AFTER some delay, the UK Government has announced its package of changes to the Renewable Heat Incentive – the five-year-old scheme created to encourage investment in renewable heating technologies by paying both domestic and commercial properties a cash tariff per unit of green heat used.

But while the announcement was held up by wider political goings-on, the implementation date has not, and the biomass heating sector is now reeling from the news that as of September 20 – next Tuesday – the sweeping changes will take effect.

Savills Energy's Adam Baxendine commented: “In order to benefit from the current rates, a renewable heat installation will need to be commissioned and application submitted to Ofgem by September 19, otherwise the new rates will apply, which will be higher in a number of cases. This may catch some developers and landowners by surprise if they are in the middle of installing renewable heating technologies."

The RHI changes are as follows:

- Alignment of the non-domestic biomass tariff – tier 1: 2.96p/kWth, tier 2: 2.08p/kWth – and changes of load factor from 15% to 35%;

- New degression triggers until July 2018;

- Domestic demand limits for domestic biomass, Air Source Heat Pumps, and Ground Source Heat Pumps;

- New tariffs for domestic RHI, including biomass plants to 6.54p/kWh, ASHPs to 10.18p/kWh, GSHPs to 19.86p/kWh, and solar thermal plants: 20.06p/kWh.

Speaking from top Scottish renewable heat installer VG Energy, managing director Steven Rawding welcomed the long awaited RHI reforms, saying that the changes would promote wider access to the scheme, and improve its affordability by reining in its costs.

He also said that the tightened RHI would offer the taxpayer better value for money, by maximising the benefits of the scheme including carbon abatement and renewable heat generation, while driving cost reductions and innovation in technologies to help build markets that are sustainable in the future.

The robust scheme redesign, said Mr Rawding, dealt with existing "perverse incentives" and addressed overcompensation.

"The non-domestic RHI has largely supported agricultural and leisure sectors to date, mainly with solid biomass technologies, and the domestic scheme large houses with high heat demands," he observed. “The signs are that we are now moving on to another stage of development, with energy intensive industries and businesses finding that the figures add up for their green energy plans and more district heat networks looking to invest in renewable technologies.

"Decarbonisation and an energy system that is secure, affordable and clean will see the support fund treble from £430million in 2016 to £1.15billion in 2021."

But whilst the reforms "flatten the RHI rollercoaster", Mr Rawding said the downstream UK renewable sector was disappointed that the implementation had been announced on September 1 for amendment on Sept 19, whilst suppliers and clients had been aiming to complete current projects by October 1, with clients financing these projects based on the previous rates which were expected to remain until September 30.

"Once again suppliers will have to pick up the pieces, try to make the impossible possible and will probably be overly scrutinised in the process," he said. "The Department for Business, Energy and Industrial Strategy and Ofgem have not got to grips with the fact that renewables clients are investing life savings or securing asset finance based on current rates and that even previous one month notice periods for digression were near impossible to work with, as the average install timescale of large projects tends to be 8-16 weeks.

"Surely that timescale should be factored into any timetable for change?”

Speaking from Dunster Biomass Heating in Forres, Alasdair Peppe described the changes as a "welcome end to a period of uncertainty", even though he agreed that the final speed of implementation had come as something of a shock.

"We are cautiously optimistic about the long term outlook for biomass," said Mr Peppe. "In particular, the new subsidy rates are a boon for small (sub 200kW) and large (over 1MW) biomass installations both in terms of the subsidy per kWh of heat produced and the number of kWh per year which will attract the higher level of subsidy.

"The removal of artificial distinctions between different sized boilers means that people are now free to size systems based on actual heat requirement rather than being encouraged to install particular sizes of boilers to access the highest subsidies," he explained.

"Biomass heating continues to provide excellent value for money for the government in its efforts to cut CO2 emissions. For organisations with a significant heat demand who are off the mains gas grid, biomass heating installations still offer generous returns on investment as well as encouraging self-sufficiency and cutting CO2 emissions.

"The new subsidy rates will make well designed installations cost neutral to run," insisted Mr Peppe. "There is no longer an incentive to generate more heat than needed, but where there is a need for heat, it remains the cheapest option available. Quality design and maintenance pays dividends as system efficiency and ease of use are more important when the financial returns are not so great."

He added that some existing biomass installations might now have to be improved, to make them more efficient, more reliable and easier to use – not least becauise many were put in 'very hastily' in an attempt to access the best subsidy rates. "Now is a good time to consider an upgrade to ensure they work well for the remainder of their economic life."