1. Financing Renewable Energy: an introduction to FITs and RHI Andrej Miller Renewable Financial Incentives Office of Renewable Energy Deployment andrej.miller@decc.gsi.gov.uk

2. 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 2

3. Costs of renewables

4. 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 4

5. 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 5

6. I 4500kWh FITs in practice Non-generation household Only imports electricity Billed by their supplier based on meter readings of kWh imported 6 U 4500kWh

7. FITs in practice Non-generation household Only imports electricity Billed by their supplier based on meter readings of kWh imported 7 U 4500kWh I 4500kWh Import tariff

8. FITs in practice Avoided costs 8 8

9. FITs in practice Avoided costs Export tariff 9 Avoided costs 9 Generation tariff Avoided costs Import tariff (on fewer kWh) Export tariff

10. Differs by technology and by scale FITs in practice Avoided costs 3p/kWh Export tariff 10 Avoided costs 10 Generation tariff Avoided costs Import tariff (on fewer kWh) Export tariff

11. 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 11

12. Heat is half the battle Heat, including electrical heating, accounts for around: 46% of primary energy consumption 47% of UK CO 2 emissions, and 42% of all greenhouse gas emissions 54% of heat use is domestic; 30% industrial; and 16% commercial/public sector

13. 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

14. 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

15. 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 15

16. 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 industrys need for clarity Will be making further announcements in the autumn 16

17. Scale of delivery Estimated numbers of RHI installations in 2020: Estimated numbers of FITs installations in 2020: Additional renewable resource in 2020 TWh1,000 installations Domestic111,728 Non-domestic62144 Total731,872 Additional renewable resource in 2020 TWh1,000 installations Domestic1.7750 Non-domestic4.330 Total6780