The Legislation Behind The Tariffs
The main legislation covering the Feed-In Tariffs and the Renewable Heat incentive was passed by Parliament in 2008 within the Energy Act.
After a public consultation, the Government published its proposals for the Feed-in Tariffs in February 2010.
If you want to see all about how the legislation evolved and access all the background documents, go to the Feed-In Tariffs website.
Renewable Heat Incentive
Also in February 2010, the government began a consultation on the Renewable Heat Incentive which closed on 26th April 2010. The Government then delayed any further announcements until the Comprehensive Spending Review in October. Whilst the RHI was given the green light, it was reduced in scope by 20% and will now be paid for out of the public purse rather than from a levy on heating bills as originally intended. The go live date was also pushed back by a couple of months to June 2011.
If you want to see all about how the legislation evolved and access all the background documents, go to the Renewable Heat Incentive website.
Overall verdict: Some welcome improvements
We are pleased to see that several of the recommendations we made in our response to the consultation have been accepted.
Though the Government could have done more, especially for existing systems, the tariffs should now prove a substantial incentive to household and many business energy users.
Higher tariff levels
Some of the proposed tariff levels have been raised, especially for systems at the household scale. The tariff for small scale PV has been raised from 36.5 to 41.3 p/kWh, and there have similarly been increases for small-scale hydro and wind.
Unfortunately biomass tariffs have now been omitted so biomass power generation will now be rewarded only under the Renewables Obligation.
The Government says that while the tariff levels are designed to give a return of up to 8%, the benefit of index linking may take this up towards 10%. Private customers have the added benefit of the income tax exemption.
The generation tariffs are to be index-linked to the retail price index, as we had proposed, and so will the export tariff.
The price floor for exports has been reduced to 3p/kWh. However the ability to opt out of this 'minimum level' and negotiate prices with energy suppliers is now no longer a one-off choice - you can decide annually. We will therefore add export price reviews to our tariff management service.
As we suggested, the Government has deferred the start of degression until year three (as whown in the table below. They have also made it clearer. We reconfirm that the tariff you get is fixed at the time the system is installed and then adjusted only for inflation. It's only systems installed in future years which get a lower tariff.
Sadly these remain ineligible, except those transferring from the Renewables Obligation (at the fixed rate of 9p/kWh). The Government has also ruled out refurbished and re-commissioned systems from being eligible.
The Government's wording on treatment of existing systems is as follows:
"Many consultees disagreed with this. However, we continue to believe that allowing all existing installations access to FITs would not only increase the overall costs of the scheme but would not encourage additional generation. We therefore confirm that we will not be allowing FITs for microgeneration installations completed before 15 July 2009 that had not applied for accreditation under the RO before this date.
Refurbished and second‐hand installations
... we will only allow new equipment to access FITs support ...
... refurbished installations will not be eligible for FITs.
We will keep this issue under review and consider whether or not there are merits to allowing renovated or refurbished technologies to receive FITs support in the future, bearing in mind the different costs and the fact that equipment may have received other financial support through its life."
The consultation was published on February 1st, 2010. It proposes paying a 'tariff' to producers of renewable heat at the levels shown in the table below.
The consultation was accompanied by further documents on:
- The design of the RHI
- Costs of biomass
- Combined heat and power
The design broadly follows that of the Feed-in Tariffs for electricity but there are some particular variations for the Renewable Heat Incentive as summarised below.
The proposed tariff levels are shown in the table below. The government says these have been calculated to give a return on investment of 12% (except solar thermal, which is lower), so are generally more generous than the Feed-in Tariffs.
Most renewable heat sources are eligible, but not open fireplaces or biomass stoves. The use of liquid biofuels is quite restricted (see the section on 'bioliquids' on page 31 of the consultation).
There is more variation by technology (see table below) than in the FITs.
Where the money comes from
The Government now believes that levying the money on resellers of heating fuels may not be the most appropriate approach and will introduce measures in this year's budget to adjust the approach originally incorporated in the Energy Act 2008.
Metering and 'deeming' - the energy outputs on which tariffs are calculated
Put simply, they propose to meter the heat output of large systems. For household-scale and small systems the proposal is to calculate (deem) what that installation should produce to heat a well insulated building and to pay the tariff on that basis. That should encourage beneficiaries to adopt good energy efficiency standards too.
The Government consultation
This closed on 26th April 2010. We submitted our response and still await the Government's response to the consultation!