An update on the Renewable Heat Obligation (Ireland)

When a certain ‘Green’ minister was in power in both the Transport and Environment Departments, the liquid fuel sector rarely got a mention, and any efforts to discuss renewable fuels, as part of government heat decarbonisation policy, was rejected out of hand.

OFTEC, UKIFDA and Fuels for Ireland have been working tirelessly over the past five years to make inroads with SEAI and the Department of Climate, Energy and the Environment, and our efforts are now starting to pay dividends.

With his departure in January 2025, and recent commentary that the State could face fines of up to €26bn and may ‘only’ reduce its emissions by 51% by 2030, the landscape has changed and the Department is much more receptive to a wider range of decarbonisation solutions.

Legislation

The current Government is proposing to introduce ‘The Renewable Heating Obligation’ – this will be new legislation mandating all energy suppliers to have a certain percentage of renewable fuel in their heating fuels. This is good news, takes us away from the ‘boiler ban’ threatened many years ago and gives a new lease of life to liquid fuels.

While government still says it is pursuing an electrification policy, many now realise that electrification is not the only solution and, with an increasing demand for electricity generally, there is a realisation that alternative solutions will also have to be considered if climate targets are to me met. Biogas, biomass and low-carbon liquid fuels all have an important role to play in the country’s decarbonisation journey.

For our sector, its easy. We have seen boiler manufacturers test from 1% to 100% HVO in modern condensing boilers and it works, fantastically. The downside is the cost. HVO is in high demand from the transport, aviation and power sectors and trades at a premium to kerosene. Government recognises this and has suggested a low starting blend in draft RHO legislation of 1.5% and 3% for years one and two of the obligation but no clarity on long-term forecasts.

The Department has sent its TRIS notification on the RHO to the European Commission on 23rd December 2025. The TRIS process is to prevent technical barriers to trade and other EU member states have until the expiry date of 30th March to make comment. With a mooted start date of 1st January 2027, it does not give a lot of time for the legislation to be scrutinised, and any amendments made, before being implemented.

Lacking ambition

As a sector, we would like to see a higher initial blend, and an independent consultant’s report supports our view. The consultant clarified: “Based on an examination of future heating demand, and the penetration of other heat decarbonisation technologies as modelled by SEAI’s energy forecasting team, it was determined that (with no trading and no use of multipliers on fuels) an obligation rate of 15% in 2030 would be required for the RHO to meet its objective of contributing to an increase of up to 10% in RES-H.”

We believe the real elephant in the room is the perceived cost to the consumer. No government wants to increase costs to consumers, and heating – especially for rural users – is an emotive issue. Many rural TDs will be nervous about being seen to slap further increases on constituents already reeling from the cost-of-living crisis.
But we are concerned that the Department’s officials may not really understand the mechanics of the blending process and how a lower blend rate could disadvantage the scheme and cost consumers more!

We have provided evidence to the Department of the increased costs of blended fuel to consumers and said that our preferred starting blend is 5% with a longer-term ambition (within five years of 20%). The increased cost to the consumer at 1.5% blend rate is €20pa, at 3% its €41 and at 5% blend it’s an additional €68pa.

At 1.5%, the importers are unlikely to blend (as it’s a very low level) and will probably resort to paying the buyout price. This has not yet been set by legislation, but it is expected to be at the same level as the Renewable Transport Fuel Obligation. Our estimates show that in Year 2, at 3% this buyout cost could see the consumer paying an additional €82!

So, if government sticks with the lower blend rate and the importers go down the buyout route, this cost would be passed on to the consumer with no physical renewable fuel going into consumers tanks!

So, the Government has a choice – it can mandate a system that produces a 5% blend, which contributes to the RES-H target, reduces its liability to the EU and costs the consumer an additional €68pa or continue with the lowest level of ambition where no renewable fuel ends up in the consumer’s tank but they end up paying an additional €82pa.

It’s a no-brainer in our book and as this goes to print, we will have taken that message to the many TDs and parliamentarians that support the deployment of low carbon liquid fuel as a realistic and cost-effective option to assist decarbonisation.

_{The image, provided by OFTEC shows, from left to right: Ken Cronin (UKIFDA), Nicolas Browne (GAC UK & Ireland), Kevin McPartlan (Fuels for Ireland), and David Blevings (OFTEC Ireland)}