RHI capped at £70m for first year

If payments under the Renewable Heat Incentive (RHI) exceed £70 million, the scheme will be suspended until April 2013, Greg Barker has confirmed

The new cap will ensure the initiative, designed to encourage the uptake of renewable heat technologies, stays within budget and protect its existence in the long run, announced the energy minister.

Under the RHI, organisations installing devices, such as ground-source heat pumps, solar thermal panels and biomass boilers, can apply for payments of between 1.9p-8.5p for every kWh of low-carbon heat they generate.

The government has committed to providing £860 million of support under the initiative which launched at the end of November 2011. However, following the greater than expected take up of the feed-in tariff scheme for solar panels, which threatened DECC’s Treasury-imposed spending cap and resulted in a series of rapid changes to tariffs, the energy department launched a consultation in March outlining ways in which it could ensure the RHI stays in budget.

“We have learnt from our previous experiences and want to provide assurances to the market and the public that we are spending money on the RHI in a sustainable way,” confirmed Barker.

DECC has concluded that capping RHI payments for 2012/13 to £70 million, will ensure there is enough budget in 2013/14 to cope with new installations. The changes will mean that if DECC spending commitments under the RHI reach £67.9 million before the end of March 2013, it will it give just one week’s notice before closing the scheme for the rest of the financial year.

In a bid to prevent a shock closure of the scheme, DECC pledges to publish weekly updates on how much has been spent and provide an estimated suspension date before the final seven-day notice period.

DECC also reassured businesses wanting to apply for the scheme that the RHI is very unlikely to exceed the £70 million cap, with current estimates for the first full year amounting to just £42 million in payments.

The energy department has confirmed it will open another consultation in July on how it will keep the RHI on budget in the longer term.