Renewable Heat Incentive - Update

Monday 25 October 2010

To the great relief of the Renewable Energy industry, George Osborne, the Chancellor of the Exchequer confirmed in the October Comprehensive Spending Review that £860 million in funding would be made available for the Renewable Heat Incentive to start in 2011.

The Department of Energy and Climate Change (DECC) anticipate that this funding will "drive a more-than-tenfold increase in renewable heat over the coming decade".

The Chancellor also announced that the funding for the Renewable Heat Incentive will come directly from the Government rather than the Utility companies as originally planned

Gaynor Hartnell, Renewable Energy Association Chief Executive welcomed the decision on the Renewable Heat Incentive, "Finally renewable heat moves to the heart of UK energy policy, exactly where it belongs". She went on to estimate that it will create tens of thousands of green jobs over the coming decade.

A relieved Chairman of the Solar Trade Association, Howard Johns, also welcomed the Government’s statement, "This represents a really good win for the renewable heat sector". However, perhaps stung by the inconsistent and inadequate support for renewable energy by the previous Government, he went to caution that "the devil is always in the detail" and hoped that Solar Thermal in particular is to be well supported by the Renewable Heat Incentive.

What does it all mean?

At the moment we have no details of the level of payments that can be expected from renewable heat technologies. Although the original consultation on the Renewable Heat Incentive took place in February 2010, DECC has announced that it going "consider further the operation of the scheme including the tariffs and technologies supported"

These levels of Renewable Heat Incentive tariffs, set out in the original consultation document, were generally considered by the industry to be about right.

Like the Clean Energy Cashback scheme, which is designed to encourage electricity production from renewable sources, the proposed tariffs offer individuals, community groups and commercial organisations a rate of return on their investment that would encourage large volumes of installations to take place.

Clearly DECC’s stated aim of "a more-than-tenfold increase in renewable heat over the coming decade" suggests that the tariff levels will have to remain broadly in line with the original consultation documents levels. But we will have to wait and see.

Just for once it looks like a UK Government has done the sensible thing by Renewable Energy and renewable heat by allowing the Renewable Heat Incentive scheme to start in 2011 as planned. This is welcome news for the entire industry and the large number of customers who had been waiting for the outcome of the October spending review.

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