Renewable Heat Incentive: are things heating up for land use?

1. Introduction

The Renewable Heat Incentive (RHI) is the government’s principle mechanism for increasing renewable heating technologies and so reducing carbon emissions. The UK target to reduce emissions of carbon by 80% of the 1990 levels by 2050 is the driving force behind the creation of RHI. After signing the Renewable Energy Strategy in 2009 the UK government has committed to producing 15% of all energy from renewable sources1, 12% of this is expected to be from bioenergy2. The main objective of the RHI is to promote the uptake of renewable heat technologies, changing the contribution of renewables to heat energy from its current 1.5% to a projected 12% by 20203A. If this objective is achieved it will result in an increase in the supply of biomass to meet the bioenergy demand. Bioenergy’s contribution to renewable energy is limited as biomass is ultimately a finite resource4. Land use change to meet the rising demands for biomass may bring about negative externalities linked to the incentive. Alternatively sustainable supplies of biomass may result in positive changes in land management behaviour and land use. The policy needs to be further developed to ensure that any ‘knock on effects’ are controlled and that positive rather than negative externalities occur.

 2. Background

The RHI is one of the world’s first schemes to promote renewable heat technologies5. The Energy Act 2008 outlined the original framework for RHI, which was set up to replace the low carbon building programme.  The outline for RHI is based around the blueprint for the Feed in Tariff (FIT) scheme for renewable electricity. The advances in renewable heat technologies, combined with the consent from the 2010 Spending review allowed the RHI to be fully developed. The policy is divided into 2 phases, phase 1 was introduced in November 2011 and includes only non-residential schemes and phase 2 is aimed at domestic schemes and is expected to be introduced in November 20135. Figure 1 below demonstrates the major milestones in the development of the RHI, along with future projections and expected events.

RHI image 1

Figure 1 (Left): Timeline showing the major milestones in the development of the Renewable Heat Incentive (RHI), along with future projections and expected events. Blue dotted line represents introduction of phase 1 of the scheme. Red dotted line indication of the present day (November 2012). Grey lines indicate major events relating to the RHI.
Figure 2(Right): Renewable heat technology types and percentage contributions (ref. 6).

This government intervention is aimed at promoting the renewable heat industry, it is expected that with new incentives, the industry will see a substantial growth. The FIT for renewable electricity which the RHI is based upon, resulted in an exponential growth in renewable technologies for electricity production8. A similar growth is expected for the renewable heat industry through the RHI. Figure 2 above shows that almost 90% of renewable heat technologies involve the use of biomass, with an increase in the industry; there will be increased demand for biomass, leading to indirect land use change3B. Whether that is positive or negative depends on the future development of the RHI. The RHI holds a budget of £860 million funded by the treasury until 20145. The main policy mechanism is a fiscal and encouraging instrument, whereby cash incentives are offered for the installation of renewable heat technologies. In addition to this, a payment per watt of renewable heat produced is allocated for technologies installed since 15 July 2009 for up to 20 years7.The payments are made through the scheme administrator (Ofgem) to the renewable heat producing company. A similar policy mechanism is planned for the domestic phase 2 of the RHI.

 3. Implications for Land Use

Different sources and methods of obtaining biomass will result in different changes in land use. Both positive and negative land use change can result from the increasing demand for biomass. This depends on land use management behaviour and the extent to which the land is altered. Whilst making the sourcing of biomass economically and socially viable it is important to be environmentally sensitive, this is particularly essential for the RHI which has largely environmental driving forces. The expected effects of increasing biomass demands on different individual land use systems is described below in sections 3.1, 3.2 and 3.3 for agriculture, forestry and wastes respectively.

 3.1 Agriculture

The competition between food and non-food crops is positively correlated with the increase in both population and biomass. Land usage will remain the same (agriculture) however the land cover in this case will differ. There is the potential for 17% of the UKs arable land to be used by energy crops9. This change in land cover may have knock on effects, for example increase in commodity prices with competition for agricultural land9. An example of increasing demands coupled with rapid unmanaged land use change is rape seed oil and the biodiesel industry expansion. Although rapid changes in the UKs landscape can often result in negative outcomes, there may be some positives to a shifting land cover types. A recent study has shown that in some environments replacing arable land with a short rotation biofuel crop increased farmland bird species10. A balance needs to be made between food and non-food crops, in order to sustainably manage the indirect land use change within agriculture resulting from the introduction of the RHI.

 3.2 Forestry

Land management and land cover change within the forestry sector, like agriculture, can be both positive and negative as a result of the RHI and increased demand for biomass. Adverse land use change such as deforestation and shifting from slow growing deciduous to fast growing conifers may occur with the increasing demand for solid wood biomass. These changes will have negative social and environmental implications for both the rural communities and the UK as a whole. Alternatively, increase in afforestation and harvesting wood from currently unmanaged areas provides a sustainable alternative for the collection of biomass. Unmanaged woodlands could provide 1 million dry tonnes of biomass per annum. This could improve wildlife, amenity and recreation of the woodlands. In addition, harvesting previously unmanaged woodlands could potentially contribute to the local rural economy through farm diversification and income from previously non-profit woodlands9. This however would require a change in land management behaviour usually resulting in increased labour cost.

 3.3 Wastes/Imports

Biomass can be acquired from wastes such as agricultural cast-offs and saw mill chippings10. Waste biomass may reduce the strain on land use change from other sources. Waste sources are also often more economically beneficial in comparison to other sources. Similarly imports may help contribute to the sourcing of biomass, allowing UK land use to be unaffected; however it may cause indirect land use change abroad and has added environmental negatives in relation to carbon footprints.

