Non-domestic RHI – updates for 2021

The Department for Business, Energy and Industrial Strategy (BEIS) has announced changes to various aspects of the Non-domestic Renewable Heat Incentive, which come into effect this year.

Tariff guarantees

We were delighted to hear that from 1^st February 2021, budget for ground and water source heat pumps within the third round of tariff guarantees (TG3) will increase. The TG3 budget allocation for these technologies will increase to £17m in 2021/22, and £28m in 2022/23, meaning that more money will be available under the Non-Domestic RHI for larger scale heat pump systems.

Tariff guarantees provide investment certainty to bigger, better value for money projects, which the Government recognises are crucial to delivering the UK’s Net Zero target.

Extension applications

Budgets have also been increased for the ‘extension applications’ which were first set out by the Government in August 2020. The extensions are intended for projects which may be eligible for the Non-Domestic RHI but have been impacted by COVID-19 related delays. The scheme was amended further in November to grant extensions up until 31^st March 2022 and the latest changes will see more budget available during this period.

Budgets will increase from £0.8m p/a to £3.6m p/a for sub-100 kWth ground and water source heat pumps impacted by COVID-19 related delays. This increase is intended to ensure that, based on latest market intelligence, all such projects that are able to fulfil the evidence requirements are able to proceed with an extension application.

Degression

Finally, in this latest round of Non-domestic RHI updates, Ofgem has triggered a 20% degression for larger water/ground source heat pumps. The change is as a result of the October 2020 quarterly assessment and came into effect 1^st January 2021.

Rates will decrease from 5.58 pence per kWh in Tier 1 and 1.66p/kWh in Tier 2 from 1^st October – 31^st December 2020, to 4.46p/kWh in Tier 1 and 1.33p/kWh in Tier 2 from 1^st January 2021.

Guy Ransom, commercial director at Finn Geotherm, said:

“We are pleased to see these budget increases for both the tariff guarantees and extension applications, which will enable a larger number of heat pump projects to benefit from choosing renewable heating. While we celebrate all heat pump systems, it’s these bigger projects which will of course have a greater impact on cutting the nation’s carbon emissions at a time when it is more crucial than ever for us to do so.”

4th January 2021