Micropower Council urges government to address investor uncertainty over renewable heat incentive cost controls
On 26th March 2012 the Department of Energy and Climate Change launched a Consultation proposing the introduction of a cost control mechanism for the Renewable Heat Incentive (RHI); a measure that would suspend the RHI until the next financial year "should estimated spending - based on applications and accreditations - reach a level where the budget could be breached".
The announcement came as a bolt from the blue to industry stakeholders with no prior hints of a suspension budgetary control measure coming from DECC. This mechanism is to be introduced to act as an interim budgetary control mechanism until a flexible degression-based system can be implemented. DECC have plans to consult on a longer term cost control mechanism in July 2012.
Although DECC do not anticipate this measure being needed, they see it as a precautionary step, to protect against a feed-in tariff style demand rush, which could undermine the long term viability of the RHI scheme.
Industry fear that although the intention is to provide an intermediary solution to budgetary overspend, DECC are instead creating investor uncertainty. Stakeholders and investors alike will be keen to see this temporary mechanism build a platform upon which a reliable, long term scheme can be built.
To deliver this, the proposed cost control mechanism must look to:
• Be time limited and withdrawn as soon as a longer term cost control mechanism has been implemented.
• Monitor progress towards the budget and report it in a transparent and easily accessible way.
• If a suspension occurs, avoid deferring the re-introduction of the RHI at the start of the next financial year, even if tariffs need re-aligning for certain technologies.
• Provide a notice period of one week before the suspension of the scheme, to allow 97 per cent of the budget to be spent, and to reduce the risk of speculative applications. Introduce optional pre-accreditation for all technologies at all sizes to increase investor certainty.
To view the consultation in full please click here or the accompanying impact assessment can be accessed here.
This sponsored article was provided by Micropower Council
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