This week saw the launch of the government's much anticipated Renewable Heat Incentive (RHI) - the world's first 'feed-in-tariff' for renewable heat. This initiative will provide a welcome boost to the biomass heating market in the UK, which will need to expand significantly over the next 9 years to deliver its expected contribution towards the UK's renewable heating target identified under the European Commission's Renewable Energy Directive.
It is widely expected, that biomass will take up the lion's share of the available RHI pot. Our modelling suggests that within the initial period of the scheme (2011-2015), the first £860M of funding, could immediately support as many as 6,000 biomass installations. This would result in annual carbon savings of around 1MtCO2 and stimulate nodes of low carbon business to deliver further installations as well as services (financing, fuel and maintenance) to existing installations. As the RHI, and its impact, expands beyond this initial investment, further sites will be attributed to the scheme, delivering even more carbon savings and expanding the need for service activities.
In the past, the government support for biomass was through capital grants of up to 40%. These grants were often complimented by low or zero interest rate loans granted on the basis of the future energy cost savings likely to be achieved by the individual projects. This support certainly has helped to stimulate the market and bring it to a position where we now have a credible installer base and an established fuel supply market. However, they did not offer any assurance of operation of the plant. In the knowledge that we now have a mature installer base we predict biomass heating will absorb the majority of the RHI funds available, by attracting capital investment to a relatively low risk technology with near certain returns.
Much the same as we have seen for the electricity feed in tariffs, the shift to a revenue based subsidy will see businesses that employ this technology looking to ensure utilisation in order to claim their full RHI entitlement over the 20 year period of eligibility. This will lead to the creation of sustainable jobs around fuel supply and maintenance of biomass equipment as well as adding to those already created on the equipment and installation side of the market. These jobs will not only be assured for long periods, but, due to the nature of the biomass supply chain, they will also likely be in the local area, helping to keep the benefits local too.
Over the past 5 years the Carbon Trust has had a significant impact on the development of the nascent biomass market through its Biomass Heat Accelerator programme (BHA). We have delivered support across the whole market, working with installers to identify ways to operate more efficiently, with fuel suppliers to promote and stimulate fuel supply chains and with designers and developers to define and promote best practice in design, specification, procurement and operation.
With the launch of the RHI, it is fitting that the BHA is drawing to a close at the end of the year, its lasting legacy will be established industry best practice, the establishment of standards, industry guides and a UK first in the form of a searchable fuel supply map.
