Changes to the RHI Scheme: Spring 2016

At the beginning of March 2016, the Department of Energy and Climate Change announced a number of changes to the Renewable Heat Incentive which are planned to come into force on 24th March 2016. Six key amendments are due to be introduced but further changes could also be announced.

As of the 24th March, new applicants will not be required to provide a Green Deal Advice Report following the announcement last summer that the funding for the Green Deal Financing Company was to cease. The removal of a GDA will be welcomed by many as this was a time consuming burden for scheme participants.

The second change to be introduced in March is that new applicants with self-build properties will be exempt from the 183 days occupancy declaration. This requirement specifies that, if a property is occupied for less than 183 days within a 12 month period, it must have a heat meter installed to determine heat use and payments. It was introduced to prevent overpayments being paid for renewable heat systems installed within properties that are not continuously occupied. However, applicants who are eligible for RHI with new self-build properties are currently having to wait 183 days before applying or having to install a heat meter to prove they are living in the property for over a half a year. The new exemption will allow eligible applicants with new build properties to apply for RHI immediately.

Tariff adjustments for participants whose applications are accredited on or after 1st April 2016 will no longer be made in line the Retail Prices Index. The RPI is no longer classified as a National Statistic so, after the 1st April, tariff adjustments will be linked to the Consumer Price Index. RHI participants who are currently on the scheme will continue to have their tariff linked to RPI.

The degression mechanism, which controls the spending of the RHI scheme, applies an automatic reduction to a technology tariff if pre-determined expenditure trigger points are exceeded. Expenditure is assessed every 3 months and the next assessment against expenditure is due on 30th April 2016. This new assessment will inform any tariff reductions that take place on 1st July 2016.

In October 2015, it became a requirement that RHI participants must only use solid biomass purchased from the Biomass Suppliers List in order to remain eligible to receive RHI payments. Following on from the introduction of this requirement, the RHI sustainability criteria is being aligned with the Renewables Obligation Order 2015.

The final change to be introduced involves administrative amendments which should allow Ofgem to administer the scheme more efficiently. After 24th March, Ofgem will be able to amend RHI payments following the acquisition of a new Energy Performance Certificate. Clarity will also be given explaining what is meant by the rounding of tariffs to ensure consistency. Finally, further clarity will be provided for schemes that wish to be considered as an equivalent to the Microgeneration Certification Scheme. Further details concerning this round of changes can be found here.

In addition to the changes being implemented on 24th March, a consultation has also been published by the DECC inviting feedback on proposed reforms to the RHI scheme. The consultation, which discloses plans to introduce significant changes to both the Domestic and Non-Domestic RHI Scheme, is open for comment and will close on 27th April 2016.

The consultation opens with a foreword from the Energy Secretary, Amber Rudd, who writes, “the proposed reforms aim to rebalance the scheme and ensure it delivers its objectives in a manner which is affordable and value for money.” The Government proposes to introduce the changes in two stages, with the first stage incorporating the amendments listed above and the second stage of changes being implemented in Spring 2017.

The consultation details the implementation of a new budget cap mechanism which will be included in the first stage and will apply to both the Domestic and Non-Domestic schemes. This new cap, designed to ensure the ongoing affordability of the RHI schemes, will allow the Government to trigger the closure of the schemes to new deployment if it is deemed that leaving the schemes open to new deployment/applications would risk hitting the cap. The consultation acknowledges that this cap could create uncertainty within the industry so it proposes to publish monthly updates to show the progress of the RHI towards its budget cap.

In the Spring of 2017, a number of changes are proposed for the RHI. For the Domestic scheme, reforms include a review of the current heat pump tariffs. It proposes to set the rate for Air to Water Heat Pumps to between 7.42p/kWh (which is the current tariff rate) and 10.0p/kWh. The purpose of this review is to drive up the performance of heat pumps installed under the RHI.

For the Non-Domestic RHI scheme, a single tariff for all new biomass boiler installations will be introduced. At present, there are three tiers depending on the size of the biomass deployment but for 2017, it is proposed that one tariff of 2.03 – 2.90p/kWh will be introduced.

Furthermore, the Government intends to remove support for new solar thermal systems under both RHI schemes. This will mean that solar thermal systems installed after the date when these changes are introduced in 2017 will no longer be eligible for RHI payments.

A full list of the proposed reforms can be found within the complete consultation document available here. The suggested changes, some of which will be brought into effect within the next couple of months, will significantly change the RHI scheme. The consultation will close at the end of April, after which all in the renewables industry will await confirmation of the new legislation.

 

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