Scheme budget management

The Domestic RHI tariffs are set by the Department for Business, Energy & Industrial Strategy (BEIS), formerly known as the Department for Business, Innovation and Skills (BIS) and the Department of Energy & Climate Change (DECC). The mechanism that controls these tariffs is known as degression. BEIS have to keep the Domestic RHI within budget and they do this by lowering the tariff rates for new applicants if uptake of the scheme is higher than the approved budget, by either 10% or 20% according to rules set out in the Regulations.

We report to BEIS on the uptake of the scheme on a regular basis. On a monthly basis, BEIS publish how much committed spend this equates to and how close to degression thresholds each of the technologies are, and review whether a threshold has been passed on a quarterly basis. BEIS publish a degression announcement at least a month before any change in tariff is due to take place. Domestic RHI tariff degression can only occur on 1 January, 1 April, 1 July or 1 October of each year; so if there is 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.

If uptake of a technology in a quarter hits a degression threshold, then the tariff for that technology is reduced by 10%. If the uptake in a quarter is much greater than predictions, then a ‘super threshold may be hit. If the super threshold is hit, the tariff rate for that technology is reduced by 20%. If neither threshold is hit, the tariff rate remains the same.

Thresholds are set individually for each technology type (biomass, air source heat pump, ground source heat pump, and solar thermal). Please see Figure 1 on the next page 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 to the scheme after the degression date. Once you have joined the Domestic RHI, your accreditation stays on the same tariff rate for the full 7 years of membership (subject to changes in line with the Retail Prices Index or Consumer Prices Index). If you have more than one accreditation, for example landlords, the tariff for each application is based on when each one was made.

Applications that are being processed when degression occurs and which are accredited under the scheme because they meet the scheme eligibility criteria and application requirements 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, or fail to meet other application requirements, you may have to start again with a new application. The clock would re-set at the date of the new application and therefore the tariff at that date would apply if degression had occurred in the meantime.

To see the quarterly technology threshold table, please see the Reference Document.

The rules are different for a quarter that has followed a tariff reduction. It will also be necessary to consider whether a ‘growth threshold’, or ‘super growth threshold’ has been met. This is designed to help prevent unnecessary tariff reductions when the market has already responded to a tariff reduction.

Full details of the technology specific tariff thresholds and growth thresholds are included in the Domestic RHI Regulations.

Later in 2017/2018, BEIS is planning on introducing a new calculation method to ensure growth is always taken into account - this means degressions won’t occur 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 occur:

  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.

To see the quarterly technology threshold table, please see the Reference Document.