The Renewable Heat Incentive provides a financial incentive to promote the use of renewable heating technologies in England, Scotland and Wales. As part of the scheme users are paid a fixed amount of money (a Tariff) depending on how much heat they produce.
The Government decided on a tariff to ensure an adequate rate of return for each technology and size of installation. The aim was to provide an estimated 12% annual rate of return for most types of system.
Once signed up to the RHI your tariff rate is secured for the whole life of the scheme (20 years for non-domestic, 7 years for domestic installations). Tariff rates are index linked. This means that each year the level of tariffs will be adjusted in line with the retail price index.
For people that haven’t already signed up to the RHI, the starting tariff levels will be reviewed in 2014 or earlier under an approach called degression. This means that support levels will be reviewed and may be reduced for new entrants if uptake is greater than anticipated. People already in the RHI scheme are unaffected by degression.