 4. Effectiveness and Recommendations

 4.1 Effectiveness

Biomass for heating is the most effective form of bioenergy9. The RHI’s objectives to promote renewable heat technologies is effective, providing cash incentives will reduce capital costs and payback times, therefore reducing the economic risks of setting up renewable heat technologies. Growth in the industry similar to that seen with FIT and renewable electricity is expected11. Rapid growth through government intervention is not always a positive outcome, for example Germany’s rapid growth in heat pumps in the 1980s resulted in poor quality technology and loss in consumer confidence6. Although the RHI’s aims to increase the heat technology industry will most likely be successful, it is uncertain whether it is desirable.

The RHI’s aim to reduce carbon emissions through increasing contributions of renewable technologies depends largely on the future of the policy’s development. The sustainable sourcing of biomass and the resulting land use change are key factors in the overall success of this part of the RHI’s objective. The only current sustainability criteria linked to RHI is the renewable obligations (RO) criteria; this is left to the individual member states and is not mandatory3B. Therefore RHI could potentially be funding unsustainable sourcing of biomass inducing indirect land use change emissions. This would reduce the overall carbon abatement of using renewable heat technologies, leading to little or no carbon savings12. If biomass sourcing and resulting land use change were sustainable then the RHI would be achieving its objective, and working towards the governments renewable and carbon emissions targets. The effectiveness of the policy therefore largely depends on the sustainability of the biomass sourced; indirect land use change could be detrimental not only environmentally but also economically and socially.

 4.2 Recommendations

The RHI needs to be developed further to ensure that adverse land use change does not occur preventing the scheme from being successful. Mandatory sustainability criteria linked with the RHI needs to be put in place with respects to land use change and the sourcing of biomass for renewable heat technologies. This could involve liability or charge systems whereby companies are fined or charged for environmental damage associated with land use change (land use impact fees). Land managers could also be encouraged to manage their land sustainably to produce biomass. Payment or subsidies could be offered to farmers with unmanaged woodlands, offering incentives to harvest biomass making the extra labour and change in behaviour more worthwhile. Policing of the sustainability criteria would be recommended, including a face to face advice system for both renewable heat energy producers and biomass suppliers.

In order for the RHI to be effective biomass from a range of sources needs to be used. This will offset the pressure across the biomass source sectors, reducing the likelihood of large scale land use change concentrated in one area. The policy could include caps or percentage limits on different biomass sources e.g. only X amount of tonnes of biofuel crops per company. In order to reduce pressures on land use, it is recommended that waste biomass and some imported biomass use should be encouraged. Incentives for industries with biomass waste such as waste delivery bonds or free pick up services could be offered through the RHI scheme. The Common Agricultural Policy (CAP) could also play a role to protect the land from changes which may occur through the RHI and expansion of the bioenergy industry as a whole. The CAP reform could include incentives for farm diversification through sustainable biomass harvesting of unmanaged woodlands. This would be relevant under pillar 2 of CAP for axes 1 (competitiveness of farming and forestry) and 3 (wider rural development).

 5. Conclusions

To conclude, the effectiveness of the RHI depends largely on the next steps taken in the policy’s development. Without mandatory land use change and biomass sourcing sustainability criteria for both land managers and companies the RHI could be funding unsustainable activities with no net carbon abatement. Government intervention through the RHI to promote renewable heat technologies could lead to adverse land use change across many industry sectors. Before the launch of the domestic phase of the policy in 2013, measures need to be taken to protect land use by monitoring and policing its change, for both the benefit of the RHI policy itself and the wider social, environmental and economic impacts it may have.

6. References

Forestry Commission. Government Policy – National energy policy.  [Online] Retrieved: 03.10.2012 http://www.forestry.gov.uk/forestry/INFD-7WMH6Q

 2  HM Government.(2009).The UK Renewable Energy Strategy.

 3A  DECC. (2011). Impact assessment: Renewable heat incentive. Downloadable at http://goo.gl/M8JS5

 3B   DECC. Department of Energy and Climate Change. (2012). Impact Assessment: Sustainability requirements for solid and gaseous biomass in the renewable heat incentive.

 4  Berndes G, Hoogwijk M, Van den Broek R. (2003). The contribution of biomass in the future global energy supply: A review of 17 studies. Biomass and Bioenergy 25:1-28.

 5  Renwable hear incentive Ltd. Renwable Heat incentive. [Online]. Retrieved: 1.11.2012 http://goo.gl/77Yd4

 6  Abu-ebid M, Barker N, Stambaugh J. NERA Economic Consulting and AEA. (2009). The UK Supply Curve for Renewable heat.

 7   Allen P. Passiv Systems. (2008). Renewable heat incentive (RHI) a ‘sideways step rather than genuine move forward’.

 8  Feed-In Tariffs Ltd. Feed-In Tariffs. [Online] Retrieved 1.11.2012. http://www.fitariffs.co.uk/about_ownergy/

 9  DEFRA, Department for Environment Food and Rural Affairs. (2007). UK Biomass Strategy. Pages 8:35.

 10   Anderson G.Q.A., Fergusson M.J. (2006). Energy from biomass in the UK: sources, processes and biodiversity implications. IBIS special issue: Wind, fire and water: Renewable Energy for Birds 148:180-183.

 11  Renewable Energy Forum. (2010). The Renewable Heat incentive: Risks and Remedies. Downloadable at  http://www.ref.org.uk/attachments/article/181/ref.on.rhi.16.09.10.low.res.pdf

 12   Kretschmer B. Institure for European Environmental Policy IEEP. (2011). The Land Use Implications of EU Bioenergy Policy – Going beyond ILUC.

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