The Department for Energy and Climate Change (DECC) announced on Friday 30 September that the Renewable Heat Incentive (RHI) subsidy scheme will be delayed for at least two months. This announcement came just hours before the scheme was due to be launched. The scheme had previously been delayed from its proposed summer launch date.
DECC attributed the delay to the European Commission’s concerns that the RHI’s Biomass tariff of 2.6p/kWh was too high. A spokeswoman for DECC stated: “We understand the EU will grant approval for the scheme as a whole, but it may be subject to reductions in the tariff available for large biomass installations”. State aid rules require the European Commission to approve any government funded program which allocates funds on a discretionary basis. Changing the tariff would require the RHI regulations to be amended and submitted to parliament for approval. Despite this delay the government contends that the scheme will still go ahead.
Paul Thompson, head of policy at the Renewable Energy Association stated: “this last minute announcement is desperately disappointing. The industry has been gearing up over the last six months to deliver on the government’s ambitious plans for renewable heat,”
“As heat demand is seasonal, delaying until the end of November will mean many customers will either put off a decision until next winter or buy a new fossil fuel boiler now, locking them in to higher carbon heat for years to come.”
He said the delay would further add to “low confidence levels” in the renewables industry as a whole, which he claimed had been fuelled by uncertainty over feed-in tariffs, the Renewables Obligation and the Renewable Transport Fuel Obligation. (www.letsrecycle.com)
Andy Johnston, chief executive of Local Energy, echoed these concerns stating: “After the feed in tariff changes this is yet another blow to councils’ low carbon plans. It’s important that DECC get it right this time.”
For carbon saving in the public sector, this delay is highly problematic. Organisations who have already invested in renewable heat generation could now face budgetary difficulties, having included the subsidy from the scheme in their accounting projections. Furthermore, organisations who were considering renewable heat generation may lose confidence in the viability of the scheme in the face of potential future problems.
At Local Energy we believe that central government has a clear role in incentivising carbon reduction in the public sector. Yet, when such schemes as the RHI suffer last minute setbacks, the resulting loss of confidence damages the attractiveness of future carbon reduction proposals. We hope that future carbon reduction incentives will be more properly scrutinised before launch dates are announced, to avoid confusion, cost and damaged credibility.