The Renewable Heat Incentive

What is the Renewable Heat Incentive?

The Renewable Heat Incentive (RHI) is a Government scheme to support households and businesses to generate renewable heat for their buildings. The first phase of the RHI, non-domestic RHI, was introduced in 2011. The domestic RHI was opened to applicants in 2014. The RHI is similar to the Feed-In Tariffs, which incentivise smaller renewable electricity generation, but it is paid for by HM Treasury, rather than through consumers’ energy bills. Ofgem has a dedicated RHI page setting out how the scheme works in detail and how to apply.

In the Spending Review in November 2015, the Government confirmed funding for the scheme to 2020. It also published a consultation on its review of the RHI, aimed at maintaining affordability and increasing the focus on technologies that are likely to be strategically important. It also proposed imposing a spending cap on the scheme.  DECC introduced new sustainability criteria for installations using biomass and biogas fuels and producers of biomethane in October 2015. To continue to receive RHI payments, participants must now use fuels that meet the sustainability criteria.   

Deployment Statistics

The former Department of Energy and Climate Change (DECC) and now the Department for Business, Energy and Industrial Strategy (DBEIS) publish monthly statistics on Renewable Heat Incentive (RHI) deployment and a quarterly statistical release. The data release for February 2017 showed 16,456 accredited commercial schemes and 54,131 accredited domestic schemes. The total capacity was 3.1MW and the total generation to date, since November 2011, was just over 13,095GWh for commercial installations and 1,519 GWh from domestic installations. This compared to a total combined figure of 998.6 GWh in June 2016.

Changes to RHI

The Government published a consultation on reforming and refocusing the RHI scheme in March 2016.  At the same time, it also published an Impact Assessment and some data on cost of installation for both non-domestic and domestic systems.  One of the Government’s aims in revising the scheme was to reduce what it regarded as overcompensation. 

 The Renewable Heat Incentive Scheme (Amendment) Regulations 2016 (SI 2106/718) came into force on 1 August 2016.  The regulations were introduced:

1. to close a loophole that has come to light which represents a financial and value for money risk to the scheme (…) The further amendment being introduced here is part of a planned programme of scheme improvements to drive uptake and deliver value for money.

Biomass-CHP plant are now prevented from receiving the (higher) biomass-CHP tariff for all their heat output unless a power efficiency threshold of 20% is met. The remaining changes proposed in the consultation, including degression of tariffs, will be implemented through the draft The Domestic Renewable Heat Incentive Scheme (Amendment) Regulations 2017, currently before Parliament.

Other Commons Library briefings on energy and climate change issues are available from Parliament’s topic pages on energy and climate change