March 27, 2012

Low Carbon Heat Plans Revealed

Press Ref: 2012/029

26 March 2012

  • £25m for second phase of household voucher scheme 
  • Cost control plans set out for non-domestic renewable heat
  • Timetable revealed for longer term support on household renewable heat

A second phase of the Renewable Heat Premium Payment (RHPP) scheme, which gives money off renewable technologies like biomass boilers, air and ground source heat pumps and solar thermal panels, will be launched on 2nd April this year and will be worth £10m more than the existing scheme.

The new money will help the RHPP go further including an £8m competition for communities to apply for grants to encourage community groups to install renewable heating. This will be on top of the existing voucher scheme which will be mainly focused at around 4 million homes in Great Britain which are not heated by mains gas, who have to rely on higher carbon forms of heating which also tend to be more expensive than gas such as heating oil and electric fires. There will also be a £10m competition for social landlords.

Climate Change Minister Greg Barker said:

“The new Renewable Heat Premium Payment scheme will be bigger and better than the original.

“We’re increasing the budget from £15m to £25m, for the first time we’re including community schemes and there’ll be more social housing schemes that can benefit. Those people who are reliant on expensive oil or electric heating should consider applying to the Premium Payment scheme to cut their fuel bills in the long term.

“Generating heat from renewables will not just cut carbon emissions, it will also help create a market in developing, selling and installing kit like solar thermal panels or heat pumps.”

The scheme will continue to be administered by the Energy Saving Trust.

Karen Lawrence, Energy Saving Trust Director of Delivery, said:

“Our aim is to empower householders by giving them the right tools and advice to help them reduce both their energy usage and bills.

“Without a doubt, one of the main barriers that prevents people from taking the plunge is the up-front capital cost. The announcement of the second phase of the government’s Renewable Heat Premium Payment (RHPP) scheme not only offers homeowners help with the initial costs, but it also provides them with access to heat technologies that can help them to reduce their energy bills, year on year.

“We are encouraged by the interest in the first phase of the schemes – particularly the social landlord scheme – and look forward to building on this.”

The coalition remains committed to providing longer term support for renewable heat technologies in households and has published an update to parliament today. Proposals will be consulted upon in September at which point a firmer timetable for the launch of a scheme will be published, although it is anticipated this will be from summer 2013. Given this, the tariffs set out by the previous government in the consultation document in February 2010 should not be used as a basis for predicting what future support may be.

Cost control plans

Also today, plans to manage the budget for the Renewable Heat Incentive (RHI) for commercial, public sector, industrial and community-scale installations have been revealed to ensure its long term success. The proposals include a package of measures to be in place by the end of this financial year and a plan to control spending in the interim.

The £860m RHI opened in November last year to make it more financially attractive to install low carbon heating systems like heat pumps, biomass boilers or solar thermal panels.

Greg Barker said:

“Putting in place cost control measures for the Renewable Heat Incentive is the prudent thing to do, given this is millions of pounds of taxpayers’ money at stake and taking on board the lessons learned from the Feed-in Tariff scheme.

“We will ask industry for its views in the summer and in the meantime will arrange for interim measures to be in place to manage the scheme’s budget. Looking at the scheme’s current spending it’s unlikely we will need to use these short-term measures, however Ofgem will hold a series of conferences for potential applicants over the next few months so it is right for us to be cautious and have the ability to act should we need to.

“Renewable heat is a largely untapped resource and an important new green industry of the future. It’ll help the UK shift away from fossil fuel, reducing carbon emissions and encouraging innovation, jobs and growth in new advanced technologies.”

DECC will launch a formal consultation in the summer to explore different policy options to ensure the RHI stays within its budget. This could include a system to lower tariffs as the scheme grows. The plans would then be in place by the end of the financial year. This consultation will also include amendments to the existing scheme covering air quality and biomass sustainability issues as outlined in the original RHI Policy document.  As with the proposals above we hope to lay these in Parliament in November.

In the meantime, DECC is launching a consultation today proposing an interim measure to keep the RHI within the budgetary limits set by the Comprehensive Spending Review. This includes the possibility of giving industry one month’s notice to temporarily suspend the scheme to new entrants if 80% of the available budget is expected to be spent. In the interests of transparency and ensuring industry is not taken by surprise, regular updates on the budget spend will be published. These measures will be in place as early as the summer and will last until the longer term cost control system is in place.

DECC will consult in September this year about increasing the number of technologies eligible under the industrial RHI with a view to implementing the plans by summer next year.

DECC will also set out shortly its long term plans to decarbonise the heat sector when it launches its Heat Strategy.

Notes for editors

  1. The new RHPP will provide
  • Around £10m – Social housing competition. Details about how to apply will be revealed when it’s launched at a later date. DECC will run a series of awareness seminars to improve the quality and quantity of bids.
  • Around £8m – Communities competition. Details about how to apply will be revealed when it’s launched at a later date.
  • Around £7m – Household voucher scheme, this money will also include costs to cover technical monitoring and evaluation. Pre-registration for the household voucher scheme will begin on 2nd April, with applications open on 1st May. Vouchers will be worth the same and cover the same technologies as the existing scheme
    • Ground Source Heat Pump – £1250 grant (for homes without mains gas heating)
    • Biomass boiler – £950 grant (for homes without mains gas heating)
    • Air source heat pump – £850 grant (for homes without mains gas heating);
    • Solar thermal hot water panels – £300 grant (available to all households regardless of the type of heating system used.

In order to help increase the rate of meter installation relative to the first scheme, a small change will be made to the voucher payment process. For heat pump installations, all householders will receive 80% of their voucher value when a valid claim is submitted, together with a signed checklist from the installer confirming the installation can be fitted with a meter. Householders will receive the final 20% following a visit from the metering team to check that the installation is really “meter ready” and install a set of equipment, or if their installer has been trained to install monitoring equipment and installs it on EST’s behalf.  If a householder has indicated that they are not meter ready, they will receive the final 20% of the grant at the end of the scheme. Installations of biomass boilers and solar thermal panels are not affected.

2. As of 20th March 2012, under the existing RHPP scheme

  • 6412 vouchers to households have been issued with £4.8m allocated.
  • 37 social housing schemes have registered to the competition installing around 1100 installations with £4.2m allocated.

3. The RHI consultation into interim cost control measures can be found here on the DECC website.

4. Update to parliament, “Departmental note: Support for renewable heat technologies in the domestic and non-domestic sectors”. [filetype:pdf filesize: 29.6Kb]

5.  We are intending on consulting on the longer term cost control measures over the summer.