Renewable Heat Incentive - latest uptake figures from DECC

The latest RHI figures continue to demonstrate how successful the scheme has been at increasing the rate of renewable heat generation in Great Britain.

Biomass heating remains the clear 'winner' of the RHI and account for 94% of all installations, 99% of the installed capacity and 85% of the payments made under the scheme.  

Whilst the number of biomethane installations is small (just 3) they are starting to account for around 5.6% of the total payments made (which is great than the 'large biomass' category).  As I stated before this seems to demonstrate the enormous potential of biomethane production from anaerobic digestion.

Of note, particularly to those considering installing a biomass system, is the recent acceleration in applications seen in June.

Whilst the precise reasons for this dramatic increase are not clear (backlog?) it is possible that it might lead to additional tariff adjustments later in the year (on top of the 5% reduction for small biomass implemented on July 1st).

In terms of geography the South West region continues to lead the way with 19% of all installations. 

In the South East, where this blog lives, Kent has the most accredited installations.

The top 10 business types benefiting from the RHI are shown in the table.

Will there be more tariff adjustments in 2014?

In simple terms - yes, quite likely.

The results of the next tariff review will be  the announcement on 31 August 2014 (with any changes commencing on 1 October 2014).

The data suggests the expenditure thresholds for the overall RHI budget are starting to be exceeded.  The cause of this is 'small biomass' tariff which is now well over its  expenditure threshold. 

This situation has been tolerated for a while because uptake of the non-biomass tariffs was, and still is, well below forecast and the overall budget was within its limits.  The difference now is that uptake of the 'small biomass' tariff has accelerated so fast that it has now impacted the finances of the overall scheme.

Given the scale of the current overspend it is possible that a 10% reduction in the 'small biomass' tariff might take place on October 1st.  This would reduce the tariff from 8.4 p/kWh (tier 1) and 2.2 p/kWh (tier 2) to 7.6 pence and 2.0 pence, respectively.

The impact of this reduction for a 199 kW biomass boiler is around £2,000 a year (although this depends heavily on the heat load and of course the actual meter readings).

Summary

There has been a large 'spike' in applications in June - whether this develops into a 'trend' is yet to be seen.  Regardless of this the scheme overall is starting to overspend and as such the rules for degression are clear.

Any decision to reduce tariffs (in October) will most likely affect the 'small biomass' tariff.

Any sub-200 kW installations that are currently in progress now have a clear signal to complete as soon as possible.  New projects, with an expected commissioning date post-October 1st, should probably factor-in a lower tariff for feasibility and business planning purposes.

Non-domestic RHI - small biomass tariff reduced

Ofgem has announced that the small biomass tariff will be reduced by 5% from July 1st 2014.

This is in response to increasing uptake in the sub 200 kW category as well as higher than anticipated levels of eligible heat being submitted in meter readings.

This degression of the small biomass category follows the annual inflation increase that took place on April 1st.  This saw the tariff increase from 8.6 p/kWh (Tier 1) and 2.2 p/kWh (Tier 2) to 8.8 and 2.3 p/kWh, respectively.

The 5% reduction from July 1st will mean that the tariff falls again to 8.4 and 2.2 p/kWh (which is similar to the levels seen in 2012).

The latest uptake figures clearly indicate that whilst the RHI overall is operating within it budgets, uptake of the small biomass category has accelerated.

Meanwhile, uptake of the medium tariff remains strong but is currently operating below budget forecasts.

Activity in the large biomass tariff category is far lower than the other categories.  However, there are clearly a number of schemes at pre-application stage (green column) and these may start to have greater impact on budgets over the next 24 months.

Overall biomass heating remains the clear 'winner' in the non-domestic RHI.  The majority of the available budget (and installed capacity) is currently allocated to biomass technologies and activity in the other RHI-eligible technologies remains relatively modest. 

RHPP due to end soon - £2,000 grant towards the cost of a biomass boiler

Last chance for off-the-gas-grid households who want to make the most of the Government’s one-off grant designed to help meet the costs of installing renewable technologies in homes across the country.

The Renewable Heat Premium Payment Scheme will close on March 31st 2014 and householders are encouraged to apply now before it’s too late. 

