Chancellor Extends RHI Scheme with Further Net-zero Commitments
Before you read on: From March 2022, the Renewable Heat Incentive will be closed to new applications and will be replaced by the Clean Heat Grant
The government has announced an extension to the Domestic Renewable Heat Incentive (RHI) to 31st March 2022 as part of Chancellor Rishi Sunak's first budget.
The Domestic RHI scheme was introduced by the UK government in April 2014 to incentivise homeowners to embrace renewable heating technology and reduce their carbon emissions. Under the scheme, homeowners who install a renewable heating system could be entitled to 7 years of cash payments from the UK government for the units of energy generated by their renewable heating system (measured by a meter).
The scheme was due to finish in March 2021, but the Chancellor's budget confirmed that the Domestic RHI will continue for a further 12 months. The budget also confirmed that a new allocation of flexible tariff guarantees to the Non-domestic RHI would be introduced in March 2021. This is to “provide investment certainty for the larger and more cost-effective renewable heat projects".
Renewable heating systems which are eligible for the RHI are:
- Biomass Boilers (wood-fuelled)
- Biomass Pellet Stoves with Integrated Boiler
- Ground to Water Heat Pumps
- Air to Water Heat Pumps
- Solar Thermal Panels (flat plate or evacuated tube)
For more information on the RHI, click here.
The path to net-zero
The budget also outlined several other programmes and policies designed to enable us to reach net-zero emissions by 2050 and how our home heating systems will be affected. Home heating systems of the future are likely to be primarily a mix of green gas, heat pumps and heat networks.
Low Carbon Heat Support Scheme
The installation of heat pumps and biomass boilers will be supported by a Low Carbon Heat Support Scheme. A consultation period will explore how such a scheme would help households and small businesses invest in heat pumps and biomass boilers. It will be backed by £100 million of new Exchequer funding.
Green Heat Networks Scheme
The government has committed £270 million to a new Green Heat Networks Scheme which would enable new and existing heat networks to be low carbon, connecting to waste heat that would otherwise be released into the atmosphere.
Carbon Capture and Storage (CCS)
A new CCS Infrastructure Fund of at least £800 million will help to establish carbon capture and storage (CCS) in at least two UK sites by 2030.
Green Gas Levy
There will also be a consultation on introducing a Green Gas Levy to fund biomethane production. The aim is to increase the proportion of green gas in the grid.
The Future Homes Standard
The government has committed to the Future Homes Standard, i.e. improving the energy efficiency and installing low-carbon heating in new build homes. A consultation on how to achieve this ended in February 2020 and the government is yet to announce its plans. The Chancellor has been criticised for not addressing the Future Homes Standard, including how we will improve insulation on 40 million homes. According to the government, this will be addressed in November when the Treasury’s reviews the net zero emissions policy.
Prior to the budget, the BEIS announced £90 million which would be primarily invested in hydrogen production, distribution and storage as well as several other small-scale renewable energy projects. Specifically, £70m will also be used to develop technology which will harness offshore wind energy from off the Grimsby coast to power electrolysis in order to produce hydrogen. The funding will be used to build two new hydrogen production plants which will provide 200,000 homes with clean heating energy. The first hydrogen production plant will be built on the banks of the River Mersey with the second planned for Aberdeen in Scotland. It is part of a £500m innovation fund intended to tackle factors influencing climate change.
Hydrogen is a fuel which, unlike the natural gas we currently rely on from the national grid, does not emit carbon when burnt. Many experts believe that gradually replacing the natural gas with hydrogen will enable homeowners to keep their existing gas boilers, avoiding the expense and inconvenience of changing their heating system for an unfamiliar renewable technology. Find out more about hydrogen boilers here.
What has been the reaction?
This budget has been met with mixed reactions from the energy industry and environmentalists. There are plenty of green measures and investment into tackling climate change, including £1 billion investment into energy research and development, reducing taxes on electricity which is generated from renewable technology, a commitment to plant 30,000 hectares of trees over five years and a new tax of £200 per tonne on plastic items containing less than 30% recycled plastic.
However, these measures come alongside other contradictory moves such as developing more roads, freezing fuel duty and removing the tax break on red diesel for industrial vehicles (excluding agriculture and rail).
Rebecca Newsom from Greenpeace, said: “The Chancellor has completely missed the opportunity to address the climate emergency. He’s driving in the opposite direction.”
Friends of the Earth’s head of policy, Mike Childs, commented: “This Budget contains a massive road-building programme which completely destroys any pretence of UK government leadership ahead of this years’ crucial climate summit. Funding for cleaner cars, EV [electric vehicle] charging, action on plastics and more trees are just a few green sprinklings on a truly awful budget.”