Renewable Heat Incentive withdrawn hours before launch

Published:  03 October, 2011

LONDON: The government's £860m scheme to subsidise renewable heating systems has been postponed just hours before it launch.

The Department of Energy and Climate Change says the Renewable Heat Incentive is being delayed rather than abandoned blaming the European Commission for failing to give it the immediate go-ahead.

In March, the government announced the details of the RHI, saying it would "revolutionise" the way heat is generated and used. It boasted at the time it was the first financial support scheme for renewable heat of its kind in the world.

"The industry has been gearing up over the last six months to deliver on the government's ambitious plans for renewable heat," said Paul Thompson, head of policy at the Renewable Energy Association. "This further adds to low confidence levels in the renewables industry as a whole, added to uncertainty around the feed-in tariffs, the renewables obligation and the renewable transport fuel obligation."

DECC officials said that the European Commission's concern had been that the RHI's tariff for large biomass had been set too high, and argued that they had tried to find ways of keeping to the original timetable. "We understand that the commission has given state aid approval for the RHI, subject to a reduction in the large biomass tariff, and we expect to receive written confirmation of this very soon," a statement from the department said. Changing the heat tariff from its current planned level of 2.7p per kilowatt-hour would require the RHI regulations to be amended and submitted to parliament for approval.

"Once we have received written confirmation from the commission, we will make a further announcement about what this means for the large biomass tariff and the timing of the launch. We are committed to launching the scheme as soon as possible to minimise disruption to stakeholders," it added.

Department officials have told the industry that it hopes to be back up and running in around two months' time with a new subsidy scheme, but the REA said any postponement would cause significant disruption.

There has also been speculation that the full launch of the government's Green Investment Bank could also be delayed as a result of EU state aid rules, according to the BusinessGreen website.

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