THE RENEWABLE HEAT INCENTIVE

THE RENEWABLE HEAT INCENTIVE A CLEAN ENERGY PIPELINE GUIDE www.cleanenergypipeline.com

WHAT IS THE RENEWABLE HEAT INCENTIVE? The RHI is a financial support programme for renewable heat designed to bridge the gap between the cost of fossil fuel heat installations and more expensive renewable alternatives. It is part of a suite of policies and incentive mechanisms designed to assist the UK meet its renewable energy and carbon reduction targets. These targets include: meeting 15% of the UK s energy demand from renewable sources by 2020; generating 12% of heating demand from renewable sources by 2020; and reducing CO2 emissions by 80% from 1990 levels by 2050. Tackling heat is vital if the UK is going to meet these targets some 47% of UK energy consumption is for heating purposes and 32 billion is spent on heating annually. Furthermore, approximately one third of the UK s carbon emissions are generated directly from heating. When details of the scheme were first unveiled in March 2011, the government forecast it would drive 4.5 billion investment in renewable heat in the ensuing decade and that it would support 13,000 industrial and 110,000 commercial and public renewable heat installations by 2020. Thus far only c.4,000 projects have applied for the scheme, which is why the government made amendments to the scheme in March 2014. The RHI has two strands: Non-domestic RHI, which subsidises renewable heat produced by businesses, industry and public sector organisations. This was launched in November 2011. Domestic RHI, which provides subsidies to heat produced by homeowners and landlords. This was launched in April 2014. Investors should note that companies benefitting from the RHI will not qualify for EIS, SEIS, or VCT investment in the near future. This restriction was announced in the Budget in March 2014 and will come into effect from the date of Royal Assent of the 2014 Finance Bill in July 2014. TIMELINE: IMPLEMENTATION OF THE RENEWABLE HEAT INCENTIVE November 2011 July 2013 December 2013 April 2014 May 2014 Non-domestic RHI launched Full details of domestic scheme announced Government publishes improvements and updates to the non-domestic scheme Domestic RHI launched Government introduces changes to nondomestic RHI 2 Clean Energy Pipeline THE RENEWABLE HEAT INCENTIVE

NON-DOMESTIC RHI biomass heat pumps geothermal solar thermal bioenergy (biomethane & biogas) Applicable projects receive quarterly payments for 20 years, which are calculated based on the type of technology, the capacity of the project and the heat consumed. The subsidies available when the scheme was first launched are shown in the table below: TARIFF NAME ELIGIBLE TECHNOLOGY ELIGIBLE SIZES TIER CURRENT APPLICABLE TARIFFS Small commercial biomass Medium commercial Biomass Medium commercial Biomass (w/e from 1 July 2013) Solid biomass including solid biomass contained in municipal solid waste and CHP RPI ADJUSTED TARIFF FOR 1 APRIL 2014 (2.7%) Less than 200 kw Tier 1 8.6 8.8 200 kw and above; less than 1MW Tier 2 2.2 2.3 Tier 1 5.3 5.4 Tier 2 2.2 2.3 Tier 1 5 5.1 Tier 2 2.1 2.2 Large commercial Biomass 1MW and above N/A 1 1 Small commercial heat pumps Large commercial heat pumps Groundsource heat pumps; Water Source heat pumps; deep geothermal Less than 100 kw N/A 4.8 4.9 100 kw and above N/A 3.5 3.6 All solar collectors Solar collectors Less than 200 kw N/A 9.2 9.4 Biomethane and biogas combustion Source: UK Government Biomethane injection and biogas combustion, Biomethane all scales, biogas combustion less than 200 kw N/A 7.3 7.5 THE RENEWABLE HEAT INCENTIVE The Lawyer Research Service 3

The level of support is fixed and then adjusted annually in line with inflation. As with feed-in tariffs for renewable energy, the government reviews tariffs for new installations regularly to ensure they decrease in line with reductions in equipment and installation costs. 1.2 TWh of heat will be generated in 2013/2014, according to government estimates. As of March 2014, over 4,000 applications for the nondomestic RHI had been received, the majority of which were for biomass boilers. To date the non-domestic RHI has generated the greatest interest from the agricultural sector, where biomass boilers for off-mains gas heat in poultry and horticulture applications dominate. More recently, a growing number of applications for biomethane injection-to-grid from Anaerobic Digestion plants have been submitted. Some case studies are outlined below. However, the number of applications is well below government forecasts. Based on the number of applications, the government estimates that 1.2 TWh of heat will be generated in 