Saffery Champness: 'RHI rates for sub 1 Mw installations on farm and estates will stimulate demand for biomass'

The regulations governing the Renewable Heat Incentive (RHI), the new Government financial incentive scheme worth £860m to promote the uptake of renewable heat, were approved by both Houses of Parliament and by Scottish Ministers on Friday 10th November 2011. Jamie Younger, a partner of Saffery Champness Renewables Group, says: “This was the last piece in the jigsaw to be put in place for the RHI scheme which will provide a subsidy per kWhth of eligible renewable heat generated from accredited installations and a subsidy payable to producers of bio-methane for injection.

“However, the payment rates proposed for large schemes (over 1MW) have had to be reduced because the European Commission felt they constituted an unfair subsidy. The payment level for these schemes has therefore been reduced from 2.7p per kWh to 1p per kWh, although the rates for schemes below 1MW remain unchanged. It is expected that the RHI rates for these sub 1 Mw installations (which is the size that many farms and estates will be looking at), will stimulate significant uptake in demand for biomass heating systems, and perhaps some of the other technologies."

Saffery Champness notes that the Government has appointed Ofgem to administer the RHI scheme following its experience in delivering similar environmental schemes, such as the Renewables Obligation and the Feed-in Tariff scheme. Ofgem are still aiming to open the RHI for registration at the end of November with first payments being received 3 months after registration is submitted.
 “Initially the scheme will support non-domestic renewable heat installations and the production of bio-methane for injection in the national gas grid”, says Jamie Younger, who adds:

“The Government aims to introduce support for the domestic sector in phase two of the scheme. In the interim, the domestic sector may be eligible for the Renewable Heat Premium Payment (RHPP), which is a separate, complementary grant scheme to the RHI”.

The following renewable heat technologies will be supported initially:

• solid biomass and solid biomass contained in municipal waste (including CHP),
• ground and water source heat pumps,
• geothermal (including CHP),
• solar thermal (at capacities of less than 200 kWth),
• biogas combustion (except from landfill gas but including CHP; at capacities of less than 200 kWth)
• biomethane injection.

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Shirley Mathieson, renewables partner of Saffery Champness Landed Estates & Rural Business Group, says: “Participants will also need to meet several other eligibility requirements including the need to demonstrate that the heat is used for an eligible purpose, that metering arrangements are appropriate, and that grants have not been received for certain purposes. Participants will be able to apply via the Ofgem RHI website from the start of the scheme, expected to be before the end of 2011”.

Saffery Champness is advising companies and landowners involved in the commercial production of heat through biomass, bio-methane and geothermal sources to seek professional advice now to maximise the incentives in the RHI scheme and assess their tax planning in the light of the available grants and subsidies.