The government has today announced details for the £860m Renewable Heat Incentive (RHI), setting out details of a tariff system to pay companies and the domestic sector for burning wood in biomass boilers, as well as other renewable technologies.

Chris Huhne, secretary of state for energy and climate change, said the RHI was the first of its kind in the world and would stimulate a new market in renewable heat, with the potential to increase the number of industrial, commercial and public sector installations by seven times by 2020.

Companies installing a biomass heating system with a capacity of less than 200kW/thermal will be eligible to receive a payment of 7.6p per kW/hour of heat produced up to a threshold level, which thereafter drops to 1.9p. A metering system would be installed to back up the scheme.

The “Tier break” threshold is calculated by multiplying the installed capacity by 1,314 peak load hours. For a 60kW biomass boiler running continually at peak load this equates to nine years of payments.

Installations of above 200kW/hr but less than 100kW/th will receive payments of 4.7p per kW/hr followed by 1.9p after the threshold. Large biomass schemes over 1,000kW/hr will receive 2.6p per kW/hr.

“We are looking to seek parliamentary approval of the regulations in July 2011 and will introduce the tariff scheme thereafter,” said Mr Huhne.

The government predicts that by 2020 there will be 110,000 renewable heat installations in the commercial and public sector, supplying 25% of the heat demand in these sectors – seven times the number of anticipated installations in 2014.

Industrial, business and public sector installations will be able to receive RHI payments in phase one – once parliament has approved the regulations, with the domestic sector following in October 2012.

A £15m renewable heat premium scheme will boost the domestic sector during the transition to RHI payments next year.

The RHI scheme, alongisde the Renewables Obligation and Feed in Tariff scheme, is a further sign of strong government support for the renewables sector.