Renewable Heat Incentive Scheme (Amendment) (No. 2) Regulations 2013

Lord Teverson Excerpts

Wednesday 10th July 2013 Grand Committee

In conclusion, the RHI must drive up the uptake of renewables for us to meet our 2020 renewables targets. These amendments go some way to making that scheme more accessible. The renewables market is still relatively young and the improvements and extensions planned for the RHI will result in our seeing a significant increase in the uptake of renewable heat. The scheme is a key driver in helping to develop that market. I therefore commend the regulations to the Committee.

[Lord Teverson]

My Lords, I always find on these occasions that it is a great motivation to speak to a crowded House. I congratulate the Minister on her mastery of the subject. I did not even see her grasp for her water once, which is a tremendous start to the debate. I now understand the context of drying and cleaning. I could not quite work that out; I was thinking of washing machines, but it was clearly nothing to do with that.

This is a serious subject. As my noble friend said and as the Explanatory Memorandum sets out so well, heat is an important part of our energy usage in this country. It is an important part of decarbonising our energy requirements and meeting our 15% target by 2020. Starkly, as the Explanatory Memorandum says, we are now at something like 2% and we need to get that up to 12%. That is a big ask over the next few years and therefore I very much welcome this instrument.

There are bits of the regulations that I particularly like. One is the emphasis on air quality, which is really important in terms of solid biomass, and another is the flexibility that it gives to ensure that the scheme will be much more user-friendly than it is at the moment. The consultation showed that some of the metering requirements were difficult, and I congratulate the Government on taking that on board and trying to fix it in a very practical way. I shall come back to a couple of issues on that but, as I say, the air quality side is important as well. In my modest house I have two wood burners, and if the wind is in the wrong direction the air quality in my house is pretty bad with the solid biomass of the logs. However, that is not quite what this statutory instrument is about.

I wanted to ask the Minister about the domestic RHI but she has more or less answered that. I hope that the urgency on that continues because, apart from anything else, there has been a stalling of that industry in terms of waiting for the scheme to come along. It is very important to make sure that it starts now.

Coming back to the regulations and the Minister’s speech, she said that certain of these technologies have not met their potential with the RHI so far. What are those technologies? I particularly welcome deep geothermal technology as one of the things that the Government are starting to look at in terms of future moves on these schemes. That is excellent.

I should like to ask a question about Regulation 23. It refers to new Regulation 42A(3)(a), which states that,

“each length of piping which is 10 metres or less and situated outside a building is properly insulated”.

Although this document has technical depth, it says that the piping must be “properly insulated”, and we see that that is key when reading the document all the way through. I am surprised that there is not more of a specification there. I presume that there is an industrial definition of “properly insulated” but, to monitor and control the process, it would seem to be important to have a specification relating to the insulation. It is a term that I would like to understand.

When equipment is moved—again, I welcome this as part of the flexibility—does it have to be recertified or does it have so-called grandfather rights in its new situation?

My last question is on the impact. Paragraph 10.2 of the Explanatory Memorandum talks about air quality limits and states clearly that they will affect only people who are investing in the scheme. Does that mean that the air quality standards for an RHI installation are different from those for boilers otherwise—or are there air quality standards for these boilers otherwise? I should be very interested to understand whether there is a differentiation here and, if so, why, and how we move forward on that—or perhaps I have misread or misinterpreted that.

I am delighted to say that I have just completed a solar thermal installation on my house—at my own expense, obviously, as there is not a domestic RHI. I got it there just in time for the wonderful sunshine that we are having at the moment, and I am really enjoying free hot water. The more that British industry can do this, the better.

[Lord Grantchester]

I thank the Minister for her extensive introduction to the regulations. The RHI, launched in November 2011, is a key financial scheme focused on encouraging climate change mitigation and is especially relevant to off-grid businesses in rural areas which are dependent on heating oils.

On all sides of the House, renewable heat is recognised as an essential component of the UK’s long-term energy mix. In a debate on the order in the other place yesterday, the Minister there gave details regarding uptake of the scheme, which is very encouraging—indeed, the Minister here has mentioned some of those figures today.

However, I am concerned about the application of the degression system, whereby tariffs are reduced if one or other or both of two thresholds of expenditure are reached—namely, a technology-specific trigger where an imbalance in take-up between technologies occurs and a total trigger that puts an overall cap on spending. While I am not critical of there being an overall total trigger, I am nevertheless concerned that the total may be set rather low, and therefore I am concerned about its effect on applications. If, as of 1 June this year, a scheme payout to date of £13 million has resulted—as the Minister in the other place said yesterday and the noble Baroness has repeated here today—the degression system is already in action.

I am concerned that a tariff reduction of 5% at this early stage will discourage schemes coming forward. The Minister in the other place went on to say that £53.8 million is expected to be spent by this time next year. Will this result in further tariff reductions and does this total include the effect of degression? When an application is made under the scheme, when is it known at what level the tariff will be paid? While it is not specifically relevant to the regulations, it is nevertheless important to understand how the scheme has worked to date and how details of the degression payments are published in real time to applicants. Will the payment level be set at the time of an application and thereby not be affected by later uptake by further applicants?

The developments in the RHI that the Minister has outlined today are entirely to be welcomed. Meeting renewable energy targets should not come at the price of increased risks to public health or the environment. Several key outputs will be achieved. First, air quality will be protected through the introduction of emission limits for new biomass installations supported through the scheme. Secondly, the number of excessive, burdensome compliance requirements will be reduced, thereby increasing take-up; for example, by reducing the burdens associated with metering.

Thirdly, the relocation of accredited installations will be permitted, thereby allowing asset values to be maintained and the economic life of assets to be extended. The Explanatory Memorandum is commendable in its assessments, judging that the total resource cost increase will amount to about 8% over the lifetime of the policy, that additional testing and certification costs are likely to be largely immaterial and that Ofgem’s administrative costs be limited to 0.5% of total costs. Against this, the benefits are estimated to outweigh costs by the commendable margin of eight to one.