Grants of up to £2,300 are available for households to help pay for new renewable heating systems including biomass boilers and ground, water source or air-to-water heat pumps.

The cut-in date for this scheme is 21st July 2011 and participating households must have undertaken a Green Deal assessment.

Vouchers will be valid until 31 March 2014  when all required paperwork will need to be submitted for payment  to the Energy Saving Trust. No extensions will be available to this deadline.

The following leaflet has now been developed to explain the benefit of applying in customer friendly language and where to go for more information.

Commercial RHI - summary of changes to tariffs and technologies

Are you sitting comfortably?

DECC has been busy releasing new and updated information about both the commercial and domestic RHI and renewable heat in general.

To my eyes the overall renewable heat situation looks extremely healthy at the moment, particularly if you are in the biomass sector.  However, it is also clear that biomass is dominating the commercial RHI.  Consequently DECC will introduce changes to the budgetary process to increase the degression trigger sensitivity for sub-1MW biomass.

We have read the latest update on the commercial RHI and have picked out the main points from the executive summary.  We would urge interested readers to look at the entire document in case we have missed anything.


A key change is the capping of all tariffs at 10p/kWh.  This means that the RPI inflation of tariffs will stop at 10p/kWh.  For biomass it is the tier 1 small biomass tariff that is closest to this limit (n.b. the solar thermal tariff will be increased to 10p/kWh).

It is true that some renewable heat technologies are underperforming in the RHI, such as heat pumps and solar thermal.  However, DECC has recognised this and will beef up support - via increased tariffs and budgets - as well altering some requirements (such as energy efficiency).  The large biomass tariff, for example, will increase to 2.0p/kWh from 1.0p/kWh.



Eligibility

For new technologies and updated tariffs - 4 Dec 2013.  Any applications with a date of accreditation of 21 January 2013 or later will benefit from the tariff increases brought forward as a result of the Early Tariff Review consultation (this applies to ground source heat pumps (GSHP), solar thermal and biomass over 1MWth).


Energy Efficiency

DECC will not be introducing explicit energy efficiency criteria for non-domestic RHI applicants at this time. The mixed views from consultation respondents made it clear that more work needs to be done to establish a range of effective but not unduly burdensome energy efficiency measures that could be introduced into the scheme.


Biomass Sustainability Update

Based on feedback from stakeholders about industry readiness,  DECC  will postpone implementing mandatory compliance with GHG lifecycle emissions savings to Autumn 2014, so that industry and participants can monitor their processes in light of the sustainability criteria and build the audit trail necessary to demonstrate compliance.

DECC intend for the Biomass Suppliers List to be open for applications from suppliers of biomass in Spring 2014.

Subject to the availability of Parliamentary time,  DECC  intend to implement land-use sustainability criteria by 1 April 2015.


Biomass CHP

DECC will be introducing support for biomass CHP (4.1p/kWh), biogas >200kW (5.9 p/kWh and 2.2pkWh depending on size) and deep geothermal (5.0p/kWh). 

However, we do not intend to proceed at this time with support for heating only air-to-air heat pumps or biomass direct air as the consultation did not enable the development of appropriate deliverable policy.

Biogas combusion >200kWth

Subject to State Aid approval, tariffs will be set at 5.9p/kWh for installations with a thermal capacity of between 200 to 600kWth and 2.2p/kWh for those greater than 600kWth.

Deep geothermal

DECC will introduce a new tariff for deep geothermal heat at 5p/kWh. Deep geothermal heat will be defined as heat coming from a drilling depth of a minimum of 500m.

Heating only air-to-air heat pumps (AAHPs)

Although these technologies do produce renewable heat,  DECC  will not be introducing support for them at this time. This is primarily because of the risk of incentivising the installation of separate heating and cooling AAHPs in order to claim the RHI, rather than a reversible AAHP, which is likely to be more energy efficient.

Air to Water Heat Pumps and Energy from Waste

DECC will be introducing support set at 2.5p/kWh for AWHP (designed to achieve a minimum seasonal performance factor of at least 2.5) and 2.0p/kWh for the biogenic proportion of energy from waste (commercial and industrial).

Value for Money Cap and Tariff Rate of Return

From Spring 2014 tariffs across the RHI will be capped at 10.0p/kWh of renewable heat (and continue to be adjusted by RPI annually).

