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UK renewable heat incentive faces 'cost control' after 4 months

The UK Government introduces measures to control spending under the £860 million Renewable Heat Incentive (RHI) scheme introduced last November.

By Kari Williamson

The Department of Energy and Climate Change (DECC) says it plans “manage the budget” for commercial, public sector, industrial and community-scale installations under the RHI to “ensure its long term success”.

The proposals include a package of measures to be in place by the end of this financial year and a plan to control spending under the RHI in the interim.

Climate Change Minister, Greg Barker, says: “Putting in place cost control measures for the Renewable Heat Incentive is the prudent thing to do, given this is millions of pounds of taxpayers’ money at stake and taking on board the lessons learned from the feed-in tariff scheme.”

DECC recently lost an appeal against a ruling stating that DECC's retrospective changes to feed-in tariff payments was unlawful.

On the RHI changes, Barker says DECC will ask for the industry's view this summer with Ofgem holding a series of conferences for potential applicants over the next few months.

Possible options include a system to lower tariffs as the scheme grows – like what was seen with the feed-in tariffs.

The RHI consultation will also include amendments to the existing scheme covering air quality and biomass sustainability issues as outlined in the original RHI policy document.

The interim measures includes the possibility of “giving industry one month’s notice to temporarily suspend the scheme to new entrants if 80% of the available budget is expected to be spent.”

DECC says, however, that regular updates on the budget spend will be published to avoid surprises to the industry.

These measures will be in place as early as the summer and will last until the longer term cost control system for the RHI is in place.

Unnecessary and unhelpful

Responding to the announcement, the Renewable Energy Association's (REA) Chief Executive, Gaynor Hartnell, says: “To launch an official consultation on bringing the shutters down, having only just fired the starting gun on the RHI, is premature to say the least.

“The renewable heat market isn't going to flare up like solar did. If anything were concerned about an underspend.

“We’re totally supportive of getting effective cost control measures in place. Done properly this will be reassuring to the industry.

“In our opinion this consultation on interim cost control is unnecessary and unhelpful, but it’s certainly not a reason for lenders to become alarmed - particularly as Government intends to remove this power when longer-term control measures are in place.”

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Bioenergy  •  Energy efficiency  •  Green building  •  Policy, investment and markets  •  Solar heating and cooling