Saturday 20 April 2013

You Just Couldn’t Make This Up

Government Interventions in the Market for Domestic Scale Renewable Heat, and how to make it all better

Less incredible?
Imagine you work in government and you've been asked to really slow down the development and growth of a new industry. How would you go about it?

How about just outlawing it? You could pass a law that makes it illegal.  Bit too obvious for your tastes?  Perhaps not clever enough?  Yes, you're right.  It could get messy, people might protest, take you to court, that kind of thing.  

OK then, how about about this?  Why not announce a scheme that is going to actually pay a subsidy to people who buy the products this industry produces, but that its going to start in 12 months' time.  Anyone thinking of buying will wait for this scheme to start,  so no one will buy anything this year. 

Then, just before you were going to launch it - delay it for another year. 

Then do the same again. And again. Genius!   

Hmm, what if people spot that the delays will damage the industry, and moan about that?

Easy - just announce that anyone buying the products from now on will be able to get the payments once the scheme launches, (subject to qualifying criteria), so there's no reason to wait.  Then keep those qualifying criteria secret because you "haven't decided what they should be".

The great thing about this plan is that you can even claim that you're helping the industry as sales fall and businesses go to the wall. 

Why stop there?  Why not start a wildly generous subsidy scheme for similar products that people could buy instead.  MWA HA HA

Does this sound crazy? Unbelievable?  Like you couldn't make it up?

Stranger than Fiction

Unfortunately, this is exactly what the Department of Energy and Climate Change (DECC) has done to the UK's market for domestic-scale renewable heat. 

Filsol, Solartwin, Genersys, Sundwell...

As the roll-call of UK renewable heating companies that have got into difficulty continues to grow, the domestic Renewable Heat Incentive (RHI), originally announced in 2010 and due to start in April 2011 has been delayed again and again, most recently being put back from summer 2013 to spring 2014. 

Installation companies have largely given up on promoting the "forthcoming" RHI as they are embarrassed to have to field calls from customers who bought low-carbon heating systems on the back of previous government announcements. One well-known Bristol based solar installer quipped to the solarblogger recently that you could put "RHI starting next year" on your website and you never have to update it. 

Renewable heating companies used to moan about how DECC, the government body charged with encouraging the transition to a low-carbon economy, increasing energy independence and protecting the environment, was too focused on decarbonising electricity, and was neglecting the task of decarbonising energy used for heating.  

Maybe they'll be more careful what they wish for in future.  

Unlike some of his more cynical colleagues, the solarblogger doesn't see conspiracy here, just a well-meaning, but ultimately extremely damaging intervention in the market.

Government urgently needs to make a strong statement to the market and consumers that it truly is behind renewable heat, and that the industry is not just the butt of some cruel joke with a particularly long and drawn out punch line...

How to Fix This

A good start would be to increase the Renewable Heat Premium Payment (RHPP).  This is a stop-gap grant scheme, that was to run from  April 2011 for one year. It's now about to start its third year, running to spring 2014. 

The recent consultation on the domestic RHI proposed that anyone applying for the RHI who was already in receipt of an RHPP would get the RHI payments less what they'd already been paid.   

Perfect!  If government really is serious about introducing the domestic RHI they could announce a doubling of the RHPP right now and at no net cost.

A solar heating installation would qualify for £600 grant, air source heat pump £1,700, a biomass boiler £1,900 and a ground source heat pump £2,500.

The next thing that is needed is that the announcement of RHI tariffs in summer 2013 must be complete and unambiguous.  It must not only confirm tariff levels, but also qualification requirements, and the deeming methodology.  With this is in place, consumers will be able to install with absolute confidence.

The industry would at last have something to cheer, and we could launch the domestic RHI next spring with a vibrant, growing renewable heating sector. 

You may also be interested in the following posts:

The Domestic RHI for Solar
Let's Get Down to Brass Tacks