Chapter 13: RHI vs BUS - Heat Pump Subsidy Policy Analysis

[BenjaminWatts]

Summary

Comprehensive expansion of Chapter 13 analysing the shift from Renewable Heat Incentive (RHI) to Boiler Upgrade Scheme (BUS) for heat pump subsidies.

Key additions:

• RHI tariff structure and the March 2022 rush before closure
• Spark gap analysis showing how RHI made heat pumps profitable
• Moral hazard discussion (NI Cash for Ash parallel, insulation disincentive)
• Worked examples for typical semi-detached house
• Fabric-first policy gap and lack of coordination with insulation subsidies
• Skills gap and MCS certification limitations
• BUS estimation risk shifted to homeowners
• Grid capacity impact: 18 GW difference between COP 2.2 and 3.0
• Capacity charging externality and landlord-tenant principal-agent problem
• International comparisons:
  • Norway: Norgespris pricing, air-to-air dominance, NorthConnect rejection
  • Germany: Higher grants, income-tested
  • France: Fabric-first approach
  • Netherlands: Hybrid mandate from 2026
• CHMM manufacturer obligations from 2025
• Conclusion on subsidy design vs underlying economics

Word count: ~6,600 words (up from ~1,500)

Test plan

• Review chapter flow and narrative coherence
• Verify factual claims (RHI rates, dates, international policies)
• Check cross-references to other chapters

🤖 Generated with Claude Code

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Note

Substantial content expansion and restructuring of chapters/13-rhi-vs-bus.md, turning it into a comprehensive analysis of UK heat pump subsidy policy.

• Explains schemes: Adds clear definitions of RHI vs BUS and the transition from ongoing tariffs to a flat upfront grant
• RHI specifics: Tariff rates, heat demand caps, CPI indexation, and the March 2022 pre-closure installation spike
• Economics: Spark gap walkthrough showing RHI profitability; worked examples illustrating moral hazard and anti-insulation incentives
• Performance risk: Deemed payments under RHI vs homeowner risk under BUS; COP shortfalls and grid peak demand implications (e.g., 18 GW delta between COP 2.2 vs 3.0)
• Externalities: Capacity-based charging discussion, landlord-tenant principal–agent issues, and installer incentive misalignment
• Skills gap: Limits of MCS certification and workforce scaling challenges
• BUS structure: Flat £7,500 grant, winners/losers by property type, and policy trade-offs
• Hybrids: Case for hybrid systems vs current UK stance and implications for peak demand
• International comparisons: Norway pricing regime and market isolation, Germany/France income-tested and fabric-first grants, Netherlands hybrid mandate
• Future policy: BUS budget extension (2025–2028) and CHMM manufacturer sales obligations; outlook and lessons learned

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