Where do proposed changes to the non-domestic RHI leave farms and businesses?

The Government’s recent announcement that it is proposing changes to the Renewable Heat Incentive (RHI) is causing a stir among the energy industry. The RHI was introduced in 2011 as part of the Government’s target of the UK sourcing 15% of its energy from renewable sources by 2020. While the Domestic RHI focuses on homeowners, the Non-Domestic RHI is geared towards business.

Down in the South West, the agricultural sector has been particularly keen to embrace the opportunities the RHI presents, particularly as so many farms are not on gas mains so have traditionally been reliant on oil, which suffers from fluctuating prices.

Put simply, the Non-Domestic RHI offers financial incentives to encourage more businesses to invest in green technologies, rather than relying on fossil fuels. If you fulfil the eligibility criteria, the Government gives you a fixed amount per kilo watt hour of energy produced over the next 20 years. It has been a success in terms of increasing uptake of green energy systems but the proposed changes will undoubtedly hit some parts of the energy sector hard – particularly biomass.

One of the key proposed changes is that food stock can no longer go into renewable energy. This means, for example, that a farmer cannot grow maize for fuel. Morally, I think this is the right thing to do and believe this will alleviate the negative image that biomass has suffered from, as a result of a minority of users growing crops specifically for burning.

Another potential change to the biomass tariff addresses an area that was previously open to abuse. Moving to one tariff for all new biomass boilers will remove the temptation for businesses to buy a bigger boiler than they need just to earn more revenue.

Unfortunately the proposed changes include removing solar thermal from the RHI. While this has had low take-up in the UK, it is a technology that is proving successful in Europe, Not encouraging take-up of solar thermal is a missed opportunity, especially as we have seen how well this is working in Austria and Germany.

Of course, the RHI is not the only consideration for businesses looking at green energy options. We know that planning applications for wind and solar projects are increasingly being rejected. Meanwhile, ground source heat pumps remain expensive and are often mis-sold.

All of this could leave farms and other businesses feeling they have nowhere to go, but there is some good news in all of this. The Government is increasing its RHI spend from £430 million in 2015/16 to £1.15 billion in 2020/21. This additional investment means that there are technologies that will continue to have attractive tariffs going forward. One of these is biogas, which not only includes anaerobic digestion, but also biomass gasification used in combined heat and power (CHP) technologies. Less well known that biomass boilers, these systems generate both heat and power by transforming biomass fuel into a gas.

Biogas tariffs remain attractive and the proposed changes include introducing a tariff guarantee, which will. We are early adoptors of this CHP technology and believe it will become increasingly popular as businesses recognise nothing else gives better returns.

We will be watching the outcome of this consultation closely so we can offer the most up to date advice to help you make the right decision and get the most out of your green energy investment.

 

Nathan Ward, Managing Director of Ignis Heat & Power, the Cornwall and Devon distributor for the ArborElectroGen®.