The Business Energy and Industrial Strategy (BEIS) department’s top civil servant has pledged that the government will outline its review of the options for decarbonising the UK’s heat system by the end of this year.
Under cross-examination on Wednesday (21 March) by the House of Commons Public Accounts Committee on the renewable heat incentive (RHI) scheme, the department’s permanent secretary Alex Chisholm said BEIS is conducting a strategic review this year of the “optimum mix of low carbon heating technologies”.
Pressed on the timing of the review’s publication by the committee’s chair Sir Geoffrey Clifton-Brown, Chisholm said the results would be published by the end of this year.
He also hinted that a review on the future of support for renewable heat would be announced as part of the wider government-wide spending review, which is due to be published later this year alongside the Autumn Budget.
The hearing was sparked by last month’s publication of a report by the National Audit Office into the RHI, which criticised the handling of the scheme by BEIS and Ofgem, which is responsible for its administration.
Pointing to the committee to how there had been announcements on the RHI in the government’s previous three spending reviews, Chisholm said: “We would expect to have a further update as part of spending review 2018. It’s a logical time to have an update.”
But while unable to provide details on the design of the RHI’s replacement, he said the government would seek to revive the market for heat pumps, which have accounted for only 3 per cent of the total installations under the scheme.
Responding to criticisms in the NAO report into the operation of the RHI, Chisholm said Ofgem and BEIS had kept the scheme’s costs under control in recent years.
He said that over the last year Ofgem had conducted 1,700 audits, revoked 79 RHIs and recovered £369,000 of sums awarded under the scheme.
Chisholm said that unlike the Northern Ireland version of the RHI, which has gone hugely over budget and triggered the downfall of the province’s devolved administration, the Great Britain scheme contained strong cost controls.
Chris Poulton, managing director of Ofgem E-Serve, defended the energy regulator’s track record in tackling instances of costly non-compliance with the scheme.
He said over the lifetime of the scheme, 10,000 applications have been rejected and 600 accreditations revoked because they had not met the department’s standards.
In January, Ofgem announced Poulton would be leaving the organisation “over the next few months” along with Andrew Wright, senior partner for energy systems. Ofgem is set to be streamlined into three divisions next month, which will be separated according to their different regulatory functions.
Dermot Nolan, chief executive of Ofgem, told the committee the regulator accepted the NAO’s recommendation that it should work more closely with local authorities and the Environment Agency on policing potential abuses of the scheme.
When pressed on figures in the NAO report showing that uptake of the scheme had been much more limited than originally expected, Chisholm said the government had been right to set ambitious targets for installations.
He said: “We need to be very ambitious because unlike other European countries, the UK had very low level of renewable heating,”
He said that the undershoot in the number of projected installations also reflected a targeting of the RHI on a smaller number of larger installations that would have a greater impact in terms of reducing carbon emissions.