World's first Renewable Heat Incentive launched to reduce emissions

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The world’s first financial incentive of its kind to revolutionise the way heat is generated and used in buildings has been launched by Energy Secretary Chris Huhne.

  • £860m government scheme expected to increase green capital investment by £4.5 billion up to 2020, stimulating a new market in renewable heat;
  • Incentive to increase number of industrial, commercial and public sector installations by seven times to 2020
  • A full system of RHI payments will be available to households from October 2012;
  • In the interim, more than a quarter of the first year’s budget to be guaranteed for up to 25,000 household installations through a “RHI Premium Payment” to encourage take-up;
  • 150,000 existing manufacturing, supply chain and installer jobs to be supported

The world’s first financial incentive of its kind to revolutionise the way heat is generated and used in buildings has been launched by Energy Secretary Chris Huhne.

The Renewable Heat Incentive (RHI) will 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.

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.”

RHI tariff scheme: industry, commercial and public sector

  • This is a new market for the UK. The RHI tariff scheme, which we will shortly be asking Parliament to approve, will stand alongside the Renewables Obligation and Feed in Tariff scheme to send a strong signal of support to the renewables sector.
  • By 2020 we estimate that the renewable heat sector will have grown to include around:

    • 13,000 installations in industry;
    • 110,000 installations in the commercial and public sector, supplying 25% of the heat demand in these sectors;
    • This is seven times the number of anticipated installations in 2014.

  • 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 premium payment: households

  • 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.
  • 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;
    • agreeing to give feedback on how the equipment performs

  • 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.

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