The incentive, due to come into force next April, is the government’s mechanism for encouraging homes and businesses to generate heat from renewable sources. It will pay owners of equipment such as biomass boilers and solar thermal units a subsidy per kilowatt-hour (kWh) of heat generated (ENDS Report 421, pp 46-47).
The incentive could be paid for by a levy on fossil fuels and that would increase industrial energy bills by 20-30%. But the business organisations have labelled the rises as unsustainable.
The consultation closed on Tuesday and many of the responses seen by ENDS agree such a funding mechanism is unworkable.
“For those industries with high-grade heat requirements, the RHI will be no more than a punitive measure, which will increase energy prices without any bearing on their ability to move away from fossil fuels,” says the CBI.
Glass, metal, cement and chemical manufacturers cannot use biomass to meet their heat needs because it does not produce high enough temperatures. If bills rose by 20%, the competitiveness of these firms would be undermined.
The point is echoed in responses from manufacturers’ federation EEF and the UK Petroleum Industry Association (UKPIA). “The risk of further UK refinery closures would become a very real possibility, leading to import substitution on a far larger scale than EU markets can supply,” UKPIA’s response says.
Steel manufacturer Corus says any rise in energy bills would “not only affect our competitiveness, but would directly affect our ability to decarbonise.”
The incentive should either be funded through general taxation, or through an extension of the climate change levy (CCL), the CBI suggests. But those businesses already receiving a discount on the CCL through climate change agreements should not have to pay more, it advocates.
None of the above responses are yet available online.