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


  1. The fact that the Government dangled the carrot of incentives in the first place is what has stalled the industry, why they announce an incentive scheme that is not ready to launch is beyond me, not only that but it was first announced 3 years ago, the offering of an incentive from the Government has led to the public believing that renewables are only viable with some sort of grant, we would of been better off if the Government had kept their nose out, we could of been selling renewables based on the energy savings and so lower running costs, I am sure the market would be in a better position now 3 years down the line if we had sold this way, rather than the Government dangling a carrot that they were either not ready to launch, or had no intention of launching

  2. Well said Stuart... though increasing the RHPP would make it look dangerously like a grant, and of course the government are allergic to grants!! and no chance for giving OFGEM any remit to manage an enormously complex regulatory system

  3. All fair points and much similar sentiments to my commentary over recent years. However, having been in the heat of the action a while back, the blame can not be simply laid at DECC's feet. Yes they have been weak and confused as they lost their management being churned into other sectors. But who else was on watch as this slow car crash evolved ?

    Ladies and Gentlemen, our various lobbyists and trade representatives must stand forward and admit it was on their watch that the ship sunk ! We still have a confusing myriad of solar this, generation that and heat & power the other. If you were in the government, how would you resolve so many differing voices ?

    I didn’t like the sound of the RHI the first day I heard it. It was an appeasement invented by PV hot-head lobbyists who gave the administration of the time one less excuse to hold back from a supposed low-Co2 heaven of the FiT. A few of us then, as we do now, shook our heads knowing the gloopy reality of measuring heat to any decent margin of error let alone one that James Prescott Joule would refuse to acknowledge could be meaningfully measured were he still here. Pity then the Stanford University researchers who now tell us the PV industry still hasn’t paid off its net energy debt and won’t maybe until 2015. That PV energy balance has to balance from crystal bath cradle to landfill grave or else the IEA’s recent statements that global efforts to decarbonise energy have completely stagnated will remain with us quite a while longer. Or is CO2 no longer the driver after all ?

  4. This is good stuff, you are justifiably frustrated Stuart.

    I'll add another reason why the combined effect of the PV-FiT and the non-RHI is so damaging. It's the perverse incentive that FiT customers have been given to heat their water with spare PV electricity. As you'll all know, the payments for export to the grid are deemed and not metered so there is no reason to export if you can use the electricity within the home.

    I recently wrote to Greg Barker on this and he said in reply that he was 'not aware of a widespread practice to install products to divert spare generation to the immersion heater to heat the water tank'. He also said he was not 'aware that the FITs for PV was diverting interest in solar thermal'.

  5. Thanks Ed, that is a staggering fact to hear about from Greg Barker - 'FiT's for PV not diverting interest from solar thermal'

    Every single lead or enquiry at the moment we get is for PV and/or PV with an water heating add on - no one cares or knows about solar thermal anymore.

    Could you Greg Barkers reply in full for me?

  6. Brilliant blog by the way stuart, I am promoting it on my facebook page as well..

  7. I agree with your comment Ed, I have been trying to make people aware of this for some time, but generally it falls on deaf ears. Not only is heating water with PV ineffiecient, it means any benefit of PV "feeding in" to the grid is lost. It should more accurately be called a generation tariff becuase a feed in tariff would incentivise "feeding in" more than "generating". With the renewables market so depressed at the moment most companies are just grateful for any work at all: I'm sure this is the key to the strong promotion of these products

    Unfortunately people generally only care about the money... Having done solar thermal installtions for 10 years I find this very frustrating.

    I think it is no surprise that the UK's energy stock is the least well insulated across Europe but our energy prices are the cheapest... If we insulated our houses as well as possible and destroyed some of the perverse incentives with a more sensible energy taxation / strategy, solar thermal could be contributing significantly more to our countries energy reduction: but as it stands it is marginalised compared to PV. Its diffcult to know where to start on how we could improve this situation, on the bright side the only way (I hope) is up!

  8. Hi Stuart,

    Great article, summarises the situation beatifully. Since you deal with the nice people at DECC you have been far nicer than I would have been.

    I think that what is relevant to the discussion is that the millions of pounds that DECC have spent on 264 additional staff (26% increase) since the last elections.The increase in staff has not resulted in any decisions around the RHI. One could speculate that 264 staff could cost between £8,000,000 and £10,000,000 a year. The millions could have been better spent on RHI payments or RHPP. At an average of 2000 kWh per year output and payments of 17 p/kWh, that would fund 29,411 domestic solar installations.

    Another point that I would want to raise with Greg Barker is that on the 6th of March at Ecobuild he announced that he planned to bring forward the domestic RHI. Three weeks later, on the 26th of March, he announces that the RHI is being delayed by another year. Is this the same bloke!

    According to a report in the Daily Mail (which I can’t substantiate), the UK government has given £31 million to Turkey to develop wind power and geothermal. That investment would make a massive contribution to the UK solar thermal industry. Charity begins at home….

    Isn't it time the solar thermal industry stood up and made itself heard? Why don't we march on Westminster the way the PV folks did when the tariffs were cut?

  9. The government have the total support of REA/REAL and Gemserv (big 6) They are all partners and have designed everything to make sure the sector doesn't grow. This enables the big 6 to keep control of the energy market and keep the profits rolling in. They have the power and will not give it up. The big con is getting small business to pay for training and accreditation that they will never be able to use.

  10. Rick Greenough9 May 2013 at 14:38

    I have just come across this excellent blog and have found it very useful to catch up on developments in this fast moving industry. Having enjoyed over a year of solar thermally heated water (thanks Kai) and just started down the path to domestic PV, I have to agree with comments by Ed and Ben. Many of the PV installers at Eco-build were selling immersion heater switches and all of the people who have quoted for my PV installation tried to sell them to me. I must be one of the few who refused due to my existing solar thermal set-up! Ben is quite right to say that the FiT has little to do with 'feeding in' and is mostly about generation - especially if more people choose to use what they generate thanks to immersion heater switches and those nifty energy monitors that help householders to shift the timing of their electrical loads. From what I know of research in mainland Europe, solar thermal seems to have an excellent future. This government should be acting much more intelligently to help the UK be a part of this future.

  11. This comment has been removed by a blog administrator.