Is the RHI Next in Line for Big Tory Cuts?

The Renewable Heat Incentive is a Government programme that allows you to earn money from a selection of sustainable heating technology such as biomass boilers and air source heat pumps. Similar to the Feed in Tariff for electricity production, the RHI has a number of different payments depending on the type of heating you have installed.

The scheme was initially introduced in 2011 to help non-domestic businesses and organisations including schools, care homes and hospitals to switch to greener ways of heating. It was then broadened out to include domestic properties and has been a popular innovation that has created jobs in the industry and helped to reduce our collective carbon footprint.

There is, of course, a limited budget for the programme and the levels of subsidy have naturally reduced over time. For instance, in April 2014 the tariff for biomass boilers and stoves was just over 12 pence but had reduced to 6.43 pence in the recent adjustment at the beginning of October.

As with the Feed in Tariff, the industry has said that any more proposed cuts to the RHI could well signal closing time for an industry that currently employs over 30,000 people across the UK. In the Financial Times at the beginning of September, much was made of the possible impact that the uncertain future of the RHI was beginning to have on the market and investment:

“A lack of clarity about the scheme’s future has already affected a water heat pump project in north London aimed at drawing heat from the Regent’s canal to warm local homes and businesses. Scotland’s Star Renewable Energy Company said it had reluctantly decided to pull out of the venture because it was not clear if RHI payments would be available.”

With its growth in popularity more money is being taken up from the budget of the RHI. Last year alone this equated to £424 million and is set to rise even more this year. That presents a problem in curbing the amount being spent by a government that is committed to keeping the impact of spending on renewables as low as possible. As with the Feed in Tariff, the RHI is funded by everyone contributing through higher energy bills rather than through direct money from the Government coffers.

The question arises is how we can reduce our carbon footprint by removing subsidies from valuable contributors such as the renewable heat industry? Absence of any commitment to keeping the RHI going beyond 2016 means that larger initiatives are going to be far less likely in the wake of the Government’s proposed scathing cuts to the FiT.

In short, there seems to be have been less collaboration from the Government with the renewables industry and more active culling which is surprising since Amber Rudd wrote in her DECC blog earlier this year:

“Creating a simple energy tax system that rewards energy and carbon saving, and allows businesses to increase productivity, support growth and ensure their place in a competitive global market, cutting red – or green – tape and bureaucracy. We want to collaborate with industry and the wider green economy sector in the coming months to ensure we develop a framework for simplicity and stability.”

Perhaps the more worrying thing for the RHI and other subsidising incentives is that there doesn’t seem to be much in the way of an alternative that the industry can latch on to for some degree of stability. In fact, there doesn’t seem to be any coherent plan at all. In the meantime, investment suffers, business are beginning to struggle, with some actually going to the wall, and our contribution to climate change and a more independent energy infrastructure remain at risk. Many in the industry feel that the lack of a clear direction from Amber Rudd and the DECC has muddied the waters so much that it is going to be all but impossible to now navigate a safe path through to a greener future.

 By Steve M.

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