The times are changing

Our success in increasing the amount of electricity that comes from renewable sources in the UK is well documented but our progress to transition to sustainable heat systems and their enabling technologies remains a serious challenge.

There is no doubt that decarbonising heat is key to meeting our carbon emissions targets and combat the climate crisis. Studies suggest that around a third of UK greenhouse gas emissions are from heat used for domestic, commercial and industrial purposes.

In the last two years we have seen a growing number of heat pump installations, demonstrating our ability to deliver this kind of renewable heat technology at scale, but the numbers are still disappointing. The Renewable Heat Incentive (RHI) remains a critical driver to greater deployment,  reducing costs in the medium to long term and supporting investment in training and skills. The real impact of RHI will start to be seen very soon but the government needs to maintain its support.

The RHI, which supports both commercial and domestic renewable heat, incorporates a number of different technologies and is vitally important to investors that remain committed to funding the decarbonisation of heat.

At Triodos Bank we have seen this from our experience in financing the installation of bespoke ground source and air source heat pump systems and heating and cooling systems. For example, the financing of commercial ground source systems through a combination of traditional lending and capital raising via direct mechanisms like crowdfunding. 

It has taken the market a while to implement the changes that came from the government’s last review of the RHI but we are now finally starting to see the positive impact of these changes on heat pump system installations. The assignability of the domestic RHI to investors is going to be an extremely positive feature of the scheme going forward. Our recent experience working on the financing of residential air source heat pump installation has looked to maximise the impact of the recent changes which allows individuals to assign their rights to receive RHI payments in favour of “Registered Investors.” 

The government has now announced that gas boilers will be banned from new homes from 2025 onwards. In order for the renewable heat sector to continue to flourish it needs support under the RHI in order to build greater momentum and give the overall market time to develop. The government must build on the recent progress in the sector for it to be able to deliver at the scale required in this critical decade of transformation. 

By Philip Bazin of Triodos Bank