2013/2014. This is just over a third of what was originally expected. With this in mind, the government introduced a series of amendments to the non-domestic RHI in May 2014 including: tariff changes; the inclusion of new technologies; different eligibility criteria; and biomass sustainability The government hopes that these changes will incentivise an additional 5,000 installations and 6.4 TWh of renewable heat by the end of 2015/16. The main changes implemented in May are outlined on the following page. CASE STUDY 1: RAINBARROW FARM ANAEROBIC DIGESTER (AD) WITH BIOMETHANE INJECTION The UK s first AD biomethane to grid project was installed at Rainbarrow Farm, Dorset, in October 2012. It is subsidised through the RHI. The plant is owned by a joint venture between J V Farming, the Duchy of Cornwall and ABP Ltd. Feedstock includes 4,000 tonnes of potato waste, 26,000 tonnes of maize silage, 4,000 tonnes of grass silage and 7,000 tonnes of food waste. The feedstock is digested in an anaerobic digester which produces biogas with 96% biomethane content. This is then upgraded and converted into biomethane before being injected into the grid as a substitute gas by Southern Gas Networks, who operate the Southern Region gas network. The project currently injects 400 cubic metres of gas into the local gas grid per hour. CASE STUDY 2: NORTHAMPTONSHIRE POULTRY UNIT In December 2012 Rural Energy completed construction of a single 1 MW biomass wood-chip boiler at a poultry farm in Northamptonshire. The unit, which provides renewable heat for six poultry sheds, replaces fossil fuel heating systems, which used 150,000 litres of liquid petroleum gas (LPG) and 65,000 litres of oil per year, costing 150,000. The biomass boilers enable immediate savings of 120,000 in fuel costs. In addition, the project receives 68,000 per year in RHI subsidies. 4 Clean Energy Pipeline THE RENEWABLE HEAT INCENTIVE

TARIFF CHANGES: THE FOLLOWING TECHNOLOGIES WILL SEE AN INCREASED TARIFF TECHNOLOGY CAPACITY OLD TARIFF NEW TARIFF Ground source heat pumps Small GSHP less than 100kW 4.8p/kWh Tier 1: 8.7p/kWh, Tier 2: 2.6p/kWh (All capacities of GSHPs) Large GSHP of 100kW and above 3.5p/kWh Solar thermal collectors Less than 200kW 9.2p/kWh 10p/kWh Large biomass 1MW and above 1p/kWh 2p/kWh Source: UK Government NEW APPLICABLE TECHNOLOGIES: TARIFFS WILL BE INTRODUCED FOR THE FOLLOWING TECHNOLOGIES TECHNOLOGY CAPACITY NEW TARIFF Air source heat pumps All capacities 2.5p/kWh New deep geothermal All capacities 5p/kWh New solid biomass CHP systems All capacities 4.1p/kWh Biogas Medium biogas (200kW and above up to 600kW) 5.9p/kWh Source: UK Government Large biogas (600kW and above) 2.2p/kWh NON-DOMESTIC RHI TARIFFS (P/KWH) Following the increases to existing tariffs and the expansion of the RHI to new technologies, the following tariffs are available: 10 EXISTING TECHNOLOGIES NEW TECHNOLOGIES 8 p/kwh 6 4 2 0 Tier 1 Tier 2 Tier 1 Tier 2 - Tier 1 Tier 2 - - - SMALL MEDIUM LARGE GROUND SOURCE SMALL MEDIUM LARGE BIOMASS BOILERS HEAT PUMPS BIOGAS SOLAR THERMAL BIOMETHANE INJECTION COMBINED HEAT & POWER AIR SOURCE HEAT PUMPS DEEP GEOTHERMAL New technologies: Only air-to-water heat pumps will be eligible for the scheme. Air-to-air heat pumps will not be. Biogas capacity limits have also been extended beyond 200 KWh, while Energy from waste has been extended to cover industrial and commercial waste. Heat pump eligibility: Extra requirements for ground and air source heat pumps have been introduced, including a requirement for pumps to have a design seasonal performance factor of at least 2.5 and a requirement for ground-source heat pumps with simultaneous heating and cooling to provide quarterly meter readings of electrical input and heat drawn from the ground. Biomass Sustainability: New legislation is being crafted to introduce sustainability requirements for the RHI. This will likely impact the biomass feedstock that can be used. The rules should come into effect in the Autumn of 2014. THE RENEWABLE HEAT INCENTIVE The Lawyer Research Service 5