Biomass

To date deployment of large biomass has been below expectations and therefore  DECC  will go ahead with the proposed tariff increase to 2.0p/kWh.

Ground Source Heat Pump Tariffs

DECC will be replacing the current banded GSHP tariffs with a single tariff of 7.2p/kWh, which will be tiered.

The tier 1 tariff of 8.7p/kWh will be paid on the initial heat generated for an eligible purpose and the tier 2 tariff of 2.6p/kWh will be paid on the remaining eligible heat generated. This is equivalent to a tariff of 10.0p/kWh renewable heat assuming an SPF of 3.6.

Solar thermal

DECC will be raising the solar thermal tariff to 10.0p/kWh.

Budget management

Since implementation,  DECC  has made three quarterly degression assessments, one of which resulted in the medium biomass tariff being reduced by 5%. The outcome of the most recent assessment was published at the end of November.  DECC  will publish the fourth quarterly announcement by 1 March 2014.

In the May 2013 tariff review consultation we set out that the budget management policy would need to be developed in light of any tariff changes or scheme extensions and to reflect the outcome of the spending review for 2015/16, which has since confirmed an RHI budget in 2015/16 of up to £430m.

Having reviewed the budget management mechanism to ensure it remains fit for purpose,  DECC  will make some changes to the policy from Spring 2014 to:

• base the deployment levels set out in the degression mechanism on refreshed market intelligence rather than the expectations that were modelled prior to the scheme’s introduction;
• reduce the tolerance in the technology trigger for biomass under 1MWth and bio-methane injection by reducing the amount that these triggers are scaled above expected levels of deployment. They will change from being 150% of expected deployment to 120% of expected deployment. This will reduce the risk of unsustainable growth and dominance of the budget by a small number of technologies;
• set the triggers for technologies  DECC  expects to deploy in relatively lower volumes (solar thermal, deep geothermal and all biogas) at 2.5% of the overall budget, rather than the current 5%.

Reducing uncertainty for projects with long-lead times

DECC intend to introduce a form of tariff guarantee for the largest installations (for example, those over 1MW), initially available for plant due to be commissioned by 31 March 2016. Subject to further policy development in 2014, State Aid and Parliamentary approval,  DECC  will aim for this measure to be in place from April 2015 to March 2016 and thereafter factored into the next spending review discussions on the RHI so that it can be available from Spring 2016 for plant due to commission by 31 March 2020.

Public Grants

After two years of the non-domestic RHI we think a more flexible approach to the interaction between public grants and the RHI could encourage more renewable heat installations to come forward. Pending further work alongside the 2014 review to look at the interaction between public grants and the non-domestic RHI,  DECC  intend to introduce some additional flexibility next year. We will take forward regulatory amendments to extend the eligibility window for repayment of grants and to allow some grant recipients who are unable to pay back their grants to access the RHI via reduced tariff payments.

Biomass sustainability criteria announced by UK Government

DECC has released details of the criteria that will be used to judge Renewables Obligation payments for electricity produced by biomass power stations.

Rather than repeat the press release we have included it below.



This is good news for the biomass industry in the UK.  There has been a lot of negative publicity recently and this new approach appears to set a clear route forward for biomass energy developers.

Of course these new rules are demanding and they will undoubtedly affect  projects >1MW.  However, we welcome these measures which should help ensure the role of biomass electricity in the UK's energy mix (and in meeting the 2020 renewables targets of course).

Press release:

From April 2015 biomass industry must show fuel is sustainable or lose financial support.

Biomass electricity will produce over 70% greenhouse gas savings compared to fossil fuel alternatives, under changes made by the government to ensure the sustainability of wood-fuel used to create energy.

From April 2015, the biomass industry – which is worth over £1bn in new investment and supports over 3,000 jobs – will be required to demonstrate their fuel is sustainable or lose financial support.

Greg Barker, Minister of State for Energy and Climate Change, said:

“The Coalition is committed to delivering clean, affordable and secure energy for consumers.

“This includes an important role for biomass power as part of the UK’s energy mix.

“The new criteria will provide the necessary investor certainty and, crucially, ensure that the biomass is delivered in a transparent and sustainable way.”

