The Minister for Communications, Climate Action and Environment, Denis Naughten TD, is introducing a national Support Scheme for Renewable Heat after securing Government approval.
The Scheme is designed to financially support the replacement of fossil fuel heating systems with renewable energy for large heat demand non-domestic users. This covers commercial, industrial, agricultural, district heating, public sector and other non-domestic businesses and sectors (in the non-emissions trading sector).
Minister Naughten said:
“The Support Scheme for Renewable Heat is a tangible and viable measure that will kick-start the biomass and biogas sectors. Crucially it will provide the basis to create new commercial opportunities for farmers in heat technologies including biomass boiler installations and new opportunities for foresters. It will also contribute to meeting Ireland’s 2020 renewable energy and emission reduction targets”.
Under the 2009 Renewable Energy Directive, Ireland has a target of 12% of energy consumed in the heat sector to come from renewable energy sources by 2020. Currently 6.8% of energy consumed in the heat sector in renewable.
Budget 2018 allocated €7 million to fund the initial phase of the Support Scheme for Renewable Heat next year.
The Scheme is designed to ensure that air quality impacts will be addressed to support sustainable biomass use in installations, using best available technology and emission abatement.
The development of the Support Scheme involved detailed economic analysis, extensive engagement with industry and the publication of two public consultations on the design and implementation of the scheme.
“My Department received almost 200 submissions from the public and the final design of the scheme incorporates the findings from these submissions,”
added Minister Naughten.
The Support Scheme for Renewable Heat will consist of two types of support mechanism:
- An on-going operational support (paid for a period up to 15 years) for new installations or installations that currently use a fossil fuel heating system and convert to using biomass heating systems or anaerobic digestion heating systems
- A grant (of up to 30%) to support investment in renewable heating systems that use heat pumps.
The maximum tariffs paid will be 5.66 cents per kilowatt hour of energy produced from biomass heating systems and 2.95 cents per kilowatt hour of energy produced from anaerobic digestion heating systems. The tariffs paid will reduce with increasing output reflecting the economy of scale associated with larger systems.
The Minister added:
“The economic analysis shows that biomass and anaerobic digestion have a significant role to play in Ireland’s renewable energy future.”
Other technologies and methods of support are under consideration, including biomethane grid injection, for subsequent phases of the Scheme.
The Minister noted:
“The production of biomethane from anaerobic digestion and its injection into the natural gas grid has significant potential in Ireland. In addition to being a source of renewable energy, it can also provide an outlet for farm wastes. My Department continues to examine how best to support biomethane production and, as part of this work, we will be holding a workshop with industry early in the new year.”
Highlighting the budgetary control measures in place, Minister Naughten added:
“The lessons learned from schemes in other jurisdictions have been included in the design of this support scheme. In particular, there are eligibility criteria that projects must conform to over the period of support payments. These criteria will ensure that heat generated under the Scheme is applied to useful purposes only. In addition, there are a number of budgetary controls in order to control overall costs including project budget caps, a Scheme budget cap and periodic reviews to prevent windfall gains.”
The Sustainable Energy Authority of Ireland (SEAI) will administer the Scheme and develop the detailed Terms and Conditions, including eligibility and sustainability criteria and these must be approved by the Minister for Communications, Climate Action and Environment.
Minister Naughten concluded:
“Securing Cabinet approval this week was a key milestone in order to move to the next stage of the Support Scheme for Renewable Heat which will provide an opportunity for growth in the domestic biomass sector.”
Notes for Editors
The proposed tariffs for the Scheme are:
Tier | Lower Limit (MWh/yr) | Upper Limit (MWh/yr) | Biomass Heating Systems Tariff (c/kWh) | Anaerobic Digestion Heating Systems (c/kWh) |
1 | 0 | 300 | 5.66 | 2.95 |
2 | 300 | 1,000 | 3.02 | 2.95 |
3 | 1,000 | 2,400 | 0.50 | 0.50 |
4 | 2,400 | 10,000 | 0.50 | 0.00 |
5 | 10,000 | 50,000 | 0.37 | 0.00 |
6 | 50,000 | N/A | 0.00 | 0.00 |
The need for a renewable heat incentive is set out in the National Mitigation Plan, the Energy White Paper and the Programme for Government. The primary objective of the scheme is to increase the level of renewable energy in the heat sector. This will contribute to meeting Ireland’s 2020 renewable energy targets and reduce greenhouse gas emissions.
