Yesterday's budget was disappointing for renewable energy generation, which did not get a mention, but buried in the detail are some key announcements about decarbonising heat.


Heat is one of the main sources of carbon emissions in the UK but we have only managed to decarbonise it by 7.5% in the last ten years. In a sign that the Government has started to take this seriously, the budget announces:

  • The Domestic Renewable Heat Incentive (RHI) will be extended until 31 March 2022 and there will be a new allocation of flexible tariff guarantees to the Non-Domestic RHI in March 2021
  • The Government will consult on introducing a new grant scheme from April 2022 to help households and small businesses invest in heat pumps and biomass boilers, backed by £100m funding. This will presumably be a replacement for the RHI when it ends.
  • For heat networks, the Budget confirms £96 million for the final year of the Heat Networks Investment Project (HNIP) which ends in March 2022. After this, the government will invest a further £270 million in a new Green Heat Networks Scheme, enabling new and existing heat networks to be low carbon. This will enable a transition away from gas-fired communal heating to a system using low carbon generation.
  • Look out for a consultation on a new Green Gas Levy: support for biomethane production to increase the proportion of green gas in the grid. New levy-funded support is an interesting development when in the past the government has rowed back on this (the FIT being a prime example).

All this on top of the Heat Networks Market Framework shows that low carbon heat is shaping up to be a key element in the UK's drive to meet Net Zero carbon emissions by 2050.

Paul Dight

Paul Dight

Partner, Energy and Utilities
United Kingdom

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Richard Goodfellow

Richard Goodfellow

Partner, Head of Infrastructure, Projects & Energy Group
United Kingdom

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