European Commission relies on NERA Economic Consulting in State Aid Approval of Domestic Renewable Heat Incentive (RHI)

Official Journal of the European Union
07 March 2014

The Renewable Heat Incentive (RHI), the first of its kind in the world, is a UK Government scheme designed to stimulate a massive increase in the use of renewable energy for heating across all sectors of the UK economy. Phase 1 of the RHI roll-out plan was for non-domestic installations in the industrial, business, and public sectors, while Phase 2, introduced in Spring 2014, covers the domestic element.

In a notice published by the Official Journal of the European Union on 7 March 2014, the Commission notes that it "requested from the UK detailed information on the non-financial barrier costs for the domestic RHI. The UK provided detailed explanations and 2 reports, prepared by NERA Economic Consulting and Ipsos-Mori."

NERA's report, Design of the Renewable Heat Incentive, was commissioned by the UK Department of Energy & Climate Change to assist with the design of the RHI. Led by Associate Director Daniel Radov, a NERA team provided three main outputs: an updated supply curve for renewable heat; proposed RHI subsidy levels for technologies to be covered by the RHI; and modeling of the deployment of renewable heat, along with calculations of the associated rates of return, subsidies, costs, and emissions benefits. NERA also set out the various barriers influencing the adoption of renewable heat technologies, including consumer unfamiliarity with renewable sources, high capital costs, and space constraints for fuel storage.