Renewable Heat Incentive (RHI) update – and implications for the AD industry

The Department for Business, Energy and Industrial Strategy (BEIS) has not been able to pass the emergency legislation it was hoping to, which would have updated the degression triggers in the Renewable Heat Incentive. 

This means that the overall RHI scheme trigger will remain at £ 578.0 million for the “Total expenditure anticipated for subsequent year” and will remain at £ 289.0 million as the “Expenditure threshold when calculating C for the purposes of regulation 37A ” (i.e. half of the total anticipated). So the RHI is likely to continue to be above its thresholds until the new legisaltion is passed.

Biomethane has an expected growth rate in legislation of £15.2 million per quarter. It is unlikely that, at the current tariffs, biomethane will be 50% or above this growth. However, biomethane is likely to be above its total expenditure threshold of £175.4 million. This could mean a 5% degression.

What does this mean in English?

While the degression mechanism can seem hard to understand at times, this essentially means that the current biomethane tariff of 3.56 p/ kWh for plants up to 40 GWh/ year could fall by 5% to 3.38 pence on 1 July. If the proposed new legislation is not in place by 1 October then the tariff could fall by a further 5% on 1 October. 

According to the government consultation response, any plants commissioning in this period would also be able to claim the new higher tariff once any new legislation is in place. 

What does this mean for the industry?

As we've outlined in our last four blogs in as many weeks, the delays to the RHI are hitting the industry. We've heard from over 10 projects already that are having to delay their plants due to the legislative delays. We'll be writing to the new Ministers as soon as they are in place after the general to explain the damage that has been caused and why they must act quickly to pass the legislation.

If you are a developing a biomethane project and are being affected by the delays – please tell our Market Analyst Emiliano Lewis on emiliano.lewis@adbioresources.org 

For any policy questions please call Thom Koller or myself on 020 3176 0592 or 020 3567 0751.

Talking point

The RHI is one of the key issues to be debated at UK AD & Biogas and World Biogas Expo 2017. Speakers from BEIS, ADBA and AD operators will be discussing the new government and the likelihood of the consultation response and accompanying legislation being rapidly implemented.

Ollie