The scheme is aimed at supporting larger industrial and commercial installations outside of the EU Emissions Trading System (ETS) to change to heating solutions that produce heat from renewable sources. Budget 2018 allocated €7 million to fund the initial phase of the scheme. State Aid clearance from the European Commission will be required before the scheme can commence operation.
Why introduce a renewable heat incentive?
Under the 2009 Renewable Energy Directive, Ireland has a target of 16% of gross final energy consumption to come from renewable sources in 2020 with sub-targets for the electricity (40%), transport (10%) and heat (12%) sectors. In 2016, Ireland had reached a level of 6.8% (with a target of 12%) in the heat sector. The Government has introduced a range of measures across the electricity and transport sectors to help meet our targets, and a renewable heat incentive will expand this suite of support measures into the heating sector. The scheme will support the adoption of renewable heating systems by commercial, industrial, agricultural, district heating, public sector and other non-domestic heat users not covered by the emissions trading system.
How does this support scheme differ from other countries?
The lessons learned from similar schemes in other jurisdictions have been integrated into the design of this support scheme, as set out in the Scheme Overview (attached)
In particular, there are eligibility criteria that projects must continue to conform to over the period of support payments (of up to a maximum of 15 years). These criteria will ensure that heat generated is applied to useful purposes only.
In addition, there are a number of budget management mechanisms – including project budget caps, a scheme budget cap and periodic reviews to prevent windfall gains.
What will be supported under the Support Scheme?
Based on the economic analysis carried out, the scheme will support projects through one of the following support mechanisms:
- An on-going operational support (paid for a period up to 15 years) based on useable heat output in renewable heating systems in new installations or installations that currently use a fossil fuel heating system and convert to using the following technologies:
- Biomass heating systems;
- Anaerobic digestion heating systems.
- A grant (of up to 30%) to support investment in renewable heating systems that use the following technologies:
- Air source heat pumps;
- Ground source heat pumps; and
- Water source heat pumps.
Other technologies and methods of support continue to be under consideration (including biomethane grid injection) for subsequent phases of the scheme.
How will the payment system for operational support work?
This support consists of a multi-annual payment (for a period of up to 15 years) on the basis of prescribed tariffs. The maximum tariffs paid will be 5.66 cents per kilowatt hour of energy produced from biomass heating systems and 2.95 cents per kilowatt hour of energy produced from anaerobic digestion heating systems. The tariffs paid will reduce with increasing output reflecting the economy of scale associated with larger systems. The tariffs are detailed in the Scheme Overview.
Each tariff will set the amount of support that the Scheme participant will receive in respect of each unit of heat energy used for an eligible purpose. The tariff level for a particular project will generally be fixed for the period of support. Tariff levels will not be linked to indexation. However, adjustments may be applied to prevent windfall gains.
The payment under the Support Scheme will be tiered based on the annual heat output (on a per kWh basis).
The participant will receive a payment according to the tariff (c/kWh) for Tier 1 up to the first threshold value; heat output greater than that threshold will be paid at a lower tariff level up to the Tier 2 threshold, and so on for higher Tiers. Since the cost of generating renewable heat typically falls with increasing installation size, the tariff will reduce from one Tier to the next. Therefore, the more renewable heat produced the less the applicant will get paid per unit output.
What is covered by the installation grant?
The installation grant will support up to 30% of the cost of heat pumps (air source, ground source or water source).
Who will administer the support scheme?
The Sustainable Energy Authority of Ireland (SEAI) will administer the scheme and will be responsible for its operation, including evaluating and processing applications. The SEAI will also develop the draft Terms & Conditions of the Scheme for review with approval by the Minister for Communications, Climate Action and Environment.
When will the Scheme commence operation?
The next steps will be to develop the Terms & Conditions and seek European Commission State Aid approval. Subject to this approval, it is expected that the scheme will commence operation in 2018.