Dublin, 26 January 2017
The Minister for Communications, Climate Action and Environment, Denis Naughten T.D. today launched the final consultation on a Renewable Heat Incentive for Ireland to incentivise industrial and commercial heat users to switch to greener technologies that produce heat from renewable sources. Inviting the public to provide feedback to his Department on the Design Options for the Scheme, Minister Naughten said: "This support scheme is aimed at incentivising a switch from fossil fuel based heating systems to renewable heating solutions, which will help Ireland meet its energy and climate change obligations, simultaneously. The promotion of renewable energy can be a driver of inclusive economic growth, creating jobs and enterprise opportunities in the rural economy as outlined in the Action Plan for Rural Development published earlier this week".
The Minister went on to say "As a rural based T.D., I am fully aware that farmers in the past have explored the potential market opportunities in the bioenergy space, and many have decided not to pursue this avenue until the market was more mature. As a demand side measure, the RHI will aim to give the bioenergy and biomass sector the market in renewable heat production that is needed to encourage farmers to take the next step. However, for this intervention to be successful it is critical that supply-side policies must be aligned with the demand-side measure that my Department is developing".
Cleaner heat is a part of Ireland's renewable energy policy objective and the introduction of a Renewable Heat Incentive (RHI) for Ireland is a commitment in the White Paper on Energy and the Programme for Government. The RHI is designed to accelerate our efforts to meet our 12% target of heat derived from renewable energy sources by 2020.
The consultation sets out a series of questions on the detailed design of the scheme, seeking public feedback and suggestions on rules such as timing of support; how payments should be structured; how to deal with different unit size; what sustainability and efficiency criteria to adopt; and a number of other scheme criteria. Members of the public and interested stakeholders can find out how to have their say at Renewable-Heat-Incentive-Consultation.aspx
Stakeholder responses to the consultation paper will be reviewed and considered by the DCCAE prior to a final decision on the structure and design of the RHI early in 2017. The closing date for receipt of submissions to the consultation is 3 March 2017. While it is hoped that the Scheme will become available at the end of 2017, this is subject to Government and State Aid clearance.
In conclusion, the Minister added: "The overall RHI scheme will be designed so that it ensures value for money for the taxpayers who are being asked to pay the cost of the RHI subsidy. Therefore, the RHI I am proposing will have a budget cap mechanism and a mechanism to reduce the amount applicants get paid over time built in from the start – so the more you burn, the less you earn".
Notes for Editors
The Renewable Heat Incentive (RHI) will be the primary support mechanism in the heating sector designed to meet Ireland's renewable energy obligations. The aim of the scheme is to build on the progress already made in the renewable heating sector and to help reach Ireland's 12% target by 2020. In 2015, 6.5% of heat was derived from renewable sources in Ireland.
The proposed scheme is aimed at supporting larger industrial and commercial installations outside of the EU Emissions Trading System (ETS) to change to heating solutions that produce heat from renewable sources.
Details of the consultation are available at the Department's website: http://www.dccae.gov.ie/en-ie/energy/consultations/pages/Renewable-Heat-Incentive-Consultation.aspx
The overall costs and technologies to be supported will be subject to Government approval and State aid clearance from the European Commission before any scheme is introduced.
Frequently Asked Questions (FAQs)
Why introduce a RHI?
Ireland's 2020 renewable energy target remains challenging. At the end of 2015, 9.1% of Ireland energy was derived from renewable sources, this must increase to 16% by the end of 2020. The government has introduced a range of measures across the electricity and transport sectors to help meet this target, and the Renewable Heat Incentive will expand this suite of support measures into the heating sector. The RHI will be aimed at incentivising a switch from fossil fuel based heating systems to less polluting fuels and will help participants in the scheme to bridge the financial gap to investing in the new renewable heating system.
How does this RHI differ from the RHI in Northern Ireland?
The principal difference in the scheme relates to cost controls. No budget cap was initially put on the RHI payments in Northern Ireland.
The Irish RHI will have a built-in budget management mechanism. Ensuring an effective budget management mechanism is an important part of maintaining value for money for the taxpayer and controlling overall costs. Two 'budget management mechanisms' have been identified and could apply:
- A Payment degression and;
- A Budget Cap (annual or overall)
The inclusion of a payment degression, whereby the tariffs (for new applicants only) decrease when the uptake crosses a certain threshold (either overall or on a technology basis) could be used to control the uptake and associated costs to the Exchequer. Tariff degression has the advantage of reducing the risk to the Exchequer of over-payment.
The inclusion of a budget cap could also be an important instrument to control costs. In this case, when the projected RHI payments reach the budget cap (either annually or overall) the scheme would close to all new applicants either temporarily or permanently. If uptake as a whole means that the total payment for the scheme will exceed the overall budget cap, the scheme could be closed to new participants. If an overall budget cap is exceeded, the scheme might be closed permanently.
How will the payment system work?
It is proposed that the payment under the RHI will be tiered based on the annual heat output (on a per kWh basis). The participant would receive a payment according to the tariff (c/kWh) for Tier 1 up to the first threshold value; those with a heat output greater than that threshold receive additional payment according to the tariff for Tier 2, and so on for all higher Tiers. Since the cost of generating renewable heat typically falls with increasing installation size, the tariff would fall from one Tier to the next.
Thus, the more renewable heat produced the less the applicant will get paid.
How much will the RHI cost?
The final cost of the RHI will be determined by the outcome of this public consultation, Government approval and the State Aid clearance process.
This public consultation is inviting submissions on the specific design elements of the scheme. The overall cost of the RHI will depend on the final set of design elements chosen.
What Renewable Heat Technologies are under consideration?
The following technologies remain open for consideration under a range of final scenarios that will be developed. The findings from this consultation will help to inform the final scenario and the technologies that will be supported.
- Biomass boiler
- Biomass combined heat and power (CHP)
- Biomass direct air heating
- Ground-source heat pump
- Air-source heat pump
- Water-source heat pump
- Deep geothermal
- Anaerobic digestion (AD) CHP
- Anaerobic digestion (AD) boiler
- Biomethane grid injection
- Solar thermal