World's First Renewable Heat Incentive Launched

By Aedan Kernan, Greenwell Consulting
May 2012

The UK launched the world's first renewable heat incentive scheme in November 2011. Similar to the way a feed-in tariff rewards generators of electricity, the heat incentive scheme rewards generators of heat from biomass technologies, heat pumps, solar thermal systems and biomethane.

The level of incentive varies by technology and by the scale of heat generation. Systems generating less than 200 kW of heat per hour from biomass receive 7.9 pence (12.5 US cents) for each kWh produced. Systems over 1 MWh receive 1 pence (about 1.5 US cents) per kWh. The largest incentive per kWh is available to solar thermal systems, at 8.5 pence (13.5 US cents) per kWh. The incentive is being introduced in two stages, first to those generating heat on a commercial scale and later to domestic systems.

The UK allocated £15 million (US$ 23.5 million) for the incentive program. Originally, the UK considered higher incentive levels, and enacted tariffs for some technologies are nearly half the original proposal. The intention is to be mindful of not funding the kind of demand bubble that made some renewable energy support policies, such as feed-in-tariffs, unexpectedly expensive.

Renewable Heat a Big Opportunity

illustration showing thermometer in front of map of the United Kingdom

Heat efficiency and the generation of heat from renewable resources is a major carbon-reduction opportunity, especially for countries with a climate similar to the UK's. According to Anastasios Papafragkou, a Research Fellow in Southampton University's Sustainable Energy Research Group in England, "Almost 50% of carbon emissions from the UK's domestic sector are from space heating. In some cases 60% of that space heating is wasted because UK homes are not well insulated or because the occupants don't use their heating systems wisely."

"The main focus of the incentive scheme is on biomass," says Papafragkou. Biomass is the only technology that financially outperforms fossil fuel heating systems when the heat incentive is added. For most biomass systems using this incentive, the payback period could be less than ten years, as compared to 20 years for a solar thermal system because of the UK's climate.

If the goal is to reduce carbon emissions, the emphasis on biomass systems is a good thing, says Papafragkou. Solar thermal systems are largely used to heat domestic water. However, 75% of the 20,000 kWh of thermal energy per year consumed by the average UK household is for space heating – and that is where biomass can have the greatest impact.

Ready for Improvement

The heat incentive is a work-in-progress. Eventually, the UK intends to expand the range of renewable energy sources that are eligible for the incentive. One proposal is to refine the scheme to help overcome the initial capital-intensity of carbon-efficient district heating schemes.

Papafragkou suggests graduated incentives to improve the effectiveness of the policy. The incentive categories are so large that a renewable heating system for an individual household would receive the same tariff as small district heating and many commercial heating schemes. Offering slightly more incentive to the smallest producers and slightly less to medium and large scale producers might create more incentive for the same level of expenditure, argues Papafragkou.

Regardless of what changes are made in the future, the heat incentive policy is a one-of-a-kind approach that promises to reduce carbon emissions in the UK.

UK Heat Incentive Tariffs

Tariff name

Eligible technology

Eligible sizes

Tariff rate (p/kWh)

Small biomass

Medium biomass

Large biomass

Solid biomass;

Municipal Solid Waste (incl. CHP)

Less than 200 kWth

200 kWth and above; less than 1000 kWth

1000 kWth and above

Tier 1: 7.9
Tier 2: 2.0

Tier 1: 4.9
Tier 2: 2.0


Small ground source

Ground-source heat pumps;

Water-source heat pumps;

Deep geothermal

Less than 100 kWth


Large ground source

100 kWth and above



Solar thermal

Solar thermal

Less than 200 kWth



Biomethane injection & biogas combustion, except landfill gas

Biomethane all scales; biogas < 200 kWth