The Renewable Heat Incentive (RHI)

The desire to increase renewable energy consumption is shared across the European Union (EU), with the 2009 Renewable Energy Directive (RED) setting a binding target of 20 per cent of the EU's energy consumption coming from renewable sources by 2020. The UK share of this target commits us to consuming 15 per cent of our energy from renewable sources by 2020.

The Government is committed to the ambition that by 2020, 12 per cent of heating can come from renewable sources. Only around one per cent of heat in homes currently comes from these sources.

The Renewable Heat Incentive (RHI) will help drive a significant increase in heat pumps and renewable heat and will help accelerate deployment by providing a financial incentive to install renewable heating in place of fossil fuels.

Heat pump technologies and systems will help the Renewable Heat Incentive save up to 44 million tonnes of carbon (MtCO2) by 2020. The RHI will be similar to the feed-in tariff (FIT) in substance and works on the principle of a tariff rate being set for energy produced by the system, with varying prices for the technology employed.

The Gas and Electricity Market Authority (Ofgem) will administer the RHI grant scheme including: dealing with applications; accrediting installations; making incentive payments to recipients; and monitoring compliance with the rules and conditions of the scheme.

The impact of the RHI will be significant, with the £860-million scheme expected to increase green capital investment by £4.5 billion up to 2020, stimulating a new market heat pumps and renewable heat. It will also increase the number of industrial, commercial and public sector installations by seven times to 2020, as well as support 150,000 existing manufacturing, supply chain and installer jobs.

Considering over 95 per cent of heat in the UK is currently produced from burning fossil fuel, this incentive will change the UK heating market drastically. Current estimations predict there will be 110,000 installations in the commercial and public sector by 2020, supplying 25 per cent of the heat demand in these sectors.

The scheme is to be phased and so far as heat pumps are concerned will initially focus on commercial ground source, geothermal and water source pumps.

"The heat used in our homes, public buildings, businesses and factories is responsible for around half of all the energy consumed in the UK, and accounts for roughly half of all the UK's carbon emissions.

It is for this reason that we are introducing the Renewable Heat Incentive, making renewable heat not just an environmentally sound decision, but also a financially attractive one. This support can help drive take-up of renewables now, stimulate the renewables industry, encourage further innovation and ultimately, bring down the cost of renewable heating."

Greg Barker
Minister of State
Department of Energy and Climate Change