Renewable Heat Obligation

Heat-related greenhouse emissions from the use of fossil fuels in our homes, businesses and industry accounted for 13.1 MtCO2 of emissions in 2021, which is equivalent to 37% of total energy-related emissions or 21% of total national greenhouse gas emissions. Despite efforts to add insulation and install more efficient technology, Ireland continues to have an excessive dependence on fossil fuels for heating.

Primarily due to economic growth, emissions from heating have risen 12% from post-recession lows of 2014. The renewable share of this heat was 5.2% in 2021, down from 6.3% in 2020. This trend must be reversed immediately if the heat sector is to meet its share of the required emissions reductions.

The Climate Action and Low Carbon Development (Amendment) Act 2021 commits Ireland to reaching a legally binding target of net-zero emissions by no later than 2050, and a cut of 51% by 2030 (compared to 2018 levels). These targets are aligned with Ireland’s obligations under the Paris Agreement, which aims to limit global temperature increases by restricting the total amount of greenhouse gas emissions emitted into the atmosphere. They are also consistent with the EU Green Deal objective to achieve an economy-wide reduction in greenhouse gases of at least 55% by 2030 and to achieve climate neutrality in the European Union by 2050.

Ireland’s new binding renewable targets out to 2030 will set out in the update to Ireland’s National Energy and Climate Plan, as part of Ireland’s contribution to European level renewable energy targets. It is clear, delivery will require a major ramp up in key decarbonisation activities across all sectors and full societal engagement, supported by Government.

To support the need to decarbonise the heat sector, Government has agreed to the introduction of a Renewable Heat Obligation (RHO). The RHO will support an increased use of renewable energy in the heat sector and contribute to a reduction in emissions in line with Ireland’s climate ambitions. As Ireland imports most of its fossil fuels, the heating sector is a significant contributor to Ireland’s high energy import dependency. The RHO will also help reduce our reliance on imported fossil fuels and strengthen our energy security due to greater diversification of our energy streams.

Development of the RHO will be underpinned by a number of technical assessments and extensive stakeholder engagement activities.

In October 2021, we launched a public consultation seeking views from interested parties on the potential introduction of an RHO.

The consultation was open for submissions for a ten-week period, closing on the 29 October 2021. A total of 50 submissions were received from a wide range of stakeholders, including members of the public and industry groups.

Responses largely aligned with positions set out in the consultation document, with 76% of respondents agreeing that an RHO was an appropriate measure to support a reduction of greenhouse gas emissions in the heat sector. Respondents highlighted the need for a considerable level of market maturity to support the introduction, and called for the obligation to be implemented in parallel with initiatives and supports to incentivise the economic development of the renewable heat sector.

Scoping Exercise

Using feedback received as part of the public consultation in 2021, we completed an initial scoping exercise to examine potential RHO structures, and carried out a high-level economic, social impact analysis on potential RHO parameters.

As part of this exercise, the national breakdown of heating energy sources and associated fuel supply chains were reviewed to examine appropriate methods of obligation, allowable measures for compliance, and a suitable target rate and trajectory.

Findings from the initial scoping exercise informed the next stage of stakeholder engagement, and in August 2023, we launched a second public consultation to help inform any final decisions taken on the RHO design. The consultation ran for a period of 8 weeks, closing on 6th October 2023 and focused on a proposed obligation structure and associated scheme parameters, including:

Introductory obligation rate and final target level

• Obligated party thresholds
• Obligation duration post 2030
• Obligated fuels, and fuels eligible for certification
• Scheme governance arrangements

In this second round of consultation, stakeholders again took the opportunity to highlight their support for the RHO, with the majority of respondents emphasising a critical need to incentivise the production of renewable fuels for use in the heat sector.

Whilst responses provided largely aligned with proposals set out in the consultation questionnaire, respondents cited potential implementation concerns regarding market maturity and lack of existing infrastructure. Associated key parameters including scheme duration, obligation threshold and the proposed buy-out mechanism were highlighted as areas requiring further refinement.

An executive summary outlining the response to the public consultation can be found below.

Following the completion of the initial scoping report and public consultation activities, a number of gaps and uncertainties were identified where further data was required to improve the development of the RHO design process.

A final phase of analysis to examine fuel costs, availability and sector and enhance these data sets was undertaken across 7 work packages, with the main objective being the refinement of data to support the finalisation of the RHO High-level scheme.

To ensure a robust evidence base on current market trends, a number of online workshop sessions were held in July 2024. Stakeholders who had previously engaged with the RHO public consultation process were invited to take part in these sessions. Participants included heating fuel suppliers, renewable fuel developers, relevant government departments and key industry groups.

Sessions were grouped by sector (gaseous fuels, bioliquids, solids) and focused on both current and projected costs and availability of domestic and international sources of renewable fuels.

Given commercial sensitivities and confidential nature of data analysed, a number of follow-up meetings were also held throughout August and September to discuss costs and market readiness for the RHO.

Key issues discussed also included the potential role of imports, appropriate scheme administrator and the interaction of a buy-out mechanism and non-compliance penalties.

A summary of the topics discussed, and copies of each workshop's slides can be found below.

The Renewable Heat Division is in the final stages of drafting the RHO high-level scheme, due for submission to Government shortly seeking approval to publish. Publication of the RHO high-level scheme will issue notice to obligated parties will include full details of scheme structure, starting obligation rate and compliance periods.