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Renewable Heat Incentive (RHI)

To meet our 2020 15% renewable energy target, we need to develop new ways of generating renewable energy in all sectors, including heat. Heat generated from renewable sources accounts for only 0.6% of total heat demand – this may need to rise to 14% to hit our binding EU targets.

We will not be able to expand renewable heat without some form of financial assistance because other forms of heat are currently cheaper. Providing some financial support will make the generation of renewable heat more affordable to a wider range of people and, by expanding the market, help bring costs down more quickly.

Common examples of renewable heat technologies include: air- and ground-source heat pumps, biomass fuelled stoves and boilers, solar-thermal water heaters and combined heat and power (CHP) plants which are fuelled from renewable sources.

Powers in the Energy Act 2008 allow the setting up of a Renewable Heat Incentive (RHI). Our aim is to make the RHI as accessible, flexible and user-friendly as possible to potential investors in renewable heat at all scales.

Details of the scheme have not yet been finalised and we will be consulting widely on all aspects in 2009, with an initial consultation in summer 2009. However, as broadly set out in the Renewable Energy Strategy (RES) consultation document, the following may be considered as potential features:

• It is expected that the incentive will apply to generation of renewable heat at all scales, whether it is in households, communities or at industrial scale.
• The incentive should also cover a wide range of technologies including biomass, solar hot water, air- and ground-source heat pumps, biomass CHP, biogas produced from anaerobic digestion, and biomethane injected into the gas grid.
• The Incentive will be available across Great Britain.
• We expect that the RHI will be banded for example by size or technology.
• At smaller scales e.g. domestic households we are currently considering whether the support payments could be provided as a lump sum up front.

The incentive payments will be funded by a levy on suppliers of fossil fuels for heat. These are mainly licensed gas suppliers – but could also include suppliers of coal, heating oil, LPG etc.

The RHI will provide financial assistance to generators of renewable heat, and may also support producers of renewable biogas and biomethane.

Through a consultative process, we propose to develop the detailed design of the RHI which will be set out in regulations to be approved by Parliament. We expect the RHI to be in place by April 2011.

Details on wider heat policy can be found on our Heat webpage.