The government has launched proposals to carefully manage the budget of its Renewable Heat Incentive (RHI) for businesses seeking to install green heating systems such as biomass boilers, but confirmed homeowners would be unable to take advantage of payments for another year.
The Department of Energy and Climate Change (DECC) yesterday published a short consultation proposing to introduce a temporary measure to prevent the £860m incentive scheme exceeding its budget.
The department wants to suspend registrations at one month’s notice once 80 per cent of the budget has been allocated. This measure is expected to be introduced in the summer.
DECC said it would then launch proposals to introduce a permanent cost-control mechanism by the end of the financial year, which could see tariffs fall in line with increased uptake.
Climate Minister Greg Barker said the measure is designed to avoid a repeat of the much-criticised solar electricity feed-in tariff situation, which saw DECC attempt to rush through deep cuts to the scheme when it came close to exceeding its budgetary limit.
The cuts were widely blamed for damaging investor confidence in the solar industry, as well as leading to bankruptcies and redundancies.
“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,” said Barker.
According to the latest figures from Ofgem, just 15 businesses have secured the RHI, but around 300 have applied. Barker said the government was unlikely to use the short-term spending cap, but was keen to take a cautious approach.
“Renewable heat is a largely untapped resource and an important new green industry of the future,” he said. “It will help the UK shift away from fossil fuel, reducing carbon emissions and encouraging innovation, jobs and growth in new advanced technologies.”
The government also confirmed it will delay the full-scale domestic RHI until summer 2013, and would instead inject an extra £10m into the budget for the Renewable Heat Premium Payment scheme (RHPP), taking it up to £25m. The scheme offers one-off payments for homeowners wishing to install green heating systems and is designed as a precursor to the full-scale domestic RHI.
DECC had been expected to launch the domestic RHI in October this year alongside the Green Deal loan scheme, but will now consult on new tariff rates in September, with a view to rolling it out from summer 2013.
A spokeswoman for DECC told BusinessGreen it was keen to ensure the domestic RHI was managed successfully, with the appropriate tariff levels in place.
She also downplayed concerns that a delay would put the brakes on the nascent market.