Biomass boilers, heat pumps and solar thermal panels are covered by the scheme, which aims to do for renewable heat what the feed-in tariff did for renewable power.
The 3 million UK homes not connected to the gas grid are considered most likely to benefit. On-grid households are also eligible.
Energy minister Greg Barker said: “This is the first scheme of its kind in the world – showing yet again that the UK is leading the way in the clean energy sector.
“Not only will people have warmer homes and cheaper fuel bills, they will reduce their carbon emissions, and will also get cash payments for installing these new technologies.
“It opens up a market for the supply chain, engineers and installers – generating growth and supporting jobs as part of our long-term economic plan.”
Participants in the RHI will receive quarterly payments for seven years to “bridge the gap” between the cost of renewable heat systems and fossil fuel alternatives.
The tariffs have been set at 7.3p/kWh for air source heat pumps, 18.8p/kWh for ground and water source heat pumps, 12.2p/kWh for biomass boilers and 19.2p/kWh for solar thermal panels.
The Renewable Energy Association hailed the announcement as a “major milestone”. Chief executive Nina Skorupska said: “Households off the gas grid now have a financially attractive clean energy alternative to oil and electric heating. Already over half a million people have installed solar power in their homes to cut their costs and carbon emissions. Now millions more can do the same with solar hot water, wood fuel heating and heat pumps.”
The UK Green Building Council also welcomed the launch. John Alker, director of policy, said: “The long wait for the domestic RHI is finally over and people can now start to be rewarded for the clean, renewable heat they produce in their homes.
“Alongside the Green Deal, the RHI will help to create homes that are warmer, cheaper to heat and that emit fewer carbon emissions – major wins in the fight against rising energy bills and climate change.”
However, manufacturer Worcester (part of the Bosch group) questioned whether the market was ready to respond. Neil Schofield, head of external affairs, said the renewables market had “underperformed” as a result of delays to the RHI.
The number of installers registered has fallen to its lowest since 2010, suggesting “an alarming number of heating engineers have lost faith in the market,” said Schofield.
He also criticised a perceived weighting in favour of biomass, “one of the most expensive systems to install and one requiring the largest amount of user intervention”.