Funding & the Renewable Heat Incentive

The landscape of financial support mechanisms was changed significantly with the removal of all capital grants for equipment and their replacement in 2011 by a scheme called the Renewable Heat Incentive.  This scheme makes payments linked to heat production, over 20 years.   The only other significant financial support available in Scotland provides loans to district heating projects.

Renewable Heat Incentive (Non-domestic)

The scheme is designed to bridge the gap between the cost of fossil fuel heat installations and renewable heat alternatives through financial support for owners and is the UK Governments key financial mechanism to deliver the 2020 12% renewable heat target.

The RHI scheme provides a guaranteed means to secure income from the generation of renewable heat paid via Government backed legally binding index linked contracts over 20 years. The result of this is to make eligible biomass investment predictable, safe, attractive and financially viable – in a way that wasn’t the case before the support mechanism was introduced.

District Heating Loan Scheme

The Scottish Government’s district heating loan fund, administered by the Energy Saving Trust, is designed to help address the financial and technical barriers to district heating projects as commercial borrowing can be expensive and difficult to obtain. Note: the loan is only available for the district heating network, not the biomass installation.

Loans up to £500,000 are available as low interest unsecured loans, with repayment terms of either 10 or 15 years. Loan terms for larger projects (over £500,000) are also considered.  A typical interest rate of 3.5 per cent applies for low risk projects.  The scheme is open to local authorities, registered social landlords, small and medium sized enterprises and energy services companies [ESCOs] with less than 250 employees.