Criteria for Securing a One-Year Extension for Completion of Low-Carbon Heat Projects

Nigel A-F

This bulletin gives an update on policy developments during April 2020. It gives more definitive guidance about the UK Budget and steps being taken to protect projects during Covid-19 constraints.

UK Government Announcement: 28th April

The Government has been reviewing ways to assist organisations, including schools, to maintain momentum with low-carbon heat projects in the light of the impact of Covid-19 on operating budgets and working capacity.

On 28th April the Government confirmed:

  • Beyond the RHI it is going to use regulation to require premises off the gas grid to phase out their high-carbon fossil fuel heating, as opposed to the current financial incentive of the RHI.
  • It will permit a qualified extension to the non-domestic RHI entry deadline until 31st March 2022.
  • The one-year extension is dependent on having first secured a tariff guarantee. This is being called Tariff Guarantee 3 (TG3).
  • Other than this dispensation the non-domestic RHI will close for new entrants as forecast on 31st March 2021.
  • The domestic RHI entry deadline will also be extended to 31st March 2022.

It is the non-domestic RHI that is intended to cover the large projects such as conversion of main buildings, boarding houses, sports halls, etc. The domestic RHI is only useful for smaller projects for domestic premises on school estates.

Comment: This RHI closure is of particular significance for oil burning schools, because if conversions to low-carbon alternatives have not been done by March 2022 then they are may need to be done later in the decade without any major financial support from the Government. Given the high capital cost of these conversion projects this could hit school budgets very hard indeed.

What does this mean in practice?

Any school wishing to start or complete a project that relies on the non-domestic RHI should secure a Tariff Guarantee for the project before 31st March next year. That would earn the school one extra year – until 31st March 2022 – in which to get the installation work completed.

Schools that use oil for heating should note that the RHI represents their best chance to get this done with any substantial government financial support.

Schools should allow about 6 months to get the necessary preparatory work done before applying to Ofgem for the Tariff Guarantee. This preparatory work includes:

  • Completion of the required technical risk reduction and project definition.
  • Confirmation of the design concept.
  • Securing planning permission from the local planning authority.
  • Ensuring financial cover is in place for the project. Note that the RHI is a subsidy, not a grant, therefore capital for the project has to come from somewhere else; but the subsidy in most cases will be large enough to repay the capital over the life of the project.

This preparatory work will require expert assistance: there are technical and procedural Pooh-traps to be avoided.

Covid-19 Restrictions. All of the work required to secure a Tariff Guarantee is feasible under current Covid-19 constraints.

Comment:

  • The conversion of school heating systems to low-carbon technologies is a key step on the route to achieving zero-carbon status. This one-year extension of the RHI, using the Tariff Guarantee 3 route, is therefore a most useful opportunity for schools that have just had to defer projects because of Covid-19; or have only recently started to focus on becoming low/zero-carbon.
  • Renewable heat technology is developing all the time, but the site-specific technical and design work will remain useful for several years, even if it is not used immediately.

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