Incentives and subsidies

Renewable Heat Incentive (RHI)

The main incentive to switch to wood-pellet heating is provided by the RHI. That is a payment for every MWh of renewable heat produced by eligible installations. In many cases, the value of the RHI is greater than the cost of the fuel per MWh, resulting in a negative fuel cost. In other words, the RHI pays you to stay warm. We set out the key details of the RHI on a separate page.

Phase 1 of the RHI was due to start at the end of September 2011, but the Government pulled it at the last minute, allegedly because of state-aid objections from Brussels. It may now commence in November 2011. The Government has promised to introduce Phase 2, which will cover many sectors left out of Phase 1 (including domestic heating) in autumn 2012, but the consultation on Phase 2 has already been pushed back twice. Nevertheless, it is reasonable to expect that Phase 1 will be live before the end of 2011 and Phase 2 before the end of winter 2012/13.

CRC Energy Efficiency Scheme

The CRC applies broadly to large organisations that are not intensive energy users (who are covered instead by the European Union Emissions Trading Scheme or EU-ETS and by Climate Change Agreements).

Any organisation with more than 6,000 MWh/year of half-hourly metered electricity consumption must participate in the CRC. All participating organisations must buy carbon credits at a price of £12/tCO2 for the carbon emissions attributable to their energy use.

They are also ranked in an annual league table according to their performance in reducing their carbon emissions (the money paid into the scheme is no longer recycled to the participants according to this ranking, as was originally planned).

Pellet heating is treated as zero carbon for the purposes of the CRC (i.e. avoids the cost of £12/tCO2 for all heat produced using pellets).

One requirement of the CRC is that all participants must be able to give an accurate statement of the fuel they have in stock at the start and end of each year. The DELOX fuel monitoring system can be easily retrofitted or installed with new systems, and makes it easy to meet this requirement, as it provides real-time information about the quantity of fuel in your store, without even having to go to site, let alone try to work out how much is in the store by visual inspection.

Zero Carbon Homes stamp duty relief

Stamp duty is not payable on new homes constructed to "zero carbon" standard. Biomass boilers are one of the few ways of making the heat and hot water produced for a property "zero carbon".

Part L of Building Regulations is also expected to gradually tighten towards "zero carbon" standards. If so, in due course zero-carbon heating may be necessary in order to develop properties at all.

"Merton Rule" and Code for Sustainable Homes

The Merton Rule is a planning constraint, which the Borough of Merton was one of the first local authorities to apply. Developers are obliged to incorporate at least a pre-defined percentage of on-site renewables into their designs for new developments. For larger buildings, pellet boilers are often the most cost-effective way of satisfying the rule.

The Merton Rule is being gradually superseded by the Code for Sustainable Homes (and in due course the Code for Sustainable Buildings), which will require higher standards than the Merton Rule. Pellet heating is likely to remain one of the easiest and most cost-effective ways of de-carbonising the largest proportion of a household's energy-use - its heat and hot water.

CERT, CESP and ECO

The Carbon Emission Reduction Target (CERT) and Community Energy Saving Programme (CESP) are obligations placed on the big energy companies to fund a specified quantity of energy-efficiency or renewable-energy improvements to domestic properties. The Energy Company Obligation (ECO) is the successor to these schemes, to be introduced at the end of 2012. It will be closely connected to the Government's forthcoming Green Deal for financing domestic energy-efficiency improvements. 

In theory, CERT and CESP (and hopefully ECO) can fund biomass heating installations. In practice, the big energy companies have more to gain from promoting technologies that use gas (Micro-CHP) or electricity (Air Source Heat Pumps) than technologies that use a fuel that they don't sell, like biomass, so not much of the CERT/CESP funding has gone this way. But you could pester your energy company to see if you can become one of the few.

Enhanced Capital Allowances

Businesses can claim Enhanced Capital Allowances for expenditure on equipment on the Energy Technology List (ETL). Many pellet heating systems are on the ETL.

Renewable electricity support schemes (RO, CEC, etc)

For those planning to use pellets for power or CHP, the electricity produced will be eligible for the Renewables Obligation (RO) and Clean Energy Cashback (CEC), and will also get the benefit of exemption from the Climate Change Levy (CCL). The level of support within the RO for dedicated biomass generation (with or without CHP) is currently under review.