DOMESTIC RHI Following an 18-month delay, the domestic RHI was launched in April 2014. The domestic RHI is targeted at, but not limited to, homes not connected to the gas grid, of which there are about 4 million in the UK. These homes are typically heated using oil, electricity or LPG, which is on average 50%-100% more expensive than mains gas. DECC hopes the domestic RHI will support 750,000 renewable heat systems by 2020. Applications for the domestic RHI opened on 9 April 2014. Importantly, the scheme also applies to the c.18,000 legacy renewable heating systems that were installed between 15 July 2009 and 8 April 2014. Tariffs are paid on a quarterly basis for seven years based on the technology that is adopted. Tariff levels reflect expected costs of renewable heat generation over a 20- year period. TECHNOLOGY Air-source heat pumps Ground and water-source heat pumps Biomass-only boilers and biomass pellet stoves with integrated boilers Solar thermal panels (flat plate and evacuated tube for hot water only) Source: UK Government 6 Clean Energy Pipeline THE RENEWABLE HEAT INCENTIVE TARIFF 7.3p/kWh 18.8p/kWh 12.2p/kWh 19.2 p/kwh Tariffs for new applicants will decrease by 10% once specified limits, or triggers, of the RHI budget have been reached. A higher limit, the so-called super trigger, has

also been set. A 20% tariff reduction is triggered if this higher budget limit is reached. The government analyses whether a limit has been reached at the end of each quarter. If it has, the government will issue a notice one month before reducing the tariff. Tariff reductions are calculated per technology, not for the overall budget, to ensure that one technology is not allowed to dominate the overall budget. The tariff reduction limits, or triggers, for each quarter through January 2016 are outlined in the table below: ASSESSMENT DATE Biomass boilers Budget trigger Budget super trigger 31-JUL-14 Air source heat pumps Budget trigger Budget super trigger 31-OCT-14 Ground source heat pumps Budget trigger Budget super trigger Solar thermal collectors Budget trigger 31-JAN-15 30-APR-15 31-JUL-15 31-OCT-15 31-JAN-16 2.4 4.2 6 8.4 11.9 15.5 19.1 4.8 8.4 12 16.8 23.9 31.1 38.2 2.4 4.2 6 8.4 11.9 15.5 19.1 4.8 8.4 12 16.8 23.9 31.1 38.2 2.4 4.2 6 8.4 11.9 15.5 19.1 4.8 8.4 12 16.8 23.9 31.1 38.2 1.2 2.1 2.9 3.9 5 6.1 7.2 The triggers are set to manage total RHI spend at around 35 million in 2014-15 and 80 million in 2015-16. Tariff reduction triggers for April 2016 onwards will be published in 2015-16 when the future RHI is known budget. Applications for the domestic RHI opened on 9 April 2014. Importantly, the scheme also applies to the c.18,000 legacy renewable heating systems that were installed between 15 July 2009 and 8 April 2014. Legacy systems must apply in the first year of the domestic RHI scheme in accordance with a phased timetable based on whether systems have received renewable heat premium payments (RHPPs). RHPPs are one-off grants designed to assist homeowners meet the cost of installing renewable heat technologies. They were introduced alongside the nondomestic RHI to provide support for domestic installations before the launch of the domestic RHI. The timetable for applications is outlined below: April 9 July 8, 2014: New and legacy applicants that have not received RHPP can apply July 9 October 8, 2014: New applicants, legacy applicants that haven t received RHPP, and those that applied for a RHPP voucher before May 20, 2013, can apply. October 9, 2014 March 30, 2015: New applicants and all legacy applicants can apply. Year 2 onwards: Only new applicants can apply. Homeowners must pay for a green deal assessment of their home, typically costing 100-150, before being eligible for the RHI scheme. Budget super trigger 2.3 4.1 5.9 7.8 10 12.2 14.4 Source: UK Government THE RENEWABLE HEAT INCENTIVE The Lawyer Research Service 7

APPENDIX Articles published by Clean Energy Pipeline featuring the RHI May 2014: FINANCE BILL 2014 TO EXCLUDE SUBSIDISED UK RENEWABLES FROM VCTS, EISS One of the more insidious changes to emerge from the UK government s March budget announcement is that renewable energy companies benefiting from certain subsidies will be excluded from participating in both Venture Capital Trusts and Enterprise Investment Schemes. The exclusion of certain renewable energy companies from the VCT sector was not previously announced in the Autumn Statement and will affect at least 14 VCTs focused on the renewable energy sector, according to a report in the FT Adviser. Chancellor of the Exchequer George Osborne said in March that legislation in the Finance Bill 2014 will prevent companies that already get subsidies under the Renewables Obligation or the Renewable Heat Incentive from benefiting from either EIS schemes, Seed EIS schemes or VCTs. The changes are not expected to impact investment in anaerobic digestion or hydropower companies that benefit from the feed-in tariff. The government intends to consult on the exclusion of investment in low-risk activities that benefit from income guarantees and will launch a consultation this summer on the need to accommodate investments made through convertible loans in EISs and SEISs. Source: FT Adviser NewsArticle.aspx?articleId=22788 April 2014: INTERVIEW: