Renewable Heat Incentive budget slashed by £38m

The government has slashed the budget for spending on its Renewable Heat Incentive this year from £108m to £70m as part of its plans to control the cost of the scheme.

The incentive is designed to encourage the deployment of renewable heat sources, such as biomass boilers and heat pumps, to homes by paying home owners for the heat they produce.

The Department of Energy and Climate Change said the revised budget and cost control trigger mechanism it announced yesterday was necessary to ensure subsequent years of the scheme were not overspent. It said it would use the £38m taken from the budget for other renewable heat projects.

Under the cost control trigger installers of renewable heat sources would be given only one weeks’ notice of the suspension of the incentive if spending is forecast to reach 97% of the year’s cap.

However, the take-up of the RHI, which launched last November, has been slow and installation rates would need to increase by 500% this year for the cost control mechanism to be triggered.

Energy minister Greg Barker said: “Given current uptake figures, we do not currently envisage having to use this mechanism. However, we have learnt from our previous experiences and want to provide assurances to the market and the public that we are spending money on the RHI in a sustainable way.”

But Neil Lawson, head of renewable heat at installer Ardenham Energy, said: “This will stop the development of a specialist renewable heating sector in its tracks. The only way that businesses will be able to survive a peremptory suspension of the RHI will be to ensure that RHI-based work is only ever a minority of their work stream.”

The budget for the scheme in further years remains unchanged.