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Third time unlucky - RHI cuts

The second round of RHI cuts in January were expected to hit the renewable energy industry hard but as evidenced by the most recent shock RHI degression announcement, they didn’t hit hard enough. For the third successive time, both the small commercial biomass and domestic biomass RHI schemes will be cut by 25% and 20% respectively.

Despite the reduction in the last quarter, the small commercial biomass tariff growth rate was still over the government’s threshold. Therefore, the small commercial biomass category will be subject to a 20% reduction with an automatic 5% reduction applied to account for the overall scheme expenditure exceeding its trigger. The tariff as of 1st July 2015 will be as follows:

Tier Current RateRate from 1st July 2015
1 5.87p/kWh 4.4p/kWh
2 1.56p/kWh 1.17p/kWh

As at 30 April 2015, the forecast expenditure for the domestic biomass scheme was in excess of the expenditure threshold for that quarter (£8.4m). This figure also exceeded the category’s super trigger; therefore the domestic biomass tariff will be reduced by 20%, coming into effect 1 July 2015. DECC have stated, that although the forecast expenditure threshold for the next quarter has already been passed, there won’t necessarily be a tariff deduction next quarter. Another cut will only be applied if growth in the domestic biomass tariff does not decrease. The tariff as of 1st July will be as follows:

Category Current RateRate from 1st July 2015
Small Domestic Biomass 8.93p/kWh 7.14p/kWh

As seen during the previous quarter, the possibility of a fourth round of cuts in October cannot be disregarded. Those considering installing biomass are now faced with the dilemma of either acting fast and installing a small biomass system before 1st July 2015 or considering investing in the more stable and viable larger biomass systems.

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