Renewable Heat Incentive gets green light after drastic biomass subsidy cut

The Renewable Heat Incentive (RHI) scheme was given approval by the European Commission yesterday, and is due to be launched in November. The scheme had previously been delayed just hours before it was due to launch in September, as regulators deemed that the subsidy for large-scale biomass projects violated EU state aid rules.

Climate Change Minister Greg Barker stated on Twitter that “RHI EU now given state aid approval,”. “Revised regs now re-laid in Parlt putting us bang on course for launch end of November.”

In order to gain approval, the Department for Energy and Climate Change (DECC) was forced to reduce the tariff for biomass installations with over 1MW of capacity from the 2.7p per kilowatt hour (kWh) approved by Parliament in July, to just 1p/kWh.

Speaking to Businessgreen, Paul Thompson, head of policy at the Renewable Energy Association (REA) stated:

“I wouldn’t downplay the sense of relief it is going ahead, but this is not just a bit of trimming for larger projects, this is a drastic reduction.

“People have gone ahead with projects based on the government plans set out in March and approved in July. These things always say ‘subject to EU state approval;, but you generally trust the discussions have already been had with the right people in the Commission. This is a big hit for anyone doing projects at a large scale.”

A spokeswoman for DECC said that she appreciated the change was “frustrating” yet asserted that “without this change the scheme would not have been able to proceed.”

Whilst the apporval of the scheme has been welcomed by environmental and energy stakeholders, the changes to the tariff may result in the cancellation of planned biomass projects. Andy Johnston, Chief Executive at Local Energy urged public sector organisations to “immediately reappraise large biomass projects they are involved in as they may no longer be viable”.

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Categories: Climate Change, DECC, EU, Funding, Legislation
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