Energy Minister Chris Huhne has today unveiled details of the Renewable Heat Incentive (RHI), which is aimed at boosting the UK's uptake of renewable energy.
The Cabinet Secretary announced details of the scheme this morning, which is the world’s first financial incentive of its kind to revolutionise the way heat is generated and used in buildings.
The RHI support is designed to support emerging technologies and businesses in the UK, strengthening security of supply by reducing dependence on fossil fuel heating and emissions.
Currently around half of the UK’s carbon emissions come from the energy used to produce heat – more than from generating electricity. The RHI will reduce emissions by 44 million tonnes of carbon to 2020, equivalent to the annual carbon emitted by 20 typical new gas power stations .
over 95% of heat in the UK is currently produced by burning fossil fuel but with North Sea supplies now in decline leading to an increase in imports, low carbon alternatives are needed.
The new financial incentive will encourage installation of equipment like renewable heat pumps, biomass boilers and solar thermal panels to reduce emissions and support the existing 150,000 jobs in the heating industry.
In a statement, Chris Huhne said: “Renewable heat is a largely untapped resource and an important new green industry of the future.
“This incentive is the first of its kind in the world. It’ll help the UK shift away from fossil fuel, reducing carbon emissions and encouraging innovation, jobs and growth in new advanced technologies.”
There was initial surprise from within the industry that payments for homeowners will be deferred until October 2012, with details being released in two months' time.
In a statement, DECC said the RHI tariff scheme will stand alongside the Renewables Obligation and Feed in Tariff scheme to send a strong signal of support to the renewables sector.
The department estimates by 2020, the UK renewable heat sector will have grown to include around 13,000 installations in industry and 110,000 installations in the commercial and public sector, supplying 25% of the heat demand in these sectors.
The statement added: “Anything from a pub to a public library, a school to a power plant will be eligible under the RHI to install technologies like biomass boilers, heat pumps and solar thermal. Community projects will also be eligible, provided a single installation is providing heat to more than one house.
“The tariffs will be paid for 20 years to eligible technologies that have installed since 15th July 2009 with payments being made for each kWh of renewable heat which is produced.
“Once in the scheme the level of support an installation will receive is fixed and adjusted annually with inflation. However, as with feed in tariffs, we expect the levels of support available for new entrants to the RHI scheme will decrease over time as the costs of the equipment and installation reduce through economies of scale. “
RHI tariff payments will start for homes alongside the Green Deal from 2012 to allow a more whole-house approach to heat production and energy saving.
In the meantime, up to 25,000 installations from July will be supported by a “RHI Premium Payment” to help people cover the purchase price of green heating systems. Those taking up the Premium will then be eligible for a RHI tariff from October next year when the Green Deal begins, as will anyone else who has had eligible equipment installed from July 2009.
The “RHI Premium Payment” will be worth around £15m and will ensure there is a fair spread of technologies across all regions of Great Britain. The installed technologies will be monitored to enable government, manufacturers, installers and consumers to better understand how to make sure householders get the most out of them.
DECC says there will be clear eligibility criteria in order to qualify for a Premium payment, including a well insulated home based on its energy performance certificate and homeowners agreeing to give feedback on how the equipment performs
The statement added: “A key focus of this initial phase will be on people living off the gas grid, where fossil fuels like heating oil are both more expensive and have a higher carbon content.
“We plan to publish details of the “RHI Premium Payment” and how this will apply in May this year. We will consult on the RHI tariffs that will apply from October 2012 later in the year.”
The RHI scheme will offer premium payments for heat generated from renewable energy sources to encourage people to switch away from dependence on fossil fuel heating.
It is designed to incentivise a wide range of technologies that can heat homes, schools, public buildings and large offices/factories and it is hoped the programme will help the UK to meet its legally binding renewable energy target as well as carbon reduction targets.
Heat is the biggest use of energy in the UK, supplied predominantly by fossil gas, and accounts for 47% of the UK's CO2 emissions.
The UK's renewable heat industry currently makes up just 1% of the UK‟s heat market. Across Europe the UK has the lowest contribution of renewable heat of all EU countries except Malta (on zero). By comparison over half of Sweden's heat energy is supplied by renewables. The EU average is over 10%.
The UK's entire Renewable Energy Strategy, covering heat, electricity and transport is estimated to reduce fossil gas imports by 20-30% by 2020. Today's announcement on renewable heat will play a major role in this reduction.
Renewable heat avoids emissions associated with the generation of heat energy from fossil fuels. Organic waste streams offer the greatest environmental benefit of all renewables by transforming problematic wastes that can give off methane if left untreated, into energy, including heat.
Modelling published by DECC last summer shows that medium and large-scale heat pumps and solid biomass can provide large amounts of renewable heat cost effectively.
According to the Renewable Energy Association (REA), the increasing demand for sustainable woodfuel will also provide an incentive for active investment and management of UK woodlands, allowing for greater biodiversity.
The lobby group says 60% of UK forests are currently under-managed or not managed at all. The UK currently produces 300,000 tonnes of wood pellets of which 90% is exported and the UK is using only 10% of its wood resource.
Ambient technologies like solar thermal are already popular and make up the great majority of micro renewable installations in the UK today. The RHI will make these technologies more affordable, bringing down costs over time.