UK RHI reform met with mixed feelings for biomass

By Katie Fletcher | December 21, 2016

The U.K. Department for Business, Energy and Industrial Strategy recently announced changes to the renewable heat incentive in its response to the consultation that closed April 27 and attracted criticism for proposing to slash tariffs for biomass heat by 45 percent, which was projected by the government to lead to a 98 percent drop in installations.

According to the Renewable Energy Association, the new tariffs proposed by the government will be adequate to support domestic biomass deployment, however, small- and medium-sized projects under the non-domestic RHI will struggle as tariffs remain below what industry analysis has concluded is a viable level for widespread installation. The REA added that it’s unclear what the impact of these changes will be on large biomass installations, which the government is targeting for growth.

“The reforms made today to the Renewable Heat Incentive are an improvement to the earlier consultation and will go some way to grow an effective renewable heat sector in some cases to 2021,” stated Nina Skorupska, chief executive at REA. “As recognized in this consultation response, heat is a very complex issue and we need all technologies on board to achieve our long-term goals. Renewable gas, biomass boilers, solar thermal, heat pumps, heat networks, hydrogen and other technologies will all have a role to play.”

DBEIS stated in its response to the consultation that the reforms for biomass are intended to support further deployment where the technology offers best value for money and is likely to have a long-term role, such as in high-temperature industrial processes. The consultation proposed several changes to the existing non-domestic RHI scheme, including introducing tariff guarantees for large biomass boilers (above 1 MW in capacity) and large biogas plants (above 600 kW), which DBEIS stated are aimed at addressing the imbalance in spending on smaller-scale biomass systems under the RHI scheme to date.

Within the non-domestic RHI reforms, the three current biomass tariff bands will be replaced with one level of support for all new non-domestic biomass boiler deployment, which will be subject to tiering. Under this approach, each installation will be eligible to receive an initial higher ‘Tier 1’ tariff (2.91 pence per kilowatt hour (p/kWh)) for a given amount of heat use each year. Beyond this, further heat use will receive a lower ‘Tier 2’ tariff (2.05 p/kWh). Each plant will have a tier threshold equivalent to 35 percent of its load factor. The government’s consultation included that there will be no further changes specific to support for biomass combined-heat-and-power (CHP) as a result of the March 2016 consultation.

In regards to the domestic RHI scheme, the reforms introduce a cap to the annual payments for new domestic biomass systems to make sure owners of larger properties are not overcompensated. Also, there will be a slight increase to the tariff for new domestic biomass systems, increasing to 6.44 p/kWh (the current tariff is 4.68 p/kWh). Heat demand limits will be introduced to limit the level of annual heat demand in respect of which any household can receive support, with a cap of 25,000 kWh for biomass boilers and stoves.

“We welcome the increased tariffs for domestic biomass heat projects,” stated Julian Morgan Jones, chair of the Wood Heat Association in a release. “The government is recognizing the important role that biomass projects at the household level have played, and will continue to play, in the decarbonization of our heating system. Our hope is that these reforms will result in a surge of the growth of large biomass.”

Jones added that the picture for small- to medium-sized non-domestic projects is bleak. “Small- and medium-sized projects, given these tariffs, will almost completely end,” he said. “The most apparent losers of this policy will be rural and off-grid schools, hospitals, and council estates, which is where most of these systems have been deployed.”

For biogas and biomethane, DBEIS believes the reforms will vastly improve the carbon cost-effectiveness of further support. New plants will be required to produce at least half their biogas and biomethane from waste-based feedstocks to receive support for all their production. DBEIS noted there will be a slight increase in tariffs for biomethane injection, and the reformed scheme will reverse any reductions to the tariff in support of new biogas plant that occurred between the date of the publication of this document and the date on which the regulations come into force.

“The biomethane tariff reset is most welcome,” said John Baldwin, chair of REA’s biogas group. “Government has acknowledged the strategic role biomethane can play across heat and transport and the resetting of the biomethane tariffs should enable continued deployment of the most competitive projects.”

Baldwin added, “Unfortunately, the biogas combustion tariff isn’t likely to enable many new biogas CHP projects to come forward. With the closure of the RO, and rapidly falling tariffs for the Feed-In Tariff, this sector still faces many challenges.”