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As of June 2020 BEIS has announced through OFGEM a reduction (degression) in the tariff for renewable ground source heat pump installations over and above 100kW.

In the past, the degression mechanism has been triggered by the number of installations surpassing a ‘trigger point’. However, in this instance, something else has happened.

Last year, we saw the introduction of the non-domestic ‘Tariff Guarantee’ for renewable installations. The industry saw this as a potential helping hand as the RHI began its wind down towards its end in the spring 2021.

The purpose of the tariff guarantee was to help clients who could prove they were committed to the project and had the financial resources, to secure the rate at which they would receive the non-domestic RHI when the application could be submitted.

ndrhi degression chart

The RHI was set up to encourage organisations to switch to clean heating systems. Unfortunately, it seems some of the projects applying for the tariff guarantee are by developers erecting buildings specifically to claim the RHI, doing everything as cheaply, therefore inefficiently as possible. The end result is the spike in the tariff guarantee applications.

This is clearly shown in the graph above. In January 2020, the applications for the tariff guarantee amounted to approximately a third (shown in orange) of the forecasted expenditure. This pushed the forecasted expenditure of the subsidy over the blue line, indicating the degression threshold. Without the tariff guarantees, the degression threshold would not have been reached.

Following a 10% degression which came into effect from 1st May, all 100kW heat pump installations installed after June 2020 will see a further 20% reduction in RHI payments meaning a tariff rate of 6.98p/kWh for tier 1 and 2.08p/kWh for tier 2. For more information on the non-domestic RHI, see our RHI page.

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