The proposed amendments to the RHI scheme are surrounded by some uncertainty due to a lack of clarity from the Department for BEIS regarding their implementation.
Below is a summary of when we expect things to happen, what is involved and what the current situation is.
When will the RHI amendments happen?
Following the publication of the consultation response in December, amendments were initially laid before Parliament last month but were withdrawn shortly afterwards to be re-drafted. The calling of the General Election has disrupted this process and therefore the amendments have not yet been laid before parliament. It is expected that they will take around 5 – 7 weeks to be approved once they are re-laid. However, there are only 6 weeks from the date of the election to the start of the summer recess. It is therefore possible that the amendments may not be approved until September, unless the new government prioritise these regulations.
What changes are contained in the amendments?
The relevant changes are as follows:
· Setting of new degression thresholds to match the new RHI budget
· Biomass (heat only) will be revised into a single tariff regardless of capacity
· The Tier 1 threshold to be raised from 15% to 35% duty
· Tariff rates to be set at T1 2.96p/kWh, T2 2.08 p/kWh (RPI corrected as of 1/4/17)
· No changes to biomass CHP tariff – remains a single tier at 4.29 p/kWh.
· Tariff guarantees to be introduced to allow projects to fix the RHI tariff rate once at the point of Financial Close. Open to biomass heat only >= 1MW and all biomass CHP
· The new biomass tariff and tiering arrangements will be applicable to new large biomass (1MW+) participants who enter the scheme now but the increased tariff will only apply from the date the regulations come into force. Participants will receive the existing tariff for heat generated before this point
What is the current position?
The current regulations will remain in force until the amendments are approved by Parliament.
The degression mechanism will continue based on existing thresholds and the next notice will be issued at the end of May to come into force on July 1st.
The RHI Monthly Budget Forecast figures published at the end of April, based on scheme uptake to the end of March, suggest the following:
Medium Biomass uptake is increasing and is approaching the degression threshold. A 10% reduction will potentially be imposed.
Large biomass is well below the degression thresholds.
Biomass CHP is well below the degression thresholds.
Further changes under discussion
Eligible heat use
Following the removal of support for drying digestate, the Department for BEIS is considering whether to continue to support wood chip drying as an eligible heat use. This is mainly due to concerns over circular schemes where chip is dried to fuel a scheme to dry chip. Other drying operations should not be affected.
Biomass CHP efficiency criteria.
There is a separate consultation underway considering increasing the efficiency criteria for biomass CHP to 20%. The current biomass CHP options at <5MW can generally achieve 5-9% electrical efficiency. If the 20% criteria is approved then the currently available technologies would achieve a pro-rata reduction in tariff 2.8-3.2p/kwh for 5 to 9% respectively (once amendments approved).