NEW RHI

The new Renewable Heat Incentive (RHI) Scheme Regulations 2018 have been published and subject to parliamentary approval, are expected to be introduced in April 2018.

Headline Benefits

  • New biomethane RHI tariff will start at 5.60p for Tier 1 from April 2018 (adjusted June 2016 tariff) - (currently 3.20p).
  • You can apply for a Tariff Guarantee if you have:
    • Full planning.
    • A valid Connection Agreement from your pipe-line Operator.
    • Independent verification in ISAE3000 format that you have financial close for the full construction cost (so £10 – £15 million) within 3 weeks of getting a Provisional Tariff Guarantee Notice (PTGN) from Ofgem.

ChallengeS

  • Crop feedstock payments limited to 50% of methane produced.
  • Feedstock rules paying for 50% crop produced methane are applied annually (from the anniversary of new RHI starting). If too much crop, projects gets paid in full over the year and any reductions are deducted from future payments.
  • Tariff Guarantee has many challenges to overcome:
    • Tariff guarantee will open from 10am on the day the new rules come in – we don’t know this date yet.
    • You sign a Planning declaration that you have planning for everything related to the biomethane plant and injection. 
    • Ofgem has budget checks and Ofgem decides if your application has come in before or after a budget allocation has been exceeded.
    • If you get through the queue, you need to have financial close evidence within 3 weeks,

Tariff Guarantees in detail


What is a Tariff Guarantee?

A tariff guarantee allows applicants to secure a RHI tariff rate before their biomethane plant is built, commissioned and fully accredited.

How will the Tariff Guarantee work?   

Stage 1 – Submit Application:

  • You need to have full planning permission for the whole biomethane plant.
  • You need to obtain and submit a valid Connection Agreement from your pipe-line Operator.
  • You need to tell Ofgem your:
    • Expected date of injection.
    • Volume in cubic meters you expect to inject annually (in a typical year following any initial ramp up period in the first year).
    • Expected maximum initial capacity.

Ofgem Budget Check

Ofgem will check if there is available budget for your application.

If there is available budget, Ofgem will notify you and proceed to full review of your Stage 1 application. If your application is ‘properly made’ you will be sent a Provisional Tariff Guarantee Notice (PTGN) and the RHI tariff rate will be the rate on the date you submitted the application.

OR

If there is not available budget, your application will be placed in a queue.

Stage 2a - Financial close information

If you get a Provisional Tariff Guarantee Notice (PTGN), then you have 3 weeks to give evidence you reached financial close - This date will also be specified in the PTGN you receive at the end of Stage 1.

What I don’t get financial close in 3 weeks?

Ofgem is very clear, if this evidence is not provided within the 3-week window specified, your application will be rejected.

Stage 2b - Tariff Guarantee Awarded

Once evidence of financial close has been approved, you will be sent a Tariff Guarantee Notice (TGN). The RHI tariff rate will be the rate on the date you submitted the application. 

What is Financial Close Evidence?

To prove you have Financial Close you will need to prove two main points:

  • That funds are available to cover the complete construction of the proposed project.
  • That these funds are formally committed to the project.

Crucially, financial close evidence must be verified and supported by a report from an independent auditor who is not a ‘connected person’ (this means any person connected to the applicant as defined in section 1122 of the Corporation Tax Act 2010). Ofgem prefers to receive financial close reports, including any relevant evidence in the ISAE3000 (limited assurance engagement) format, the report should confirm:

  • The validity of the financial close evidence provided
  • That funds are available to cover the complete construction of the proposed project
  • That these funds are committed to the proposed project
  • Any caveats with regards to the above points

How long does the Tariff Guarantee last?

Ofgem call this Stage 3 – Full Application Details

With a tariff guarantee confirmed (pending conditions), the final stage is for the installation to be commissioned within 183 days of the estimated commissioning date and before 31 January 2020).  A Stage 3 submission cannot be submitted before this expected commissioning date otherwise you will not receive the tariff guarantee tariff rate.

Can Ofgem revoke Tariff Guarantees?

Yes, Ofgem may revoke a tariff guarantee before the plant is accredited/ registered as part of Stage 3 under the following circumstances:

There has been a material change in circumstances such that had the application for the Tariff Guarantee been made after the change, it would have been refused if:

  • The plant does not commission or the injection of biomethane does not commence and an application is not submitted before the date noted in the Tariff Guarantee notice.
  • The information on which the decision to issue a Tariff Guarantee was based, was incorrect in a material way.
  • There has been failure to provide information during the Tariff Guarantee period or to follow any further conditions imposed by Ofgem.
  • The information on which the decision to issue a Tariff Guarantee was based is materially different to that in the Stage 3 application. Ofgem may consider any matters which it believes to be relevant including:
    • The location of the plant or place where biomethane is injected.
  • The installation capacity of the plant or maximum initial capacity of biomethane, note an installation is considered materially different for the purposes of the regulations if:
    • The source of energy and technology or design of the plant.
    • The installation capacity is such that a different tariff would apply.
    • The installation capacity is 10% greater or smaller than that provided in the Stage 1 application.

What is the budget allocation for Tariff Guarantees?

The budget allocation for Tariff Guarantees will be set by the Secretary of State and published by BEIS. The initial budget for each of the financial years of 2018/19, 2019/20 and 2020/21 will first be published at least one month before Tariff Guarantees open. The budget for Tariff Guarantees will be set at 50% of the remaining budget available for each financial year at the time of publishing.

The budget allocated to Tariff Guarantees is open to review by the Secretary of State but can only be increased and not decreased. Increases in budget allocation will only happen on 1 February, 1 May, 1 August or 1 November in a relevant financial year. The budget allocated to Tariff Guarantees will be reviewed prior to these dates by the Secretary of State and an announcement made a month before. Given the proximity of 1 May 2018 to the date on which Tariff Guarantees are introduced (expected to be in April) the first increase in budget allocation will be considered by BEIS for 1 August 2018.

What if there is not available budget?

  • No application will proceed to Stage 1 if it would cause any of the 3 annual budget limits to be exceeded. 
  • An application that would cause the budget for any financial year to be exceeded will be held in a queue. 
  • Applications in the queue may be processed later if further budget becomes available.