Combined Heat & Power, District Heating & Cooling, Demand Side Services, Energy Efficiency

Response to Non-domestic RHI: further proposed amendments

1 November 2017

The ADE’s consultation focusses on the impact of the proposed cap on RHI payments to an individual site to 250 GWh, specifically how it will limit the role of the RHI in decarbonising large-scale industrial steam, in contradiction with the Government’s industrial decarbonisation roadmaps, its Clean Growth Strategy and its Industrial Strategy.

While we appreciate the need to set caps in the level of subsidy received by an individual accreditation, we do not agree with the level of cap proposed, as we see it as a block to delivering the effective decarbonisation of large-scale industrial heat demand.

While we strongly disagree with the proposed limit, if a limit is imposed then the use of heat production is the clearest way to deliver it.

The level of the proposed cap will severely impact the ability for the RHI to decarbonise large-scale industrial heat demand, in direct contradiction with Government’s industrial and decarbonisation strategies.
The Government’s Industrial Decarbonisation Roadmaps highlight biomass as a key decarbonisation technology in six sectors: pulp and paper, at 60% of the total ‘Max Tech’ CO2 reduction in 2050, cement (28%), chemicals (37%), glass (27%), food and drink (22%) and ceramic (7%).

The Government’s Clean Growth Strategy also committed to delivering sustainable growth across the UK economy, including to make progress in switching industry from fossil fuel use to low carbon fuels such as sustainable biomass through to 2030.

However, the proposed level of the cap on the RHI will effectively prevent it from decarbonising largescale industrial heat demand. There are very few projects of this scale, but decarbonising even one large industrial heat user would have an enormous impact on the overall UK decarbonisation efforts, as well as helping to secure those large industrial sites’ long-term.
Biomass as the only currently available way to decarbonise industrial steam supply, and the RHI for the heat supply is required to secure these investments.

We appreciate the Government’s need to balance its intent to decarbonise industrial heat supply with its need to carefully manage RHI budgets. We therefore can agree on the need for an RHI cap, but only one that is set at a level which balances the need for budget controls with the ability to help deliver large-scale renewable heat projects.

For example, a cap of 850 GWh would impact the RHI budget, based on ADE’s calculations, by £33m a year, which is less than 8% of the remaining RHI budget, according to the most recent data published on the Ofgem website.

There is only one large-scale biomass CHP project which has secured planning, and a Contract for Difference contract, for delivery before the close of the RHI budget in 2021. This means that a strengthened due diligence process, alongside a more reasonable cap, would better deliver the Government’s strategic aims, while managing the protect large proportions of the RHI budget for other technologies.
As part of a more balanced approach, we think the Government should apply higher levels of due diligence to provide assurance on the quality of the feedstock and the quality of the heat demand in use at large-scale renewable heat projects. Additional assurances on the level of heat efficiency could also be included to ensure only high quality schemes receive such large financial commitments.

We would propose that lower limits are applied to higher-cost renewable technologies, to ensure that large proportions of the RHI budget are not used on poor-value renewable heat solutions, locking in high costs for taxpayers.

Lower cost renewable technologies, such as biomass CHP, should receive higher caps, as Government should be encouraging large-scale deployment of these lower cost technologies to better ensure it delivers its low carbon heat deployment at lowest cost.

Download the full consulation response below

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