Domestic Biomass Renewable Heat Incentive to Increase in 2017

The fabulous YouGen newsletter has recently published the article below.

 

For a factsheet about the Domestic Renewable Heat Incentive scheme please click here: RHI Factsheet

 

The domestic biomass RHI tariff will rise to 6.44p/kWh from 1 April 2017 – a 53% increase from the tariff of 4.21p/kWh already set for the period January to March 2017! We expect the new tariff to be available for applications made from 1 April to support the installation of biomass pellet boilers and stoves (with a back boiler) in homes across the UK. The exact date for the RHI changes is still to be confirmed by government (note our disclaimer below) but we’re assuming 1 April for now.

Click this link to calculate your Annual RHI payments   (RHI Calculator)

News of this surprise tariff rise from the government will be music to the ears of both potential buyers and installers who were disappointed by the 20% cut to the tariff back in January 2016. In simple terms, this rise returns the tariff for domestic biomass to the kind of level enjoyed by buyers prior to that cut. It comes as part of the government’s response to an industry-wide consultation on the Renewable Heat Incentive (RHI) which started in March this year.

This more generous tariff will present a window of opportunity both for homeowners interested in an efficient biomass boiler for their home and for installers ready to meet accelerating demand.

Normally the expectation for tariffs like the RHI is for it to go down as demand for a technology increases, manufacturing unit costs come down and so the need for a subsidy is reduced. The tariffs are reviewed by the government each quarter. The 6.44p/kWh tariff can, therefore, be relied on for any applications made between April-June 2017, but there is no guarantee it will hold at that level beyond June – normally it would go down again. So now is a great time to explore biomass as an option.

Ofgem assure us that those who apply for the RHI between now and the tariff increase will get upgraded to the improved tariff rate automatically when it comes into force. Therefore, anyone installing on or after 14 December will still enjoy the imminent uplift.

Of course it will take significant time to work through the options and settle on the right quote and installer for making the change to biomass. There’s a lot to consider now in order for a homeowner to ready themselves to take advantage of this substantial rise in the tariff in this window of opportunity from 1 April 2017.

The government says it wants the subsidy to provide value for money all round. As such, there will be limits to the annual level of heat for which homeowners can claim the tariff, capped at 25,000kWh each year. That shouldn’t prevent many typical homeowners getting their full entitlement (Ofgem published a range of typical domestic gas consumption values in 2015, from 8000kWh at the low end, to 18,000kWh at the high end.3). However, biomass boilers tend to suit larger homes, especially where they will replace an old oil or LPG boiler.

If your home’s heat demand is higher than 25,000kWh per year you should apply but you won’t get RHI payments in relation to your biomass boiler for the portion of that demand which exceeds the cap. We’ll therefore watch with interest to see whether the government has got the level of the cap right or not.

More information about the Renewable Heat Incentive (RHI) on YouGen.

IMPORTANT DISCLAIMER:
In its consultation response the government says only that the change will come into effect in spring 2017. At the time of writing this blog our contact at Ofgem could not confirm a precise date for the change, so we’re making the bold call that it will come into effect on 1 April which is when we’d normally expect the quarterly change to the RHI tariff to go live. If, in 2017, it turns out that spring arrives early (or late), we’ll update you as soon as we know!

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