Renewable Heat Incentive Consultation (Government Response)

Lord Barker of Battle Excerpts

Wednesday 27th February 2013 Written Statements

[The Minister of State, Department of Energy and Climate Change (Gregory Barker)]

In July last year, I published a formal consultation setting out our ambition to introduce greater certainty and make improvements to the renewable heat incentive (RHI). Since then DECC has engaged extensively with stakeholders on our proposals and received over 100 responses to the consultation. The majority of responses agreed with our proposals for improving the scheme and welcomed the package of proposals.

Today, I am pleased to announce the publication of the formal Government response to our consultation which sets out how we will provide certainty and scheme improvements by ensuring the scheme remains financially sustainable and offers good value for money for the taxpayer, meets previous commitments to introduce biomass sustainability by setting out sustainability criteria and air quality emissions limits, as well as enabling processes which will reduce administrative burdens to Ofgem and applicants. Copies of the response will be placed in the Libraries of both Houses.

Budget Management

To do this, DECC intends to introduce a degression-based approach similar to the regime adopted for the feed-in tariffs scheme. This will involve tariffs available to new applicants being gradually reduced if uptake of the technologies supported under the RHI is greater than forecast. This will be done by monitoring uptake on a quarterly basis against a series of “triggers”. Monthly updates on progress towards triggers will be published online and one month’s notice will be given before any reductions are made to the tariffs for new applicants.

Tariff Reviews

The new policy published today sets out the conditions under which tariffs may be reviewed and is now being implemented for the first time.

Following work carried out by the Sweett Group for DECC on the initial assumptions and data used to set the current tariffs under the RHI non-domestic scheme, DECC is planning to consult in the spring on changes to tariffs and will provide an update shortly on which tariffs will be included. This is intended to increase uptake and ensure the scheme continues to provide value for money. DECC also intends to review the scheme in 2014 and 2017 to ensure the tariffs continue to be set using the best available data. It is DECC’s intention that where tariffs increase as a result of the current review, installations accredited from 21 January 2013—the date the possibility of review was published—would benefit from that increase once the new tariffs come into force.

Biomass Sustainability

We will improve performance by meeting our previous commitments to introduce sustainability requirements for all existing and new installations using solid biomass as a feedstock. This means that in order to be eligible for the RHI, biomass installations will be required to demonstrate, either through reporting or sourcing from an approved supplier, that their biomass meets a greenhouse gas lifecycle emissions limit target and—from no later than April 2015—land criteria. We will work with industry through the course of 2013 to promote early reporting on a voluntary basis and to develop the “approved suppliers” approach.

Air Quality

Air quality requirements will form part of the RHI for all solid biomass installations including CHP installations which burn biomass and this will apply to all new installations only.

Metering

Metering requirements will be simplified in order to move more RHI applications into the “simple” category—those which only need one meter—and introduce more flexibility into the “complex” category to avoid redundant meters being installed, to reflect feedback received from participants, and to reduce burdens on industry.

These changes to both air quality and metering will come into force by autumn 2013 but we expect them to be in place no later than the end of 2013 subject to parliamentary process and will apply to all new installations only.

I will lay the necessary statutory instruments to implement these changes before the House as soon as possible.