Renewable heat incentive plans unveiled
Homeowners, schools and businesses will be able to apply for a slice of £860m government funding to help them install wood boilers and solar water heaters under new plans unveiled on Thursday morning.
The “renewable heat incentive” is the first financial scheme of its kind in the world to subsidise low-carbon heating, and over the next decade could reduce carbon dioxide by 44m tonnes – equivalent to taking 20 gas fired power stations off the grid, according to government estimates.
Businesses and public sector organisations are expected to be the biggest beneficiaries of the plan at first, as households will have to wait until October 2012. But up to 25,000 homeowners will be eligible from this July for a special grant to cover the cost of installing green heating.
Ministers also expect the scheme to generate thousands of new jobs.
“This is not marginal … this is a big, big scheme,” said Chris Huhne, energy and climate change secretary.
People taking up the subsidies will receive a rate of return on their outlay of about 12%, according to government calculations. For instance, a large ground source heat pump installation costing about £300,000 would receive a subsidy payment of £27,600 a year.
However, the subsidies will be reviewed over time and are likely to be reduced as the cost of the renewable heat technologies comes down.
About half of the UK’s carbon emissions come from heating, but only a tiny proportion of buildings have renewable heat sources, partly because there are only a small number of such sources that are practical and available.
These include biomass boilers, which burn wood pellets, and air or ground source heat pumps, solar thermal heating and boilers that generate electricity at the same time as heating.
However, some of these are difficult to use. Biomass boilers require more attention and refuelling than standard fossil fuel boilers. Ground source heat pumps need to be installed underground and tend to cover a wide area, which makes them difficult to retrofit, particularly in urban areas, so installing them in new houses is easier.
Greg Barker, climate change minister, said the scheme would create “local energy economies”, for instance in the sale of wood for biomass boilers. Only about 10% of the UK’s available wood biomass is currently used.
The renewable heat incentive has been beset by problems, as the government has struggled to decide how to structure the scheme and how much money should be made available to households.
Unlike the feed-in tariffs for renewable forms of electricity, which are paid for through higher energy bills, the renewable heat incentive will be paid for from government coffers.
The microgeneration industry welcomed the announcement. Dave Sowden, chief executive of the Micropower Council, said: “This scheme marks a world-first long term commitment to a rapid growth in renewable heating.”
Philip Sellwood, chief executive of the government-funded Energy Saving Trust, said: “As we have seen with feed-in tarifffs, an attractive renewable heat incentive rate will be a real boost for householders and industry.”
But some were disappointed that householders would have to wait until October 2012 to receive the subsidy. Juliet Davenport, chief executive of renewable energy supplier Good Energy, said: “We are concerned that the full scheme won’t start until October 2012, a lengthy gap which may spook potential investors. We are also concerned that excluding agents from supporting RHI customers will increase the volume of enquiries Ofgem will face, which may result in delays and confusion similar to those currently experienced by Feed-in Tariff customers. And we don’t understand why Ofgem cannot pay customers monthly – which is in the best interests of consumers.”
The Renewable Energy Association said the rates of subsidy for solar heating systems was too low.
The government’s announcement on Thursday morning was part of a series of environmental announcements aimed at burnishing the coalition’s green credentials.
Author: Fiona Harvey