When will the RHI reform?

14 June 2017

Now that the election has come and gone, some of us are still in limbo on a whole host of subjects including the Renewable Heat Incentive (RHI). Prior to the election, BEIS (the Department for Business, Energy and Industrial Strategy) was forced to withdraw the RHI regulations that will see the RHI changes, as outlined in the government’s proposal of reformation, implemented in spring of this year.

By confirming the available budget up to 2020/21 and setting out a number of reforms to how the scheme will operate, the government’s intention was to provide the level of certainty needed for consumers and industry to invest in renewable heating and for the market to transition towards being sustainable without government support in future.

For biomass, the reforms are intended to support further deployment where the technology offers best value for money and is likely to have a long-term role, such as in high-temperature industrial processes. The reforms will introduce one level of support for all new non-domestic biomass boiler deployment. The reforms also introduce a cap to the annual payments for new domestic biomass systems to make sure owners of larger properties are not overcompensated (there will be similar caps in place for new heat pumps). Alongside this, there will be a slight increase to the tariff for new domestic biomass systems, resetting the tariff at a previous level, to allow the technology to continue to deploy.

The reforms will also improve certainty for investors in larger projects. So far, the scheme has been dominated by spending in relation to smaller scale systems. ‘Tariff guarantees’ will help address this imbalance by providing certainty to investors regarding the tariff they will receive earlier in the project lifecycle. Without this reform, the risk is large-scale projects will continue to be relatively rare or will require significantly higher tariffs.

The reforms will also make some changes to the RHI’s budget management rules to take account of projects with tariff guarantees and to simplify the degression rules. The reforms also make other changes to the scheme to drive value for money, such as making some additional heat uses ineligible for support in the non-domestic scheme.

The RHI, therefore, continued as it was with the existing tariff structures, which would also lead to degressions being applied on July 1, 2017. For the reforms to be implemented, the regulations will have to be relayed anew, pending new ministers' approval.

However, considering the number of days remaining before Parliamentary summer recess (in mid-July), the previous time estimates given by BEIS for the reformation proposal to pass through both houses, and the number of other regulations to be laid from other departments (not forgetting the time allocated to debating Brexit), it is likely that implementation will be pushed to September and the autumn of this year instead. Please, however, be aware that this is not based on any official statement, but merely the assessment of the REA, and is subject to change.