The tough new criteria for sustainable forest management are based on a range of issues such as:

• sustainable harvesting rates,
• biodiversity protection and
• land use rights for indigenous populations.

Organisations who do not comply with the new requirements could see financial support withheld.

All generators of 1 Megawatt (MW) capacity or more using solid biomass or biogas feedstock will be required to demonstrate that they are meeting the criteria in order to claim support under the Renewables Obligation. This would cover around 98% of all biomass power generation in the UK.

We are also today introducing a new requirement for generators of 1MW capacity and above to provide an independent sustainability audit with their annual sustainability report.

Today’s announcement will help bring forward transitional biomass technologies such as coal to biomass conversions which are one of the quickest and most cost effective ways to help decarbonise the UK’s electricity supply.

To provide the certainty that investors and developers need there will be no further unilateral changes to the sustainability criteria before April 2027.

Notes for Editors:

• By 2020 biomass generators of 1MW and above will have to meet a 200 kg CO2eq per MWh annual target (72% saving compared to the EU fossil fuel electricity average). This reduces further to a 180 kg CO2eq per MWh from 2025 (75% saving compared to the EU fossil fuel electricity average).
• A threshold of 1MW and above covers around 98% of biomass power generation. The other 2% (those with a capacity between 50kW and 1MW) will be required to report against the criteria, but not to comply with it. Microgeneration (under 50kW) are not included in the scope.
• Biomass is expected to make a significant contribution to delivering the UK’s 2020 renewable energy target. Around 38% of our renewable electricity comes from bioenergy.
• Sustainable forest management criteria will be based on the Government’s UK Timber Procurement Policy Principles (or CPET - see http://www.cpet.org.uk/).
• Mandatory sustainability criteria have already been introduced to the RO for bioliquids as required by the EU Renewable Energy Directive (RED).
• We have introduced a cap of 400MW on the total new-build dedicated biomass capacity (excludes biomass with CHP and coal to biomass conversions) that can expect grandfathered support under the RO. We are using a notification process to allocate places within the cap. This is now open for applications for priority projects (that reached financial close by 20 August). Other projects will be able to apply from 11 September onwards.

Renewable Heat Incentive - latest results

The latest quarterly report on the Renewable Heat Incentive (Apr-Jun 2013) indicates that uptake of the scheme remains steady and total installed capacity under the scheme now exceeds 400 MW.

RHI installed capacity and payments - cumulative

There are now 1,789 accredited installations with a further 600 applications  at various stages of processing.  76% of installations are in England, 18% are in Scotland and the remainder are in Wales.

Biomass boilers remain the dominant technology type and comprise 93% of all accredited installations.  

Proportion of accredited installations by technology type

This latest report also provides some new information on recent audits that have been carries out by Ofgem.  These focused on compliance issues but were also carried out for fraud detection purposes.  The main findings were as follows:

• Rates of non-compliance are high and this has led to payments being suspended in some cases.
• The main issues relate to participants not maintaining fuel records for biomass installations, particularly where harvesting their own fuel, and the incorrect installation of heat meters

As a result of these findings Ofgem has commenced a desktop audit programme to complement site audits in order to verify ongoing obligations.

The advice is, therefore, to check that metering equipment has been installed correctly, primarily by checking meter installation manuals.  For biomass installations participants need to record the quantity and type of fuel used and the date of supply to the boiler (see template here).

Remember the date - 24th September

DECC recently announced important changes to the RHI non domestic

scheme which will be implemented on 24 September.  These include changes to metering and air quality requirements.

Simplifying metering requirements

If you are applying for RHI accreditation on or after the 24 September simplified metering requirements will apply:

• In certain circumstances disregard heat loss from external pipework where the pipework is ‘properly insulated’ to the standards outlined in BS5422 and calculated in line with and EN ISO 12241.
• Submit heat loss calculations in place of installing additional meters in such cases where doing so might be physically or financially overly burdensome
• Only install meters which are necessary to calculate the ‘eligible heat output’ from the installation to enable the RHI payment to be calculated.

Biomass air quality requirement

Again, from September 24th a fully completed RHI emission certificate (or environmental permit) will be required to demonstrate compliance with new air quality requirements. 

For more information, including RHI emission certificate template, see here.