Industry warns renewable heat projects need funding certainty

The UK Government is being urged to change budgeting rules for its flagship heat policy to unlock “hundreds of millions of pounds” of investment for large-scale renewable heat projects in […]

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By Priyanka Shrestha

The UK Government is being urged to change budgeting rules for its flagship heat policy to unlock “hundreds of millions of pounds” of investment for large-scale renewable heat projects in the country.

Two major industry groups, the Combined Heat and Power Association (CHPA) and the Renewable Energy Association (REA), joined forces to highlight the challenge faced by industry over the lack of funding and policy certainty for renewable heat projects, which are starting construction now but will not start operating until after the next election.

In a joint letter to Energy and Climate Change Minister Greg Barker, they called for the Government to adopt an accreditation scheme – a mechanism to allow investors to ‘lock in’ tariff rates to protect against further falls before the project has been completed.

The Renewable Heat Incentive (RHI) scheme aims to encourage uptake of renewable heat technologies and pays participants of the scheme that generate and use renewable energy to heat their buildings. Payments vary according to the type of technology used, how much energy the installation can produce and also how much energy has actually been generated.

By increasing the generation of heat from renewable energy sources instead of fossil fuels, the RHI helps the UK reduce greenhouse gas emissions and meet climate change targets.

DECC set out renewable heat scheme plans for commercial, industrial and community organisations earlier this year.

The RHI budget is set until March 2016 but large-scale heat projects which start construction now will not be completed by then.

The letter stated: “A number of companies have had to halt progress on these schemes because they were not able to receive a funding commitment under the RHI beyond 2015… Without RHI funding commitment beyond 2015, investors cannot ‘bank’ the incentive value when deciding on the project. The ability to bank the incentive at financial close is vital if the RHI is to be effective in facilitating investment decisions into renewable heat projects.”

Dr Tim Rotheray, Head of Policy and Communications at CHPA added: “There is a real risk that an accounting hitch will prevent hundreds of millions of pounds of in renewable heat from going ahead. Companies are ready to make renewable heat investments right now and the Government can make this happen at no additional cost to taxpayers. If the Government addresses this issue, it can unlock a major investment potential helping the UK to achieve its renewable energy commitments at a lower cost whilst delivering tangible employment benefits.”

Earlier this year the Government also announced that buildings across the country will be able to get a bigger tariff for heat generated from renewable sources.