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Are we getting the best value for money from green subsidies?

Posted by on in Heat 2014
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This week in our #Heat13 blog, Paul Woods from AECOM asks are we getting the best value for money from green subsidies?

If all subsidies were given at the same rate – i.e. a fixed sum per tonne of CO2 saved and for the same period of time then we could reasonably expect that the market would deliver the most cost-effective solutions. But the proliferation of ROcS, FiTs and RHI have left us with a huge range of effective costs to save a tonne of CO2.

A minimum figure of around £100/tonne is seen for onshore wind (and a similar level has been agreed for new nuclear albeit for 35 years) but solar PV is around £200/tonne and heat pumps receive over £400/tonne.

Bizarrely, gas-fired CHP receives nothing except at a domestic scale where there is a relatively high subsidy of £500/tonne (stirling engine type).As gas-fired CHP is the most common supplier of heat for district heating (DH) it is unsurprising that DH still supplies only 2% of our heat market.

So what kind of incentive could work? 

Whilst an incentive for gas-fired CHP would be welcomed it may be better to incentivise DH through a DH Incentive that would make payments retrospectively on an annual basis according to the amount of CO2 saved. This would encourage DH operators to develop lower CO2 forms of heat production and design efficient networks. In return for the DHI they would have an obligation to provide data on their scheme on energy and CO2 emissions which would be made publicly available to aid designers and policy makers.

An RHI set at £100/tonne could be sufficient to convert marginal projects into standalone projects financed by the private sector. However a higher figure could easily be justified when compared to other technologies which compete with DH such as domestic air-source heat pumps. Is there any reason why gas-fired CHP and DH should not receive the same level of incentive as heat pumps?”

Paul is Technical Director of District Energy and Sustainability at AECOM. 

Paul's recent presentation on a district heating incentive can be viewed here



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