Wood Pellets get budget boost

Biomass and wood pellet sector gets UK budget boost

Now that we know the Renewable Heating Initiave (RHI) is being continued, and with a budget that will allow the entry of many thousands of new projects, there is some certainty in the U.K. biomass heat sector for the foreseeable future.

Back in September, there was an uncertain tone, thanks to the lack of policy certainty around renewables in the United Kingdom, and the swinging cuts that had been made to various support schemes in the preceding months.  At the time, the biomass heat sector was lobbying hard to avoid falling foul of the knife being wielded by U.K. Treasury in the run-up to the Comprehensive Spending Review, the process government uses to set its budgets for the remainder of the parliament.

The biomass heat industry let out a collective gasp on the day of the CSR. The Renewable Heat Incentive had been retained, but with what appeared to be just £10m ($15.1 million) of funding for new projects in the 2016-‘17 financial year. That’s enough for just a few hundred new installations to join the RHI. This caused 24 hours of concern and consternation—funding just a few hundred more schemes spread across an industry that has been averaging 250 systems a month since the RHI was launched in November 2011—sounded very much like a death knell for biomass heat. Thankfully, the figures in the original announcement were wrong, and the RHI budget has actually been increased by £210m ($318.3 million), to £640m ($940 million), which includes existing commitments in the 2016-‘17 financial year, triggering sighs of relief all round.

Now that we know the RHI is being continued, and with a budget that will allow the entry of many thousands of new projects, there is some certainty in the U.K. biomass heat sector for the foreseeable future. That said, there were accompanying announcements about reform to the RHI, which has seen its fair share of gaming over the past four years. Thanks to loopholes in the RHI scheme design, some unscrupulous suppliers and heat customers have taken advantage of opportunities to create projects with disproportionately high rates of return. The language of DECC—the scheme funder—indicates what many of us have been hoping for: that the days of RHI gaming are numbered.  We’ve been told that radical reform and bold changes are in the cards, all to ensure that the RHI delivers the best value for money possible for the U.K. taxpayer.

We still have a long way to go to reach our legally binding carbon reduction targets in the U.K., and as heat is the largest contributor to our national CO2 emissions, decarbonizing the sector clearly remains a priority for our government. The DECC is now very much in information gathering mode, with civil servants actively polling the views of industry to help shape the changes to come. Ultimately, all responsible participants in the biomass heat sector want to see us deliver value for money, as only by doing this can we ensure that government has the confidence to continue supporting the industry for as long as it needs to become sustainable. Improving quality and efficiency through the development and enforcement of standards is seen as critical, as are moves to provide the industry with more than just a cash injection. The various forms soft support needed to help the industry professionalize and grow are high on our list of priorities for the coming years.

As Adam Sherman, Vermont-based Biomass Energy Resource Center’s executive director recently commented in his talk to the 2015 Wood Heat Association conference in Bristol, the way to ensure a biomass heat sector grows as we all would like it to, is to use “silver buckshot” rather than a silver bullet. We’ve tried the silver bullet over the past four years and made good progress, but the time has certainly come to break out the big guns now that we’ve dodged treasury’s knife.

Author: Neil Harrison
Board Member, Wood Heat Association
neil@reheat.uk.com

Changes affecting the Renewable Heating Incentive (RHI)

New biomass sustainability requirements

  • The UK government will introduce new sustainability criteria for installations using biomass fuels under the Renewable Heat Incentive on 5 October 2015.
  • From 5 October 2015 biomass fuel used by RHI participants must be sourced from a supplier on the Biomass Suppliers List – http://biomass-suppliers-list.service.gov.uk/ at the time the fuel was purchased. This is a list of suppliers of sustainable biomass fuel.
  • It is advisable to check whether your fuel supplier is registered on the Biomass Suppliers List before entering into any long term supply contract.
  • Not all fuels supplied by suppliers on the BSL are sustainable as a supplier may supply more than one type of fuel. You should  check with your supplier, or prospective supplier, which of their fuels are registered

What could I earn using RHI?

RHI cash payments are made quarterly over seven years. The amount you receive will depend on a number of factors – including the technology you install, the latest tariffs available for each technology and – in some cases – metering.

What technologies can I claim RHI support for?

  • Biomass (wood fuelled) boilers
  • Biomass pellet stoves with integrated boilers providing space heating
  • Ground to water heat pumps
  • Air to water heat pumps
  • Solar thermal panels (flat plate or evacuated tube only) providing hot water for your home

Air to air heat pumps, all log stoves, pellet stoves without back boilers and hybrid PVT are not supported by RHI.

Water source heat pumps  can potentially be eligible for the Domestic RHI – they are included in the definition of a ground source heat pump.

Certain cooker stoves and certain high temperature heat pumps may also be eligible.

All systems must also be listed on the Domestic Renewable Heat Incentive Product Eligibility List – https://www.ofgem.gov.uk/publications-and-updates/domestic-renewable-heat-incentive-product-eligibility-list-pel

Who can apply for RHI?

  • Owner-occupiers, self-builders, private landlords and registered providers of Social Housing who have installed an eligible technology can apply for RHI support (provided they meet eligibility criteria).
  • Single domestic dwellings are covered.
  • RHI support is not available to new build properties (other than self-build projects).

You must apply within one year of the commissioning date of your system.

How do I apply for RHI?

You can apply for RHI via Ofgem’s website . Providing you have all the relevant information to hand and your application does not require a manual review, you should receive an immediate decision. To check if your application will need manual review, visit https://www.ofgem.gov.uk/environmental-programmes/domestic-renewable-heat-incentive

If you are unable to apply online then you can contact Ofgem via their Domestic RHI Applicant Support Centre on 0300 003 0744 Monday to Friday from 09:00 to 17:00.

To apply you will need

  • MCS installation certificate number for the heating system
  • Energy Performance Certificate (EPC) number
  • Green Deal advice report number (unless you are a self-builder or a social landlord)
  • Bank details

Tariffs

The table below summarises the latest tariffs available for each technology:

Air source heat pumpBiomassGround source heatpumpSolar thermal
Tariff (p/k Wh renewable heat) (Applications submitted between 1 Oct. 2015 and 31 Dec. 2015 incl.)7.426.4319.1019.51
  • These tariffs have been set by the UK Government at a level designed to compensate for the difference between costs of installing and operating renewable heating systems and fossil fuel systems, including non- financial costs such as disruption, on the basis of 20 years of heat produced. Fossil fuel costs used are those for off-gas households.
  • Ofgem will make payments quarterly for seven years. Normally the heat required to heat the property will be deemed (estimated) and payments will be based on this amount.
  • Biomass –  renewable heat generated by biomass will be based on an estimated heat demand from an EPC
  • Heat pumps –  renewable heat generated by heat pumps will be based on an estimate of the heat demand from an EPC combined with an estimate of the heat pump’s efficiency
  • Solar thermal systems – renewable heat generated by solar thermal systems will be based on the estimate of system performance completed as part of a Microgeneration Certification Scheme (MCS) installation.

Elements affecting payment

  • Once you are receiving domestic Domestic RHI payments, the rate you get will change annually in accordance with the Retail Price Index (RPI).
  • The RHI scheme uses a ‘degression’ system designed to manage the scheme budget available for the domestic RHI. From time to time, the tariff for a technology will be reduced (for new applicants only) if the total amount being claimed in total for that technology reaches a certain level. Anyone who is already claiming domestic RHI will not have their tariffs reduced through degression.
  • If you have already received a grant from Government or public funds (such as the Renewable Heat Premium Payment), then the amount received will be taken into account when calculating your domestic RHI payments.