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Pixie Chart of the Week

2019

RHI tariff degression for large biomass and biomethane

Michael Brown Year in Industry

On 1 January 2019, the Department for Business, Energy and Industrial Strategy (BEIS) announced that it would reduce the tariff price level (through a process called degression) for large biogas and biomethane installations on its non-domestic Renewable Heat Incentive (RHI) scheme. The Non-domestic RHI opened on 28 November 2011 as a UK Government financial incentive scheme to promote the generation and use of renewable heat by non-domestic users. Unlike most low-carbon incentives, it is funded directly by Treasury, not energy suppliers. Figure 1: Forecast expenditure and expenditure threshold by technologySource: Pixie Energy, from BEIS dataThe scheme provides incentives for seven types of technology including biomass, biogas, biomethane, heat pumps, solar thermal, combined heat and power and deep geothermal, which are split into eight expenditure categories (see Figure 1). Each expenditure category has a set budget cap which, if exceeded, may result in tariff degression. In quarter 4 of 2018 (October – December), the forecast expenditure for large biogas and biomethane exceeded its budget cap of £395mn by £31mn. This was in partly a result of continued high installation of biomethane technology in quarter 4. New biogas installations were also accredited for the first time since January 2018. This higher-than-anticipated accreditation contributed to an increase in BEIS’ forecast expenditure and results in less favourable tariff levels for the technologies in the future as a consequence of degression. For ‘Tier 1’ pricing, biomethane fell from 5.60 p/kWh to 4.76 p/kWh whilst large biogas fell from 1.36 p/kWh to 1.16 p/kWh. This change is anticipated to reduce demand ...

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