than 2% of accredited schemes. Decc suggests that the low level of deployment, despite the high tariff, indicates that the RHI cannot support the UK’s renewable targets and is proposing to entirely remove the solar thermal from the scheme.

Biomass technology has comprised 25% of projects under the domestic RHI and produced 56% of the heat, according to Decc. Meanwhile, the technology has dominated projects under the non-domestic scheme, but seen relatively low deployment of large plants compared with less cost-effective small and medium ones. The department is proposing to reduce biomass tariffs by up to 61% by 2017.

DECC also wants to reduce or remove subsidies for energy crops in anaerobic digestion. The consultation outlines the department’s concerns over the rise of crops grown specifically for energy production and their impact on soil and water quality.

Renewable trade bodies warned that the proposals would be catastrophic for the industry. Paul Barwell, chief executive of the Solar Trade Association, said: ‘Discriminating against this globally important technology would have very serious ramifications for the British solar thermal sector.

‘Manufacturers of solar thermal equipment, including cylinder manufacturers as well as installers, risk a full scale winding-up of their sector. We are urging government to think again, particularly since sales enquiries are on the rise.’

The changes could also damage attempts to tackle fuel poverty, since solar thermal is popular with social housing associations, he added.

The Renewable Energy Association (REA) said that the proposed tariff for biomass boilers would make most projects unviable and represent the loss of five years’ worth of government effort and investment that have helped build a mature and stable industry.

Nina Skorupska, chief executive of the REA said: ‘This consultation proses yet another series of sudden and severe changes to the UK’s energy sector. The energy and climate change committee this week said that such changes have “marred the UK’s reputation for stable and predictable policy development,” and we couldn’t agree more.’

In the consultation, Decc states: ‘We are mindful of the fact that increasing the level of certainty for government on budget management comes at the expense of potentially decreasing the level of investor certainty. However, we consider it imperative that controls on spending are tightened so as to reduce the risk of exceeding the overall budget for the scheme in each year.’

The reformed scheme could support 23TWh of renewable heat generation in 2020/21 and could support between 27 and 40 MtCO2e of carbon abatement under the fourth carbon budget (2023 – 2027), Decc estimates.

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