Scheme budget management

The Government has introduced changes to the Domestic RHI Regulations. Changes were introduced in two stages. The first stage of changes to the Domestic Scheme came into effect on 20 September 2017. The second stage came into effect on 22 May 2018.

For more information about changes to the scheme and what they mean to you, please see our changes to the scheme webpage and our Factsheet: Important changes to the Domestic RHI Scheme.

The Domestic RHI tariffs and overall budget controls are set by the Department for Business, Energy and Industrial Strategy (BEIS). The mechanism that controls these tariffs is known as degression.

BEIS has to keep the Domestic RHI within budget and it does this by lowering the tariff rates for new applicants if uptake of the scheme is higher than expected and estimated spend exceeds set expenditure thresholds. BEIS does this in accordance with rules set out in the scheme Regulations.

We report to BEIS on the uptake of the scheme on a regular basis. BEIS publishes how much committed spend this equates to, how close to the expenditure thresholds each of the technologies are on a monthly basis, and reviews whether a threshold has been passed on a quarterly basis. BEIS publishes a degression announcement at least a month before any change in tariff is due to take place. Domestic RHI tariff degressions can only occur on 1 January, 1 April, 1 July or 1 October of each year. For example, if there’s due to be a degression on 1 January, BEIS must make an announcement by 1 December at the latest. The announcement includes which technologies are affected, and what the new tariff rates for those technologies will be for new applications.

Generally, if uptake of a technology in a quarter hits a technology and growth degression threshold, then the tariff for that technology is reduced by 10%. If the uptake in a quarter is much greater than predicted, then a “super technology” or “super growth” threshold may be hit. If both ”super thresholds” are hit, the tariff rate for that technology is reduced by 20%. If neither threshold is hit, or only a technology threshold, the tariff rate remains unchanged.

When the second stage of new regulations came into effect, BEIS introduced a new rule to ensure growth is always taken into account - this means degressions won’t be triggered when the number of accreditations for a particular technology has significantly slowed. This is designed to help prevent further degressions when the market has already responded to a tariff reduction.

There are three scenarios in which a degression can be triggered:

  1. If the estimated budget spend for a specific technology is above the ”technology threshold” and the growth in the estimated spend is also above the ”growth threshold”, the tariff for that technology will be reduced by 10%.
  2. If the estimated budget spend for a specific technology is above the ”super-technology threshold” and the growth in estimated spend is also above the ”super-growth threshold”, the tariff for that technology will be reduced by 20%.
  3. If the estimated budget spend for a specific technology is above the ”super-technology threshold” and the growth in estimated spend is also above the ”growth threshold”, but less than the ”super-growth threshold”, the tariff for that technology will be reduced by 10%.

In all other circumstances, there will be no degression.

Thresholds are set individually for each technology type (biomass, air source heat pump, ground source heat pump, and solar thermal) – see Figure 1 for the specific thresholds for each technology. If a tariff is reduced because a threshold is hit, a notice is published at least a month before the tariff is due to reduce. We publish all tariff tables on our website.

A tariff reduction only affects people who are applying on or after the degression date. Once you have joined the Domestic RHI, your accreditation stays on the same tariff rate for the full seven years of membership (subject to the Retail Price Index or Consumer Price Index). If you have more than one application - for example, if you’re a landlord – the tariff for each application is based on when each one was made.

Applications that are being processed when a degression occurs (ie. which are “in review”) and which go on to be accredited are not subject to future tariff changes caused by degression.

If you submit an application but it does not meet the eligibility criteria, or you fail to submit requested information in the time period specified by us, you may have to start again with a new application. The clock would reset at the date of the new application and so the tariff at that date would apply - if a degression had occurred in the meantime, the degressed tariff would apply.

Full details of the technology specific expenditure and growth thresholds are included in Schedule 6 of the Domestic RHI Regulations (and subsequent amendments).

The latest thresholds will be published in the amended Domestic RHI Regulations 2018.