Government contingency plans to temporarily halt payments under the renewable heat scheme in case it overspends its budget have been criticised as “premature”.
Today DECC announced a new “cost control mechanism” which would stop new application for payments until the next financial year.
The move sees the Government adopt a cautious approach to spending on renewable subsidies in the wake of the solar Feed-in Tariff debacle when it tried to cut the subsidies.
But the consultation on interim cost control has been dismissed as “unnecessary and unhelpful” by the Renewable Energy Association.
Gaynor Hartnell, chief executive of the trade body said: “To launch an official consultation on bringing the shutters down, having only just fired the starting gun on the RHI, is premature to say the least.
“The renewable heat market isn’t going to flare up like solar did. If anything we’re concerned about an underspend.”
Based on the current number of applications DECC has received, it expects to spend around £2 million in 2011-12. The Budget for the RHI for this period is £56 million, although this includes spending for the Renewable Heat Premium Payments for homeowners, which has a budget of £15 million for 2011/12.
Analsyts also believe the move is “disappointing” for the young industry.
Stuart Campbell, Assistant Director at Ernst & Young said: “It is disappointing that once again this will mean uncertainty for project developers in this area. Just at the point when developers are ready for operations they may be faced with a delay in receiving RHI payments until next year if the RHI Interim Cost Control measure has been activated.”
But Ms Hartnell at the REA added there was “no reason for lenders to become alarmed… [because] Government intends to remove this power when longer-term control measures are in place.”