Renewable Heat Obligation – when will it deliver?

As the Autumn issue of Oil Installer magazine went to print, the Government in the Republic of Ireland was still to decide on how effective the renewable heating obligation (RHO) will be. The plan is that suppliers of solid, liquid and gaseous fuels will be required to ensure a proportion of the energy they provide comes from renewable sources – and the aim was to have this in place by early 2027.

Laudable though this is, the proposals on the table only have a starting blend rate of 1.5% in the first year, before rising to 3% in the second year. The fuel sector has argued repeatedly that the scheme, as currently designed, will increase costs for consumers while failing to drive additional renewable fuel use. We’re not the only sector concerned about the low rates; other trade organisations and industry groups are also questioning the methodology of this important piece of legislation.

There was speculation that the legislation would be rushed through before Dáil Éireann went into summer recess, but this didn’t happen and we await with bated breath to see how the Minister proposes to move this important piece of legislation forward in the autumn sessions.

There’s little doubt that the legislation was also designed to bolster biomethane development locally, but the Government encountered an unwelcome setback when they tried to include a 1.5 multiplier for locally produced biomethane as this was declared anti-competitive by Europe.

A blended future

There’s been much engagement back and forth with the Department of Environment, Climate and Communications, but that hasn’t yielded any enthusiasm for a higher blend rate, or a more robust and clearer pathway to 2030 that would give confidence to the sector as we move towards a blended future.

Let’s face it, we all know a blended future for heating fuels is needed. As it stands, the State is failing miserably at its own targets for heat pump installs and retrofits. According to the Economic and Social Research Institute (ESRI), the ‘State’ is “materially off-track” on its targets. By the end of 2024, its recent report noted that deep retrofits reached 57,932 (11.5% of the target) while heat pump installations were estimated at 14,194 (3.5% of the target).

So, why aren’t we aiming for higher blend rates of 10%/20%?’

Government says that concern over the cost to consumers is dictating the lower blend rates, but we suspect the real reason is a shortage of locally produced biomethane.

We have continually argued that a low blend obligation at the start (1.5%) will not drive meaningful additional blending to the liquid fuel market and, as it is written, the Government is set on a policy which will increase the cost of heating in Ireland for no positive benefit.

OFTEC recently hosted a Eurofuel meeting in Dublin where we heard from other countries about their experience of blended fuels.

In Germany, in some federal states like Baden Württemberg, Hamburg and Schleswig Holstein, regulations are already in place that require the use of renewable fuels after replacing a heating system. Here, a 10% blend of renewable fuels (HVO or FAME) is generally required. Proof is provided by the delivery slip that the heating oil dealer gives to the customer.

Additionally, a law has been in effect since 2024 that requires the use of a 65% blend of renewable energy throughout Germany following the modernisation of heating systems. Oil and gas heating systems can still be installed today, provided that the appropriate fuel blends will be used.

In the USA, blends of 5,10 and 20% are commonplace with B20 (20% blend called Bioheat) being eligible for a tax credit of 20 cents per gallon in New York State.

Looking to the future, liquid-fuelled boilers will still be part of the heating fabric for years to come. In Germany a pragmatic approach has been adopted. They have agreed to scrap a heating law which would have introduced mandatory renewables in newbuilds and many municipal areas.

So, liquid-fuelled boilers can have a viable future – they don’t have to run on 100% fossil fuel. Far from it. We can see clearly around the world that other countries are embracing renewable blends, and Ireland is about to embark on that journey. However, Government needs to be bolder and embrace realistic targets that work for the sector, the homeowner and the decarbonisation targets.

_{Image provided by OFTEC Ireland}