Renewable Heat Incentive (Amendment to the Energy Act 2008) Regulations 2011

My Lords, there are two sets of regulations before you. The first sets out the details of the renewable heat incentive, which will allow the scheme to start operating. The second enables an amendment to Section 100 of the Energy Act, the primary legislation which underpins the renewable heat incentive. This change relates to our treatment of bioenergy, which I will speak about in more detail later. As with similar financial support schemes the RHI is subject to state aid clearance, which we hope to receive in the next few weeks. The RHI regulations set out our commitment to provide 20 years’ financial support to eligible renewable generators of heat. This means support for technologies such as solar thermal, biomass boilers, ground-source heat pumps and geothermal, to name a few. The full list of technologies supported and the levels of support are set out in the regulations. These are calculated to bridge the financial gap between the cost of conventional and renewable heat systems. Once in the scheme the level of support for participants will be fixed, changing each year only with inflation. Support under the RHI will be available for renewable heat installations in England, Wales and Scotland through these regulations. However, I am pleased that provisions in the Energy Bill will now allow the Northern Ireland Executive to introduce their own RHI in future. The RHI represents a serious investment in our future. It will provide financial support to a wide range of technologies and set us on a path towards rapid change. By the end of the decade, we will see 500,000 jobs created in the renewables industry with the RHI stimulating £7.5 billion of capital investment. Once introduced, the RHI will be available to renewable heat generators in the industrial, commercial, public, not-for-profit and community sectors. We want to see a broad range of businesses and organisations take the opportunity that the RHI offers to change the way they generate heat—for example, with businesses such as restaurants or supermarkets using food waste to generate biogas. Ofgem will deliver the RHI on behalf of DECC. It has significant experience in delivering schemes which provide financial support to renewable energy generators already delivering the renewables obligation and feed-in tariffs. Generators will need to apply to Ofgem to be accredited under the scheme, and the processes they need to undertake are set out in guidance recently published for consultation on their website. Because Ofgem has experience in delivering similar schemes, it will build on experience and existing structures, such as IT systems, to ensure that the RHI operates as effectively as possible. I am pleased that, subject to parliamentary approval of these regulations, Ofgem will be ready to receive applications for the scheme from 30 September this year. To receive a payment under the scheme generators will need to commit to undertake certain ongoing obligations—for example, providing meter readings in order to receive their quarterly RHI payments, maintaining equipment and, in the case of biomass installations, providing information on a number of sustainability issues. This is part of a range of measures to ensure the integrity of the scheme. In addition, for small and medium-sized plants, both installers and the equipment to be installed will need to be certified under the microgeneration certification scheme or an equivalent. I would now like to turn to bioenergy. The second set of regulations amends Section 100 of the Energy Act 2008. This amendment does three things. First, it amends the definition of biogas so that, as well as including anaerobic digestion, it will now also include advanced conversion technologies such as gasification and pyrolysis. The second change prevents the use of peat as biomass fuel. The third corrects a previous omission by adding biogas to the list of eligible sources of energy. These are important changes, as we believe that bioenergy is critical to meeting our renewable energy targets. We expect it to contribute over half of the over sevenfold predicted increase in renewable heat by 2020. However, we are also aware of concerns that the increasing use of biomass raises, particularly with regard to issues around sustainability and air quality. In the RHI regulations we have addressed these concerns by including sustainability reporting criteria from the outset of the RHI, and will use existing legislation to cover restrictions on air quality for large-scale biomass. For installations below 20 MWth we will introduce emission limits in our RHI legislation when phase 2 of the scheme is implemented. Finally, I would like to set out our position on the funding of this scheme. Last October, as part of the coalition Government’s spending review, we announced £860 million of funding for the RHI scheme to 2014. We have listened to feedback that previous proposals to fund the scheme through a levy on fossil-fuel suppliers would be unworkable, so instead the scheme will be funded through general taxation. Therefore I commend these regulations to the Committee.