DOMESTIC RHI COULD CAPTURE UP TO 20% OF HOMEOWNERS, BOLSTER GREEN DEAL The UK Renewable Heat Incentive (RHI) for domestic energy consumers, which was introduced this month following a two-year delay, will tap a market that could grow to account for up to 20% of UK households over the next three and a half decades, according to industry expert Richard Hiblen. Hiblen was brought in to lead UKbased renewable heat installer GreenSquare, which shares the same shareholders as Specflue Ltd., an ancillary heating company that remodelled its business to take advantage of the RHI. I would hope 20% of existing houses will have micro-renewables products by 2050, Hiblen said. Every new-build will have some renewable energy products within the next five years. It s a massive market, [which will increase] over next seven years as we approach the 2020 carbon reduction target. The RHI scheme was introduced to non-domestic energy users in November 2011, but access for domestic consumers was delayed for two years. A major factor behind the delay was the Coalition government s uncertainty over how to introduce the scheme without compulsory metering; with a planned national smart meter rollout not due to start in sincerity until 2019. The domestic RHI is expected to attract far greater uptake than the government s Green Deal energy efficiency programme, mainly because it is an incentive and not a loan initiative, but it could also conversely help boost the ailing scheme. This is because homeowners who want to install renewable heating capacity under the RHI must first complete a Green Deal energy performance assessment. Energy and Climate Change Minister Gregory Barker introduced this prerequisite last year when he announced the tariff rates and structure of the domestic RHI. The cynics said we know why he has done that, said Hiblen, alluding to the lack of significant uptake for the Green Deal more than one year after its introduction. My opinion is that it will totally elicit interest in the Green Deal. Businesses have invested a lot of money in infrastructure [surrounding the energy efficiency scheme]. The RHI still has some way to go until the industry can be certain of strong uptake. Only 87 legacy systems were installed in households that had completed Green Deal assessments, a figure Hiblen branded pathetic. What is interesting about the legacy systems is that they indicate some Green Deal assessments held up as evidence of the success of the scheme have actually been down to the RHI. Hiblen estimates that a small onebed flat that uses at least 10,000 kwh of power per square metre per year would get a biomass boiler incentive under the RHI of about 1,220 per year, based on the 12.2p per kwh subsidy. The 8 Clean Energy Pipeline THE RENEWABLE HEAT INCENTIVE

only downside of this is that the upfront costs are not covered, with payback on the system and installation costs expected after seven years. Every energy performance contract has to be registered with a landlord, said Hiblen. My power usage was 224,000 kwh per square metre. If I get a biomass boiler, I get 3,635 a year for seven years. Biomass has been the overwhelmingly incumbent technology in the commercial segment of the RHI, with over 99% of all installations being biomass boilers, according to Hiblen. This is mainly down to the systems high energy potency. Solar thermal will produce 5% of the energy of a biomass boiler for one-fifth of the cost, said Hiblen. A biomass system could produce 7-10 times as much energy, but the difference is you have to buy the pellets. The RHI pays a generous introductory rate of between 7.3p per kwh for air-source heat pumps and 19.2p per kwh for solar thermal panels. These levels, Hiblen predicts, are sufficient to encourage adoption, but the initially high incentives, paired with steep degression rates, could be misguided. This is because renewable heating is not cheaply installed like plug-and-play solar photovoltaics. The government reduced the entire budget for the domestic RHI scheme from 864 million per year to between 500 million and 600 million, a discrepancy that households are unlikely to recoup in the near term. However, the government could be forced to reinstate some of the missing funds if the degression mechanism stifles future developments, according to Hiblen. If the RHI is as successful as the industry hopes it will be Green Square has already received interest from an influx of assessors interested in working on RHI projects since the introduction of the scheme several weeks ago the budget seems fairly conservative. The budget reduction fits in with the long term economic plan, Hiblen said. Borrowings