Government set to cut subsidy for biomass heat by 10%

The government is set to reduce subsidies for biomass heat systems for homes after the amount of heating capacity installed in the last quarter exceeded expectations.

However, the amount of renewable heat capacity from other technologies installed under the scheme was still well below the level that would trigger a reduction in subsidy.

The reductions under the government’s Renewable Heat Incentive (RHI) mean that biomass installations accredited on or after 1 January 2015 will attract a 10% lower rate of subsidy for each kilowatt hour of heat that they produce.

The cut forms part of the government’s planned system for lessening support for renewable heat technologies over time as their popularity increases.

In the last quarter the government committed £5.8m of subsidy to biomass units in homes under the RHI, more than £4.2m per quarter of subsidy triggers a cut in the subsidy rate.

Biomass heat system will receive a subsidy of 12.2p/kWh from January.

However, the figures also revealed that roll-out of competing technologies has been slow. Less than £1m of subsidy was committed to support each of the other three technologies subsidised by the scheme: air source heat pumps, ground source heat pumps and solar thermal plants.

The domestic renewable heat incentive was launched in April this year after much delay and, much like its non-domestic version which has been running for several years, it has struggled to drive market demand.

The government also announced last week that it will cut subsidy rates for biomass and biomethane heat systems in non-domestic properties. Both technologies will have support cut by 10% from 1 January 2015.

The government introduced a system where the subsidy rate is tied to the amount of capacity installed nationally for both versions of the RHI following the rapid uptake of the solar feed-in tariff, which operates in a similar way, in 2011, whichforced the government to cut it very suddenly.

The Department of Energy and Climate Change subsequently introduced quarterly monitoring of its micro-generation subsidies in the heating and electricity market to ensure budgets did not become overspent.