Renewable Heat Incentive Renewable Heat Incentive 4 Ministerial Foreword The Renewable Heat Incentive

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  • Renewable Heat Incentive

    March 2011

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    Contents

    Ministerial Foreword ......................................................................................................................... 4

    Summary ............................................................................................................................................ 6

    Chapter 1 - Introduction .................................................................................................................... 9

    Chapter 2 – Accessing Support ..................................................................................................... 15

    Chapter 3 - Eligibility ....................................................................................................................... 23

    Chapter 4 - Supported Technologies and Fuels ............................................................................ 34

    Chapter 5 - Bioenergy ..................................................................................................................... 43

    Chapter 6 - Support levels .............................................................................................................. 51

    Chapter 7 - Measuring heat ............................................................................................................. 63

    Chapter 8 - Administration.............................................................................................................. 68

    Chapter 9 - Devolution .................................................................................................................... 75

    ANNEX I - Areas for further consideration .................................................................................... 77

    ANNEX II - Details of tariffs ............................................................................................................. 82

    ANNEX III - Non-Domestic Transitional Arrangements ................................................................. 85

    ANNEX IV - Glossary ....................................................................................................................... 87

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    Ministerial Foreword The Renewable Heat Incentive (RHI) scheme is the first of its kind in the world. It will provide long term

    support for renewable heat technologies, from ground-source heat pumps to wood-chip boilers. The

    scheme will help drive around a seven-fold increase in renewable heat over the coming decade, which

    will help shift what currently is a fringe option, firmly into the mainstream.

    The threats and challenges of climate change are clear and real. We must take action now to protect our

    environment. That’s why we have signed up to carbon reduction targets and have committed to reducing

    our emissions by at least 80 per cent by 2050. At the same time, with diminishing North Sea gas

    reserves, we are becoming increasingly reliant on foreign imports. We must therefore diversify our

    energy supply, by turning to alternative forms of energy and move away from traditional fossil fuels.

    Ensuring our energy supply is safe and reliable is vital for the security of the nation.

    Clearly the first step is to reduce our energy use. We know that sometimes we use more energy than we

    need to. The cheapest way of closing the gap between supply and demand, reducing our energy bills

    and carbon is through greater energy efficiency and a better understanding of energy use. However,

    energy efficiency alone will not solve the problem. We also need to green our energy supply and reduce

    our reliance on fossil fuels. This will require a mix of low carbon technologies, including new nuclear,

    carbon capture and storage and renewables. And for heat, it is renewable energy that holds the key.

    Moving to a low carbon economy offers real opportunities which we must grasp from the outset. We want

    to see a green revolution that not only helps protect the climate and ensure energy security, but also

    helps re-build the economy on a longer, more sustainable footing. Britain can be a global leader in this

    transition. Increasing renewables will create new jobs throughout the supply chain: from research and

    development to manufacturing; renewable fuel production and supply; equipment installation and

    maintenance.

    Some good progress has been made so far, but we need to accelerate drastically the pace of the switch

    to renewables. We need to work hard to remove the barriers holding back take-up and we understand

    that one of the key barriers to renewable deployment is cost. The current dominance of traditional fossil

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    fuel systems, means that it is often difficult for newer, innovative systems to compete. While industry

    needs to work hard to bring costs down, financial support is needed to help bring change.

    We already have the Renewables Obligation and Feed-in Tariffs schemes to help drive an increase in

    renewable electricity, evidenced by the recent expansion in wind-farms and domestic solar panels.

    Similarly we have the Renewable Transport Fuel Obligation, to help transform our transport fuel use.

    However, until now, renewable heating has had limited support.

    The heat used in our homes, public buildings, businesses and factories is responsible for around half of

    all the energy consumed in the UK, and accounts for roughly half of all the UK’s carbon emissions. This

    huge drain on energy resources is not an issue we can ignore. Taking action now to switch from fossil

    fuels to cleaner and more sustainable green sources of heat will reduce the impact that our heat

    requirements have on the environment and help ensure the UK has an energy supply that is safe, secure

    and reliable.

    It is for this reason that we are introducing the Renewable Heat Incentive, making renewable heat not

    just an environmentally sound decision, but also a financially attractive one. This support can help drive

    take-up of renewables now, stimulate the renewables industry, encourage further innovation and

    ultimately, bring down the cost of renewable heating.

    Renewable heat is common sense. It allows us to draw energy from the world around us, taking a more

    holistic approach. Whether it is a wood-chip boiler with fuel sourced from a sustainable local woodland or

    producing biogas from organic waste, renewable heat will allow people to take control of their energy

    use, often at a more local level, and gain a greater and more complete understanding of energy and its

    impacts.

    The RHI will make it a sound, commercial decision for communities, the public sector, not-for-profit

    organisations, business and industry to install renewable heat technology. We will put the financial

    framework in place, so organisations can come together to find local, innovative and sustainable

    solutions to their energy needs. This is an opportunity that we need everyone to grab with both hands.

    Working together, we can help transform the way we heat this country.

    Greg Barker

    Minister of State

    Department of Energy and Climate Change

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    Summary

    Increasing renewable heat is key to the UK meeting its renewable energy targets, reducing

    carbon emissions, ensuring energy security and helping to build a low carbon economy. The

    Renewable Heat Incentive (RHI) will help accelerate deployment by providing a financial

    incentive to install renewable heating in place of fossil fuels.

    The Government will take a phased approach to implementing the RHI. Initially, in the first

    phase, long-term tariff support will be targeted at the big emitters in the non-domestic sector.

    This sector, which covers everything from large-scale industrial heating to small business and

    community heating projects, will provide the vast majority of the renewable heat needed to meet

    our targets and represents the most cost-effective way of increasing the level of renewable heat.

    The Government therefore wants to provide support now in order to kick-start take-up in this

    sector.

    As part of the first phase, the Government will also introduce Renewable Heat Premium

    Payments for the domestic sector. We have ring-fenced funding of around £15 million, which we

    will use to make premium payments to households who install renewable heating. These direct

    payments will subsidise the cost of installing qualifying renewable heating systems. In return for

    the payments, participants will be asked to provide some feedback on how the equipment works

    in practice and suppliers will be asked to provide a follow up service on any issues that are

    raised. This will boost confidence in the technology and the information we receive will help

    enable Government, manufacturers, installers and consumers to better understand how to

    maximise performance of the various technologies. The Renewable Heat Premium Payments

    will support a spread of technologies across all regions of Great Britain and will cover