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Could the Renewable Heat Incentive Damage the Country’s Economy?

By David Holmes on June 4, 2010

As if the UK economy had not already endured enough crises, the country is heading for another imminent collapse according to various consumer watchdogs and business groups.

Unlike the events that caused the most recent recession, the new financial downturn would have little to do with mortgages and everything to do with investing in new homes; indeed, many people believe that the renewable heat incentive, which is due to be introduced next April, will lead to higher fuel bills, reduced manufacturing output and loss of companies to overseas markets. Therefore, the question has been asked: is the renewable heat incentive all that much of an incentive for UK households?

The renewable heat incentive was drafted to provide help to households that install renewable heating devices, such as solar hot water heating, biomass boilers or geothermal heat pumps. Renewable heating devices are notoriously expensive to buy and have installed, however, which is why the former government chose to help owner-occupiers purchase such devices.

Whilst it is perfectly reasonable that households are encouraged to improve energy efficiency, it is unreasonable to ask all domestic energy consumers to foot the bill, which is arguably the case with the renewable heat incentive. In fact, even commercial consumers would likely shoulder the cost of the incentive, with experts predicting a 70 per cent annual rise in fuel bills for large energy users.

On the domestic scale, the renewable heat incentive is expected to increase average annual fuel bills by between 9 and 21 per cent. Small to medium-scale industrial bills could also rise as high as 35 per cent, which could spell disaster for manufacturing and small business in the UK. It has also been suggested that the initiative may not provide value-for-money on the environmental front, following claims by the Department of Energy and Climate Change that none of the carbon savings under the incentive would be cost-effective.

Director of the Energy Intensive Users Group (EIUG), Jeremy Nicholson, has claimed that the Department of Energy and Climate Change are “absolutely intent on rendering our energy prices uncompetitive for industry and far too high domestically”, adding that there would be “huge implications for fuel poverty”.