have to be reduced. What they are hoping is that higher tariffs now will be followed by cost reduction. They will see some success and then they will hit a degression level and installations will stop. It will come to a point where it s not viable. Investors or homeowners interested in installing domestic renewable heating capacity should contact Richard Hiblen, head of Green Square, at rhiblen@greensquare. co.uk. NewsArticle.aspx?articleId=22564 UK LAUNCHES DOMESTIC RENEWABLE HEAT INCENTIVE The UK government today launched the domestic component of its Renewable Heat Incentive (RHI), offering homeowners the opportunity to receive a fixed subsidy for small renewable heat installations. The RHI will offer a seven-year tariff for air-source heat pumps, ground and water-source heat pumps, biomass boilers, biomass pellet stoves and solar thermal water heaters. The non-domestic RHI has been available to commercial, industrial and not for profit and heat networks since November 2011. Source: Government statement NewsArticle.aspx?articleId=22381 THE RENEWABLE HEAT INCENTIVE The Lawyer Research Service 9

INTERVIEW: GOVERNMENT MUST CLARIFY EIS RULES TO ENSURE CONTINUED INVESTMENT IN AD UK investment group Ingenious Clean Energy today announced its first investment in an anaerobic digestion (AD) plant, but may have to reconsider further activity in the AD sector if the British government prevents the use of Enterprise Investment Schemes (EISs) in the industry, the firm s Investment Director James Axtell told Clean Energy Pipeline. Ingenious Clean Energy has invested 4.5 million in an AD plant in Durham based on the premises of specialist chemicals producer Thomas Swann. The plant will produce about 8,500 MWh of electricity per year and supply heat and electricity to the equivalent of 2,600 homes. The equity investment financed the entirety of the project and was provided the Ingenious Energy Efficiency EIS fund, which enjoys a series of tax benefits including a 30% relief on income tax for investments up to 1 million. EIS and Venture Capital Trust (VCT) financing was used heavily to invest in solar and wind power at the beginning of the decade, but the government took steps in 2011 to prevent tax-relief investment in small-scale solar and wind projects that received the feed-in tariff. AD was exempt from the FiT ban because it fits the profile of a less proven technology that requires higherrisk investment than proven forms such as wind and solar. However, the status of tax benefits for AD was thrown into doubt two weeks ago when Chancellor George Osborne announced in the Budget that EIS and VCT funds will also be banned from investing in projects that receive Renewables Obligation Certificates (ROCs) and Renewable Heat Incentive (RHI) support. Osborne failed to make clear in the budgetary announcement whether the exemption that AD enjoys from the FiT ban will be extended to the new rules on ROCs and the RHI. Ingenious has confidence in AD as a viable sector, but would have to carefully consider any future investments if EIS is no longer an option. We are going to keep a watch on whether the EIS ruling is clarified and if it excludes AD with an exemption, said Axtell. If it is not excluded, then we would have to see where investment appetite lies. Although AD projects are proven, they are not risk-free, which is what lends it to the EIS model. The UK government has been a strong supporter of AD to date, extending the sector with favourable ROC levels while simultaneously cutting support for more mature energy from waste technologies. Despite this backing, the AD market in the UK is still underdeveloped, with just 131 installations currently operating compared to 8,000 in Germany. Axtell claimed the sector is well placed for growth in the UK if tax incentives that can attract higher risk capital remain in place. The AD space is something we have been keeping a keen eye on, he said. If you look at the fundamentals of the market, we are still lagging severely behind Germany. The challenge to date has been what the right way is to provide risk capital to AD projects. The Ingenious EIS energy efficiency fund is almost fully invested, but the firm will continue to monitor the space for additional investments that could be made by the current vehicle or any potential successor. Aside from AD, other energy efficiencyrelated sectors targeted by Ingenious include biogas-to-grid systems and ESCO projects that retrofit buildings and equipment to save power costs. NewsArticle.aspx?articleId=22309 10 Clean Energy Pipeline THE RENEWABLE HEAT INCENTIVE

