Renewable heat incentive details announced

New supports aim to help Northern Ireland reach 10 per cent renewable heat by 2020.

Energy Minister Arlene Foster has announced details of a renewable heat incentive (RHI), expected to be introduced this autumn. The incentive is part of the Executive’s £25 million investment up to 2015 in the sector.

Once enabling legislation is passed by the Assembly, non-domestic producers of renewable heat (e.g. businesses, industry, public sector, charities), including district heating schemes and biomethane producers will be able to benefit. The domestic sector will be able to avail of the RHI’s second phase, due next summer.

Four tariff categories will be included: biogas injection; biomass boilers; ground source heat pumps; and solar thermal. Installations commissioned from 1 September 2010 can apply for support from the scheme, which Great Britain’s energy regulator Ofgem will administer.

DETI is introducing supports because renewable heat technologies are currently unable to compete with fossil fuel alternatives due to higher capital costs, and a lack of understanding and awareness of the technologies among most consumers.

The RHI aims to compensate investors for the additional costs (e.g. capital investment, fuel and operating), while the tariff setting methodology includes provision for a rate of return to stimulate interest in a developing, unknown marketplace.

Tariffs under the scheme will be lower than those offered in Great Britain but DETI has justified this on the basis of Northern Ireland’s high dependence on oil for heating fuel, in contrast to Great Britain’s reliance on gas. As oil is more expensive than gas, the department says, less incentive is required to switch to renewable heat.

Last year’s RHI consultation document stated that oil sources 77 per cent of heat demand in Northern Ireland, with gas accounting for 17 per cent. In Great Britain, gas provides 68.8 per cent demand, with oil accounting for 10 per cent.

Bioliquids will not be covered by the scheme’s first phase despite their valuable uses in renewable heat generation and combined heat and power (CHP). DETI has said that it needs to address the question of potential competition for feedstocks with other sectors, and sustainability reporting commitments under the 2009 Renewable Energy Directive. They will, however, be considered for the second phase.

Meters will be required to avail of the incentive as (quarterly) payments will be calculated by multiplying the actual metered heat output of the technology with the designated tariff. Tariffs will be adjusted with inflation. The scheme will be open to new installations until March 2020, and will last for a technology’s lifetime, up to a maximum of 20 years. The RHI will be reviewed during the 2014-2015 financial year.

A second phase will cover other technologies and sectors not currently covered (i.e. domestic installations). In preparation for this, the department will examine the need for a specific tariff for deep geothermal heating and supports for large biomass installations.

Announcing details of the scheme, Foster said: “The development of this sector is important in the realisation of a more diverse, secure and competitive heating market in Northern Ireland.”

In 2010, 1.7 per cent of Northern Ireland’s heat demand came from renewable sources. Northern Ireland’s Programme for Government (2011-2015) sets a target of 4 per cent renewable heat by 2015 as an interim goal towards 10 per cent by 2020.

A renewable heat premium payment (RHPP), launched in May, exists to help domestic householders with the cost of installations. Householders with renewable heat technologies installed since 1 September 2010 will also be able to apply for the new RHI, once extended to the domestic sector. The incentive will be reduced for those who have received the RHPP, to factor in the grant paid.