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The Renewable Heat Incentive: a Reformed and Refocused Scheme

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The Renewable Heat Incentive: a Reformed and Refocused Scheme The Renewable Heat Incentive: A reformed and refocused scheme Proposed reforms to the existing Domestic and Non-Domestic Renewable Heat Incentive schemes 3rd March 2016 – URN: 16D/012 Department of Energy and Climate Change 3 Whitehall Place London SW1A 2AW Telephone: 0300 068 4000 © Crown copyright 2016 Copyright in the typographical arrangement and design rests with the Crown. This publication (excluding logos) may be re-used free of charge in any format or medium provided that it is re-used accurately and not used in a misleading context. The material must be acknowledged as Crown copyright and the title of the publication specified. For further information on this consultation, contact: Renewable Heat Incentive, Area 1A, 3 Whitehall Place, London, SW1A 2AW e:mail: [email protected] The consultation and Impact Assessment can be found on DECC’s website: https://www.gov.uk/decc Published by the Department of Energy and Climate Change 2 Ministerial Foreword In November 2015, I set out my priorities for the Department of Energy and Climate Change during this Parliament. “The challenge we face is how we make sure that energy remains as the backbone of our economy, while we transform to a low carbon system. How do we achieve an energy system that is secure; affordable; and clean?” Heating constitutes a major part of this challenge. Heat accounts for almost half of UK energy use and a third of UK carbon emissions. It is vital homes and businesses have access to affordable and reliable sources of heat. But we won’t meet our climate change commitments without a stronger long-term plan to move to low carbon heating. So it’s also essential that we transition to cleaner heating technologies, and in a manner that is affordable for the UK as a whole and offers value for money to taxpayers. That is why in November, Government confirmed its continuing commitment to support the transition to low carbon heating in the UK, when it announced its intention for spending on the Renewable Heat Incentive schemes to rise from £430 million in 2015/16 to £1.15 billion in 2020/21, an increase of over two and a half times. At the same time it is important we get the most out of this additional spending. We are therefore seeking views on our proposed reforms to the schemes, so that we can ensure each pound spent contributes to the Government’s vision of secure, affordable and clean energy throughout the UK. The proposed reforms aim to rebalance the scheme and ensure it delivers its objectives in a manner which is affordable and offers value for money. The reforms also aim to make the scheme accessible to a wider range of consumers including those less able to pay, help build sustainable markets and support the right renewable heating technologies for the right uses. 3 Contents Ministerial Foreword ................................................................................................................... 3 Contents ..................................................................................................................................... 4 General information .................................................................................................................... 6 Executive Summary ................................................................................................................... 8 1. Introduction and Background ............................................................................................ 11 2. Degression and trigger setting .......................................................................................... 14 Objectives of reform .......................................................................................................................... 14 Current Policy ................................................................................................................................... 15 Interim Measures .............................................................................................................................. 15 Proposals to apply from April 2017 to 2021 ....................................................................................... 16 3. Budget control ................................................................................................................... 20 Objectives of reform .......................................................................................................................... 20 Current Policy ................................................................................................................................... 20 New Policy ........................................................................................................................................ 21 4. Other cross cutting issues ................................................................................................. 27 Changes proposed as part of the first package of reforms ................................................................ 27 Tariff indexation ................................................................................................................................ 27 Changes proposed as part of the second package of reforms .......................................................... 29 5. Changes to the Domestic RHI ........................................................................................... 37 The scheme to date and context ....................................................................................................... 37 Introducing New Degression Triggers and Cap Policy ...................................................................... 39 Introducing Heat Demand Limits across main RHI technologies ....................................................... 39 Making it easier for less able to pay households to benefit from the RHI .......................................... 41 Heat Pump Tariffs and Performance ................................................................................................. 43 Support for biomass .......................................................................................................................... 46 Support for solar thermal .................................................................................................................. 47 6. Non-Domestic RHI: Biogas ............................................................................................... 49 Objectives of reform .......................................................................................................................... 49 Biogas derived from crops ................................................................................................................ 49 Current Policy ................................................................................................................................... 50 4 Proposals ......................................................................................................................................... 50 Detail and questions ......................................................................................................................... 51 Eligible heat uses.............................................................................................................................. 54 Proposal ........................................................................................................................................... 54 7. Non-Domestic RHI: Heat Pumps ...................................................................................... 55 Objectives of reform .......................................................................................................................... 55 Current policy ................................................................................................................................... 55 Proposals ......................................................................................................................................... 56 Detail and questions ......................................................................................................................... 57 8. Non-Domestic RHI: Biomass ............................................................................................ 59 Objectives of reform .......................................................................................................................... 59 Current policy ................................................................................................................................... 60 Proposal ........................................................................................................................................... 60 Detail and questions ......................................................................................................................... 61 9. Non-Domestic RHI: Biomass Combined Heat and Power ............................................... 64 Objectives of reform .......................................................................................................................... 64 Current policy ................................................................................................................................... 64 Proposals ......................................................................................................................................... 65 Detail and questions ........................................................................................................................
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