January 2014: INTERVIEW: UK GOVERNMENT SHOULD REINSTATE 430 MILLION OF UNSPENT RHI FUNDS, SAYS INNASOL The UK government should reinstate approximately 430 million of unused Renewable Heat Incentive (RHI) funds that expired this year in order to meet its target to generate 12% of national heat consumption from renewables by 2020, according to David Rae, a Director at UK renewable heating company Innasol Ltd. The government initially allocated about 860 million to the RHI through to 2014 when it introduced the subsidy for commercial installations in 2011 but only half of the allocated budget has since been spent, with the budget for 2015/16 standing at 430 million, 33% less than originally anticipated. The original budget was 860 million, which is dwarfed by more than 12 billion that has been thrown at solar PV and wind, but because the [full] amount of the budget wasn t used upfront, that hasn t been reallocated back, Rae said. The renewable heat industry would like that allocation back so we can make a bigger difference getting to not just our 2020 targets, but our 2050 [targets] of reducing our carbon emissions by 80%. Part of the reason that the designated funds were not fully spent in time is because the government has repeatedly delayed the introduction of the RHI for domestic energy consumers. Although the scheme was originally expected to be available by April 2010, the domestic RHI is now on schedule to be introduced this spring. In July, the Department of Energy and Climate Change unveiled domestic RHI tariffs of between 7.3 pence per kilowatt-hour (p/ kwh) and 19.2 p/kwh for heat pumps, biomass and solar thermal projects. Rae said that delays to the domestic RHI have really impacted the uptake of renewable heating technologies within UK homes. Well over 12 million homes could benefit and save money [from renewable heat] because it s as much as 50% cheaper than fossil fuels, Rae said. A good use of government money is to help people make that switch. The UK government admitted last month that it expects to fall short of renewable heat targets by about two-thirds. The UK aims to meet 12% of the country s heat consumption from renewable sources by 2020 and in July 2011, the coalition government published a renewable energy roadmap forecasting that it could deliver 124,000 renewable heat installations within that timeframe. So far, just 13,000 renewable heat installations have been completed. Eurostat data published in 2010 showed that the UK ranked 25th of the 27 EU Member States by its share of renewables in its heating system, power supply and transport fuels. One solution to the UK renewable heat deficit would be to pump the expired, unallocated funds back into the RHI scheme. We welcome the domestic RHI coming in, but it could be so much bigger, Rae said. What we would like is an increase in the budget for what is a very substantial renewable technology. It s so small compared to what they are throwing money at with fossil fuels. Innosol released a report today highlighting that 78% of the energy used in UK homes is for heating. With energy bills having risen 170% over the past decade, Innosol promotes the use of renewable heating as an effective way of gaining independence from the Big Six energy suppliers. Renewable technologies are now much cheaper to run in your home, Rae said. Not only is [renewable heat] cheaper, but you are then independent from price rises. Air pumps in particular can be installed with ease on rooftops or on the ground in comparison to complex groundsource heat pump installations, and are the main technology applicable to the UK, according to Innosol. While Rae said that the incentive for commercial installations has been effective in promoting uptake of renewable heating among businesses, more needs to be done overall to match the adoption seen in other countries. For example, Germany s installed renewable heat capacity amounts to more than 150 TWh, which is more than double the 60 TWh of renewable heat capacity that the UK is targeting by 2020. About 90% of the German generation is biomass capacity, which Rae said is the cheapest, easiest and most carbon friendly renewable heat technology. If you look to Germany, they ve got 1.4 million renewable heat installations, said Rae. We ve got 13,000 in the UK. [A major factor] is that [Germany] started over 10 years ago. Although reallocating the missing RHI funds would be a good start to meeting the UK s 2020 renewable heat targets, substantially more needs to also be done to promote renewable heat among businesses and consumers, according to Rae. Overall there are 30,000-35,000 systems that will be supported over the next few years by the domestic incentive, he said. That is nothing