OREANDA-NEWS. The UK government will increase funding for the renewable heat incentive (RHI) scheme to ?1.15bn ($1.74bn) by 2020-21.

The RHI was was to be extended beyond 2016 but funding was only been available until March, creating uncertainty over the future of the scheme. But the government will reform the scheme to deliver savings of ?700mn, the finance ministry said today — although the nature of the reforms are yet to be announced and the Department of Energy and Climate Change said there were no further details at this stage.

The government will implement "budget caps", meaning that if forecast expenditure on existing applications and accreditations reaches the agreed budget for that year, or any future year, the energy minister can take action to suspend the scheme to new applications.

The UK's Renewable Energy Association welcomed the announcement on the continuation of the RHI. "The devil will be in the detail," chief executive Nina Skorupska said, but "a ?700mn cut is large".

The UK's Wood Heat Association "cautiously" welcomed the announcement. "Biomass heat is an outstanding success story for policy intervention in the problematic area of heating," chair Julian Morgan-Jones said.

Over 2GW of installed biomass-fuelled power generation capacity has been supported by the scheme.