Renewable Heat Incentive Degression Triggers

[Worcester]

Can anyone get their head around this!!

The key documents are here:https://www.gov.uk/government/stati...m-for-budget-management-estimated-commitments

The stats spreadsheets and the fact sheet, all from the same page.

This clearly shows the 10% degression for biomass on 1st January (triggered on 31st October), and certainly looks like a 20% degression for 1st April. However what is likely to happen on 1st June as that degression level has already been reached by 31st December?

If that triggers a 20% degression as well, then the domestic Biomass market is effectively dead, as it will be almost the same p/kWh rate as the commercial rate and that pays 20 years instead of 7.

Maybe that's what they want.

However in most cases it is the only alternative for the off-gas grid market place.

 

[Gavin A]

I suspect it will be the problem with the scheme where the entire scheme needed to hit certain targets before any individula triggers would hit, so the biomass was well overdue for a cut when it actually finally hit, and is so far overbudget it will end up getting cut after cut.

Stupid system, set up by idiots as per usual.

Predicted this last year when doing a talk on the risks of the scheme, part of the reason we pulled out of it. Had an interesting discussion with ofgem reps this year when doing the same talk, when I was pointing out the flaws in the scheme they got a bit defensive.

There's also huge volumes of applications stuck in the application process not included in those figures, as the application process is so screwed, so unfortunately I can see there being cut after cut after cut this year, but all the other technologies are well below their triggers. They obviously set the rates wrong in the first place, but now will end up massively over compensating and screwing biomass as well.

 

[jason121]

1000 of free biomass going in in my area.
The commercial biomass are being dropped off in containers ready to run

 

[Worcester]

A shade greener (the free solar guys) were also offering free biomass at one time, and so is another company - they get over it by taking a charge on the propoerty on the land registry, so get the RHI payments direct, as usual cheapest possible kit going in.. (WES / Trianco)

'Free Biomass' for commercial has been around for a while and the containerised option has been adopted by quit a few suppliers / installers. Commercial biomass will also get a degression this time around.

I've current got an ongoing discussion with the Head of Domestic RHI policy at DECC, (his earlier title was: "Head of Scheme design - Domestic RHI at DECC" when I have the definitive outcome I'll post up here. As the current degression mechanism is as clear as mud w.r.t the trigger levels.

 

[TedM]

A shade greener (the free solar guys) were also offering free biomass at one time, and so is another company - they get over it by taking a charge on the propoerty on the land registry, so get the RHI payments direct, as usual cheapest possible kit going in.. (WES / Trianco)

Given the conditions that domestic RHI imposes on eligibility that sounds like a complete recipe for disaster for anyone wanting to sell their house - far worse than rent-a-roof.

 

[TedM]

In terms of the problem with degression on the domestic RHI it is pretty clear that the levels of targets that DECC have set for each technology type bear no relationship to what could have been sensibly predicted.

That installs of solar thermal are at less than 10% of their target (at Dec 2014) while biomass installs are over 300% of their target (which will trigger a super-degression) just indicates that the targets were not set by any market-aware process in the first place.

Having the same target figures for ASHP, GSHP and biomass doesn't bear any rational scrutiny and, given the market's obvious preference for biomass over heat pumps, why shouldn't DECC react by moving some of the target value across from one to the other which would still allow the total cost of the RHI to be kept under control?

Just another example of how inept government intervention will lead to boom and bust rather than avoiding it.

 

[Worcester]

Long discussions with the policy team at DECC ...

Reason for equal budget - they didn't want to "be seen to favour one technology over another" and "to give them equal opportunity"

Also there is no opportunity to review budget allocations 'early' - the budget is only allocated until 2016 anyway. Any review would require a change in legislation, with the imminent general election, in practice that wouldn't happen before the schedule budget reveiw for 2016+ anyway..

Actual degression rules are more complicated than published in their guide documents, and they can apply certain 'growth' triggers, plus DECC will get rapped on the knuckles for overspending the budget (obviously not good at budgeting) however in practice the other technology underspends will actually more than cover it, so they won't get themselves into too much doo doo...

Degression is in the legislation and it's complicated, they are aware that super degression in March and agsin in June will effectively kill the market place.

The growth figures quarter on quarter, get applied to the actual deployed on the previous quarter to decided if a degression is triggered, hence they can get into budget overspend issues that they can practically do nothing about other than apply the scheme rules. (effectively the base is reset at each quarter if it is over the target, and the next trigger is based on the growth trigger only)

So. based on the 30th November Figures: 5.82m it needs to reach 5.82+3.6=9.42 on 30th Jan to trigger superdegression on 1st April - it has, it reached 17.02 on 30th December.

And just taking the 30th December figures, it needs to reach 17.02+4.8 = 21.82 on 30th April to trigger a 2nd super degression - it will, and that will put massive breaks on RHI deployment - March 2012 all over again, at least this time we can plan for it, and move a number of our domestic installations over to commercial - easy enough for most of our clients, pia though as it requires a different investment strategy.

 

[Gavin A]

kinda glad I took the decision to back out of biomass.

 

[TedM]

DECC's approach of eveness across the technologies would be OK if the degression mechanism worked both ways, i.e. the tariff was increased if the target was not being met.

All too logical of course.