28 April 2020: Changes to RHI support and COVID-19 response: notice of proposals
Updated 3 April 2022
Applies to England, Scotland and Wales
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This publication is available at https://www.gov.uk/government/publications/changes-to-the-renewable-heat-incentive-rhi-schemes/changes-to-rhi-support-and-covid-19-response
Applies to: Wales, England, and Scotland
The UK, along with countries around the world is facing unprecedented challenges in responding to the crisis caused by the coronavirus (COVID-19). We recognise that those wishing to respond to this notice are likely to have pressing issues to address as a result of this crisis. As such, we will continue to monitor the response period, timelines and stakeholder engagement approach as the situation develops.
On 11 March 2020, the Chancellor of the Exchequer announced as part of the Budget that the government intends to extend the Domestic Renewable Heat Incentive (DRHI) Scheme for an additional year until 31 March 2022 and introduce a third flexible allocation of Tariff Guarantees on the Non-Domestic Renewable Heat Incentive Scheme (NDRHI). These proposals are designed to ensure a smooth transition between the Renewable Heat Incentive (RHI) and the future support mechanisms, outlined in the consultation Future Support for Low Carbon Heat. Additionally the introduction of a flexible third allocation of Tariff Guarantees (TGs) on the Non-Domestic scheme will ensure that eligible projects currently having difficulty meeting TG deadlines due to issues caused by the coronavirus outbreak can still access the RHI with a later commissioning date by applying to this TG allocation.
Further to the proposals outlined in the Budget, we intend to bring forward legislation to extend the commissioning deadline for projects currently holding a Tariff Guarantee, to grant these projects additional time to fully commission in light of delays caused by coronavirus.
We are making these proposals at this time in view of the contribution they will make to supporting businesses and job creation at a time when economic recovery will be so important. The proposals set out will provide support to businesses, many of which are small and medium-sized UK enterprises, including manufacturers, installers and project developers in the low carbon heating sector.
We are currently considering what other changes may need to be made to deal with coronavirus related delays and will make any separate announcements in due course.
Extension of the Domestic Renewable Heat Incentive Scheme (DRHI) for an additional year until 31 March 2022
On 11 March 2020, the Chancellor of the Exchequer announced as part of the Budget that the government intends to extend the DRHI for a further year to ensure continued contribution to our stretching Net Zero target. This means that the scheme will remain open to new applicants until midnight 31 March 2022.
The scheme will continue in its current form. There will be no immediate changes to DRHI scheme eligibility criteria or ongoing obligations for new or existing participants.
Introducing a flexible third allocation of Tariff Guarantees (TGs)
The Chancellor also announced the government’s intention to introduce a third allocation of flexible TGs to the NDRHI. This new allocation of TGs will require plant to have submitted Stage 2 information evidencing financial close prior to the closure of the NDRHI to new applicants on 31 March 2021. TGs provide investment certainty to larger, better value for money installations, which are crucial to delivering our Net Zero target.
Previous TG allocations have made provision for a deadline date, by which point a plant must have commissioned and a properly made application submitted to receive the secured tariff. Under the new allocation, a plant will be required to submit properly made Stage 2 information prior to scheme close on 31 March 2021, but will be able to set a date for submission of Stage 3 commissioning evidence up to 31 March 2022, in keeping with current TG rules. For more information visit Ofgem’s current guidance on TG eligibility and process.
Under the new allocation, payments will begin from the point of commission and end 20 years after the properly made submission of a plant’s Stage 2 information. For example, for a plant that submits Stage 2 information on 28 February 2021, has a tariff granted on 20 April 2021 and commissions on 28 February 2022, the payment period would begin from 28 February 2021 and this plant would receive nineteen years of payments from the point of commissioning. No NDRHI payments will be made after 31 March 2041.
The department also intends to set new TG budget headrooms for the 2021/22 and 2022/23 financial years. For more information, see Ofgem’s guidance on budget headrooms for previous TG allocations. For the purposes of this flexible third allocation, we are considering setting headrooms for individual technologies, or groups of technologies, and these will be announced alongside the government response to this notice.
Extension of Commissioning Deadlines for Projects Currently Holding a Tariff Guarantee to at least mid-March 2021
Further to the proposals announced in the Budget, we are intending to bring forward legislation designed to help ease the burden on plant with existing Tariff Guarantees (TGs) to meet their predetermined commissioning deadlines in light of disruption to projects being caused by coronavirus.
Currently projects with existing TGs under the second allocation have a commissioning deadline of either 31 January 2021 or 183-days after the commissioning date that they have stated to Ofgem (the scheme administrator) in their application, whichever is earlier. The legislation that we intend to bring forward would push all of these commissioning deadlines back to at least mid-March 2021. This measure would buy all current TG projects a minimum of an additional 6 or 7 weeks to commission, with a significant number being afforded far more additional build time due to commissioning deadlines prior to 31 January 2021. Further details on the specific commissioning deadline and details of this extension will be released with the Government Response to this notice.
We are also undertaking work to ensure that the transition between TG allocations is as smooth as possible so that projects that are unable to meet the extended commissioning deadline are able to easily apply for the third flexible allocation of TGs. The introduction of this flexible allocation of TGs will have the additional benefit of allowing eligible projects to commission after the closure of the NDRHI, easing the burden being placed on projects by delays caused by coronavirus.
The NDRHI scheme will close to new applications on 31 March 2021 as scheduled
The NDRHI will close to new applications on 31 March 2021. We are consulting on a package of closure reforms alongside this bulletin and plan to bring forward legislation to address these changes in early 2021. If you wish to respond, visit the consultation.
Please direct any enquiries or comments to RHI[email protected] by Tuesday 19 May 2020.