Overview

The Department of Energy and Climate Change’s recent consultation on the proposed Renewable Heat Incentive scheme (RHI) said that:
“A decision on how the RHI will be funded will be made at Budget 2010. Ultimately we believe the costs will be passed on to consumers.”

In the event, the latest budget passed without any mention of funding for the RHI. Although this may be disappointing for some, it is perhaps unsurprising given the complexity of the task. The Energy Act 2008 envisaged funding from heat fossil fuel suppliers (ultimately via increased consumer energy bills), but this now appears less likely following industry lobbying and complications inherent in the sheer number of such suppliers.

The recent Feed in Tariff scheme (FIT), which incentivises electricity generation from small-scale solar, wind and other renewable energy sources already means that energy bills will rise to fund FITs, and it is possible that the government is awaiting more information on the popularity (and therefore the cost to electricity consumers) of the FIT before making any announcement on RHI funding at or after the October spending review.

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