Changes to Domestic RHI Scheme in Spring/Summer 2017
UPDATE 3rd July 2017: The election held in June 2017 meant that the proposed RHI reform regulations (detailed below) could not be laid before Parliament and come into force until after the election. Now that the election has happened, any changes to the Domestic RHI scheme will be subject to decisions taken by the new Government ministers. Consequently, OFGEM are unable to specify any further details until they are provided with further information from the Department for Business, Energy and Industrial Strategy.
In December 2016, the Department for Business, Energy and Industrial Strategy released details regarding proposed changes to the Domestic RHI Scheme which, subject to Parliamentary approval, will come into effect in Spring/Summer 2017.
In early 2016, a consultation was led by the Government to discuss necessary changes to the Domestic Renewable Heat Incentive (RHI). Following this consultation, the Department for Business, Energy and Industrial Strategy (BEIS) published its response which was made available in December 2016. Detailed within this response are a number of reforms which will affect the Domestic RHI Scheme later this year.
The proposed changes are designed to sustain the Domestic RHI’s commitment to help households incorporate renewable, low-carbon heating technologies into their homes. The four technologies already supported by the Scheme will continue to be supported which include: biomass boilers (and stoves), air source heat pumps, solar thermal, and ground source heat pumps. Outlined below is an overview of the principal changes proposed to come into force in the Spring/Summer, pending Parliamentary approval.
1. Tariff Uplifts
The tariff rates for air source heat pumps, biomass systems and ground source systems are going to be uplifted. Air source heat pumps will increase from 7.63p/kWh (current tariff) to a proposed tariff of 10.18p/kWh at some point in 2017. Meanwhile, for biomass systems, the tariff will increase from 3.85p/kWh (current tariff) to a proposed 6.54p/kWh later in the year. The tariff for solar thermal will not be uplifted, remaining at 20.06p/kWh (current tariff).
These uplifted tariffs are proposed to come into effect in the Spring/Summer 2017. Applicants who join the Domestic RHI Scheme on or after 14th December 2016 will receive the tariff rate current at the date of applying before subsequently becoming eligible for the increased tariff rate when it is implemented. This tariff increase will happen automatically so applicants will not need to do anything.
2. Heat Pump Metering
When the new regulations come into effect later this year, all new heat pump applications will be required to have electricity metering to monitor the heating system. The purpose of this metering is to allow consumers to monitor their heating system’s performance while also delivering a better understanding of their heat pump’s electricity usage.
Payments through the Domestic RHI will continue to be based on the deemed heating requirements of the property as detailed in the EPC, unless the property is a second home or if the renewable system is installed alongside another heating system, in which case payments will continue to be based on the heat metering.
Further details regarding this metering can be found here: OFGEM Factsheet: Do I need metering for the Domestic RHI?
3. Introduction of Heat Demand Limits
BEIS also want to introduce heat demand limits for air source heat pumps, biomass systems and ground source heat pumps. These levels will limit the amount of financial support any household can receive each year. The annual heat demand limit for air source heat pumps will be 20,000kWh and for biomass systems, the limit will be 25,000kWh. There will be no heat demand limit for solar thermal.
Properties with heat demands which exceed the limits will not be disqualified from applying to the Scheme but their RHI payments will be capped in line with the limits. Payments on heat pumps will continue to be made on the renewable proportion of the heat demand only.
Degression refers to the mechanism used by the Government to keep the RHI Scheme within budget. When the uptake of the Scheme is higher than anticipated, BEIS lowers the tariff rates ensuring that the RHI remains affordable and open to new applicants. The current approach allows degressions to be implemented even when there has only been limited growth.
Consequently, BEIS will be introducing a new rule which will take into account growth ensuring that degressions will not be triggered when the number of accreditations for a particular technology slows down. The proposed rule details three scenarios which will be able to trigger a degression and these are explained in the OFGEM Factsheet.
The overarching objective of implementing the reforms detailed by BEIS in this consultation response is to deliver value for money to both the applicants wishing to reduce their carbon footprint by installing renewable technologies, and to the taxpayer ensuring that the RHI Scheme remains financially viable.
To read the complete consultation response published by BEIS, please refer to ‘The Renewable Heat Incentive: A Reformed Scheme’.