The Renewable Heat Incentive (RHI) is a scheme to encourage a switch from fossil fuel heating systems to renewable and low-carbon alternatives in homes and business premises in Great Britain. It supports the government’s approach towards meeting EU renewable energy obligations (by 2020) and UK statutory carbon reduction targets (out to 2050).
This report assesses the value for money of the RHI for Great Britain only (the Northern Ireland RHI does not fall within the scope of this report). It explains the rationale for the design of the RHI, the approach to implementation and take-up to date by homes and businesses. It also examines progress against the objectives of the RHI, the cost-effectiveness of the scheme and how the Department for Business, Energy, Industry and Skills (the Department) and Ofgem monitor progress and learn lessons. Finally, it assesses the Department and Ofgem’s approach to controlling costs and managing the impact of fraud, non-compliance and gaming.
The report concludes that the Department needed to increase rates of renewable and low carbon heating in order to meet the UK’s legal obligations, and the RHI is a novel approach to making progress against these obligations and identifying longer-term options for eliminating carbon emissions from heat production. The Department showed flexibility in rolling out the scheme, adjusting scheme objectives to respond to a changing strategy and over-optimistic initial planning assumptions and it is learning lessons for the future. Measures it introduced to control the scheme’s costs have enabled it to avoid the budget control problems that occurred on a similar scheme in Northern Ireland.
However it also concludes that the Department has not achieved value for money. It does not have a reliable estimate of the amount it has overpaid to participants that have not complied with the regulations, nor the impact of participants gaming them, which could accumulate to reduce the scheme’s value significantly.