So today, at long last, the government (in this case DECC or the Department of Energy and Climate Change) published the details of the Renewable Heat Incentive. Ever since the last administration announced this dog of an idea in February 2010, it's been subject to a constant barrage of criticism from just about all sides. Even the manufacturers and installers of heat pumps, biomass boilers and solar panels have been throwing mud at the ministry. Not because they are against the subsidy in principle, but because the way it's been managed means that many of them haven't had any work for a year whilst their potential customers wait to see what this incentive would actually consist of.
So? Was it worth waiting for?
Well, the bad news is that the domestic customer — i.e. your typical selfbuilder — is barely any the wiser than they were yesterday. Listen up. This is what the boys from the ministry have hit upon. They have divided the market into two, domestic and non-domestic (or commercial). And whilst the non-domestic customers can plug into the incentive more or less right away, the domestic side has been put on hold for another 18 months. "Until the Green Deal comes into effect" is what they are saying. Now if the Green Deal has anything like the same smooth trajectory that the Renewable Heat Incentive has enjoyed, you can take a pretty fair guess that it won't be appearing in 2012. Methinks it's really just a delaying tactic.
Now what they are saying is that come 2012 (or whenever) there will be a payment based on how much energy you use, but they haven't actually said you how much it will be yet. And yet they expect people to make informed decisions on this basis!
All is not lost. There is a transitional arrangement for domestics which has been put in place from this July and it's to be called the RHI premium payment. This is a capital grant, very similar to the ones we have already had (first Clear Skies, then the Low Carbon Buildings Programme, neither of which was a resounding success, as they kept running out of money). And they have published a table of how much these new installation grants will be worth.
• Solar Thermal - £300/unit
• Air Source Heat Pumps - £850/unit
• Biomass boilers - £950/unit
• Ground Source Heat Pumps - £1250/unit
They have set aside £15million to fund these payments and expect to have 25,000 installations going through it before it gets reviewed. By my calcs, that's an average grant of £600. If it's anything like the Low Carbon Buildings Programme, it'll be doled out on a first come first serve basis and when the money runs out, tough.
Now these amounts are not to be sniffed at, but neither are they generous. They are at best appetite wetters. The real action is expected to be coming in from the tariffs which will pay so much per kWh consumed. But they haven't published tariffs for the domestic sector. Domestics will have to wait (18 months?) before they find out what the rates will be. It's a bit like taking out a mortgage and being told that you'll find out the interest rate sometime in the future. Not really terribly compelling, is it?
If the non-domestic tariffs are anything to go by (and these have been published today), it looks as if tariffs will be greatly reduced from the levels suggested in the original consultation document. For instance:
• Ground source heat pumps: consultation doc tariff 7p/kWh for 23yrs, today's tariff 4.3p/kWh for 20 yrs
• Solar thermal: consultation doc tariff 18p/kWh for 20 yrs, today's tariff 8.5p/kWh for 20 yrs
You get the drift. It's cuts all round before the RHI has even started. One can only surmise that, by 2012, the rates will drift even lower.
Now sir source heat pumps (ASHP) — what fate awaits them? Well, it's intriguing. As you can see, ASHP qualifies for a premium payment of £850. But the non-domestic tariffs don't support ASHP. How can this be? Buried elsewhere in the main document is a rather cryptic statement that states:
Air source heat pumps will not be supported from the outset because more work is needed to better understand the costs associated with the technology and, for air to air heat pumps, work is ongoing to develop a robust methodology for measuring heat delivered in the form of hot air. Subject to successful conclusion of this work and other factors (such as the role of cooling as opposed to heating in such systems) we intend to extend eligibility to this technology from 2012.
And if the work isn't successfully concluded? Presumably, ASHP will be dropped from the scheme. It hardly breathes confidence into the market, does it?
So it's all a bit of a dog's dinner. What started out as something like the Feed-in-Tariff for heating technologies is getting watered down to a mixture of a small installation grant and a bit of extra help with the bills. Arguably, this is what it should have been all along, as the supported technologies have questionable green credentials at best. But the problem is that the delay in implementing this incentive has contrived to all but cripple the small businesses it was setting out to support. And the consumer, especially the off-gas grid selfbuilder (who was potentially the main beneficiary of the RHI) is still left groping around in the dark as to how to heat their home. I anticipate being swamped with queries about home heating strategies at the Homebuilding & Renovating show later this month and I can tell you now that I won't have a clue what to say.
The Renewable Heat Incentive has now become a case study in how NOT to go about it. What was designed as a policy to kick-start an industry has ended up kicking it into touch.