Financing Renewable Energy: an introduction to FITs and RHI Andrej Miller Renewable Financial Incentives Office of Renewable Energy Deployment [email protected]
Mar 30, 2015
Financing Renewable Energy: an introduction to FITs and RHI
Andrej MillerRenewable Financial Incentives
Office of Renewable Energy [email protected]
Why new incentives?
• EU Renewables target– Currently no incentive scheme for heat
• Carbon targets• Instrumental in changing behaviour• Need simple incentives - particularly at small scale• Associated benefits including:
– Security of energy supplies– Economic benefits, new jobs
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Costs of renewables
FITs - key features
• 5MW limit• Support for:
– Solar photovoltaic– Wind– Hydro– Anaerobic digestion– Domestic scale micro CHP (2kW)
• Tariffs provide 5-8% returns, indexed to RPI for 20-25 years• Degression: year-on-year reduction of tariffs for new
installations in line with cost reduction predictions• MCS/RO accreditation
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Tariffs structure
• A payment for every kWh generated– Generation tariff
• An additional payment for every kWh exported / spilled to the local electricity network– Export tariff
• Additional benefit from usage of electricity “on-site”– Avoided costs
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I4500kWh
FITs in practice
• Non-generation household• Only imports electricity• Billed by their supplier
based on meter readings of kWh imported
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U4500kWh
FITs in practice
• Non-generation household• Only imports electricity• Billed by their supplier
based on meter readings of kWh imported
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U4500kWh
I4500kWh
Import tariffImport tariff
FITs in practice
Avoided costs
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Avoided costs
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FITs in practice
Avoided costs
Export tariff
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Avoided costs
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Generation tariff
Avoided costs
Import tariff (on fewer kWh)Import tariff (on fewer kWh)
Export tariff
Differs by technology
and by scale
Differs by technology
and by scale
FITs in practice
Avoided costs
3p/kWh3p/kWh
Export tariff
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Avoided costs
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Generation tariff
Avoided costs
Import tariff (on fewer kWh)Import tariff (on fewer kWh)
Export tariff
FITs launched on 1 April
• ~6000 installations transferring from Renewables Obligation
• ~2000 new installations so far, majority PV• Seeing third party provision of solar panels –
company supplies PV panels and claims FITs, homeowners get free electricity
• Some plans for large scale PV
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Heat is half the battle
Heat, including electrical heating, accounts for around:•46% of primary energy consumption•47% of UK CO2 emissions, and•42% of all greenhouse gas emissions54% of heat use is domestic; 30% industrial; and 16% commercial/public sector
RHI consultation proposals
• All scales – domestic to industrial• Wide range of technologies – must count towards
renewables target under Renewable Energy Directive:– Ground and air source heat pumps– Biomass boilers – heat only and heat from CHP– Solar thermal– Biogas combustion (anaerobic digestion of wastes)– Biomethane injection into the gas grid
• Only installations completed post 15 July 2009
Tariff setting proposals
• Compensate for cost difference between renewable and fossil fuel heating
• Rate of return of 12% (6% for solar thermal)• Plus compensation for barrier costs and inflation
adjustment• Tariff lifetime = expected equipment lifetime (10-23 years)• No degression until first review• Fixed tariffs (grandfathering)• Deeming of heat load to prevent over-generation
Consultation feedback
• ~700 responses from a range of people, organisations and business
• Broadly supportive of proposals• Key issues raised included:
– Microgeneration Certification Scheme– Energy efficiency– Backup boilers– Inclusion/exclusion of certain technologies– Support levels/banding for certain technologies– Sustainable supplies of biomass
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What now on RHI?
• Consultation closed on 26 April – proposals made under previous Government
• New Government committed to renewables target and renewable heat but also need to consider the costs of all policies, including RHI
• Aware of renewable industry’s need for clarity• Will be making further announcements in the
autumn
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Scale of delivery
• Estimated numbers of RHI installations in 2020:
• Estimated numbers of FITs installations in 2020:
Additional renewable resource in 2020
TWh 1,000 installations
Domestic 11 1,728
Non-domestic 62 144
Total 73 1,872
Additional renewable resource in 2020
TWh 1,000 installations
Domestic 1.7 750
Non-domestic 4.3 30
Total 6 780