compared to the 12 million to 13 million homes that it s applicable for. The UK government said last month that it intends to increase the RHI for commercial installations including CHP, biomass boilers, deep geothermal, ground source heat pumps and solar thermal heating and biogas combustion production. Rae welcomed the revisions, which are currently awaiting State Aid approval from the European Union. They ve realised that when they originally set the budget, they didn t understand which technologies were going to be adopted and why, he said. Now they really understand that the key renewable energy [heating] technologies are heat pumps and biomass systems and these are the ones they are focusing the budgets on. NewsArticle.aspx?articleId=21216 THE RENEWABLE HEAT INCENTIVE The Lawyer Research Service 11

December 2013: UK EXPANDS RENEWABLE HEATING INCENTIVE, PREPARES TO LAUNCH DOMESTIC VERSION IN SPRING The UK Department of Energy and Climate Change announced an increase in support for a range of renewable energy sources today as part of a response to consultation on the Renewable Heat Incentive subsidy scheme. There will be an increase in the subsidy for renewable combined heat and power (CHP) installations, biomass boilers above 1 MW in size, deep geothermal, ground source heat pumps, solar thermal heating and biogas combustion. New support measures were also introduced for air-water heat pumps, and commercial and industrial biogas installations above 200 kw. The changes are subject to State Aid approval from the European Union. The RHI pays participants that generate and use renewable energy to heat their buildings. It has been in place for non-domestic customers such as industrial manufacturers, businesses and the public sector since November 2011, and the government intends to launch a residential version of the scheme in spring 2014. Changes have been made because, despite renewable heat use rising 7% in 2012, it has not reached the levels of use that the government hoped for when it launched the RHI, and the amount of renewable heat generated in the UK in 2013/14 is expected to be barely a third of the original target. Renewable Energy Association CEO Nina Skorupska said: Although the scheme has under-performed in its first two years, the Government deserves credit for listening to industry s concerns and implementing many of the necessary changes. Mixed messages from Government have unnerved many in the renewables sector lately, so today s RHI announcement gives a timely boost to the green economy. There is still room for improvement, but what the RHI needs most now is to be left alone for a while, so the market can develop without fear of further changes. DECC announced the changes to the RHI on the same day as it released revised draft strike prices for renewable energy generation in the UK under the contracts for difference subsidy regime. NewsArticle.aspx?articleId=20621 July 2013: RHI DOMESTIC SUPPORT LEVELS OMIT AD The UK government revealed final rates for the domestic Renewable Heat Incentive (RHI) on Friday with a notable exception being subsidy levels for anaerobic digestion and waste wood burning facilities. Continued delays mean the scheme for domestic producers will not be implemented until spring 2014, according to the government, which is well behind its original plan. The government unveiled tariffs of 7.3 pence per kilowatt-hour (p/kwh) for air or water heat pumps, 12.2p/kWh for biomass, 18.8p/kWh for groundsource heat pumps and 19.2p/kWh for solar thermal projects. The tariffs will be paid over a period of seven years. Hybrids (for example combined heat pump and boiler systems) will be eligible for RHI payments, and there will be a metering bonus. Domestic users installing renewable heat today under the Renewable Heat Premium Payment grant scheme, which runs until March next year, will also be able to apply for the RHI when it launches. Source: Government statement/ Company statement NewsArticle.aspx?articleId=18382 ABOUT CLEAN ENERGY PIPELINE Clean Energy Pipeline, the online daily news and data service, is the leading independent source of news, data and analytics about the Clean Energy sector. Our specialist team delivers real-time business news and financial data, as well as research reports, data and senior executive forums. For more information on the findings of this report, please contact Thomas Sturge, Head of Research directly on +44 20 7970 4941 or email thomas.sturge@vbresearch.com. Published by Clean Energy Pipeline A division of VB/Research Ltd. Wells Point, 79 Wells Street London, W1T 3QN, UK www.cleanenergypipeline.com Copyright 2005-2014 VB/Research Ltd.