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Fresh changes to renewable heat subsidies

The government has announced new changes to the Renewable Heat Incentive subsidy scheme for a range of technologies, including a boost for heat pumps and cuts for biomass boilers.

The government has announced new changes to the Renewable Heat Incentive (RHI) subsidy scheme for a range of technologies, including a boost for heat pumps and cuts for biomass boilers.

The RHI scheme was introduced to encourage homes and businesses to move from conventional heating to low carbon alternatives by offering a 20-year subsidy for eligible technologies.

The new changes, which followed a public consultation, aim to better incentivize the technologies that the government sees as more strategically important for the UK in the long-term.

Final reforms

The final reforms are less drastic than original proposed in 2015, but represent a significant shift away from supporting small biomass boilers, which have dominated the scheme to date.

Instead, support will be refocused towards heat pumps and larger biomass projects. 

The government also decided to leave subsidies for solar thermal unchanged. It has originally proposed to remove the technology from the scheme completely, but the move faced stiff opposition from industry.

Biomass

The biggest reform to the scheme is to replace the current tariff banding structure for non-domestic biomass heating technologies with a single tariff band for small (less than 200kW), medium (200kW-1MW) and large (more than 1MW) projects. 

In practice, the move represents a significant cut in support for small and medium sized biomass projects.

Many local businesses have already benefitted from subsidies for biomass boilers, Bury-based Faith in Nature, Oldham-based Axiom Displays, and Crystal Doors in Rochdale.

Large projects

To incentivise larger heating projects by providing investors greater certainty earlier in the project cycle, tariff guarantees will be introduced for large biomass (more than 1MW), biogas (more than 600kW) and ground source heat pump (more than 100kW) projects. 

All sizes of biomethane, biomass-powered combined heat and power (CHP) and deep geothermal heat will also benefit from tariff guarantees.

Meanwhile, new biogas and biomethane installations will only receive full tariff support if at least half of the biogas or biomethane comes from waste-derived feedstock. This is to help divert wastes from landfill.

No tariff reductions will be made to air or ground-source heat pumps or solar thermal technologies.

‘Getting heat right’

Speaking at an industry event in December, Baroness Neville-Rolfe, minister for business, energy and industrial strategy, said there were “important commercial benefits for businesses in getting heat right”.

“[Businesses] can capture heat which would otherwise be wasted – from industrial processes and cooling of data centres for example. Heat networks can utilise this otherwise wasted energy to heat offices, schools and hospitals. Businesses can reduce the amount of heat that is lost from their operations and that saves money”, she said.

Nina Skorupska, chief executive of the Renewable Energy Association (REA), said: “The reforms made to the RHI are an improvement to the earlier consultation and will go some way to grow an effective renewable heat sector in some cases to 2021.”

The announced changes will be implemented in spring.