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1) financial incentives – based on direct financial support such as capital grants used to reduce the capital cost of deploying renewable energy technologies, or investment risk reduction using soft loans (IEA, 2004), and 2) fiscalincentivessuchastaxbenefits. Generally these types of incentive are funded out of government budgets. In order to be effective the design of these incentive schemes needs to allocate sufficient levels of funding to bridge the gap between the market price of heat energy and the costs for RETs. The incentives should be predictable and consistent over the life of the policy to provide investment confidence. Investment incentives Capital grants and rebates Solar thermal and geothermal heating installations are usually capital intensive but with relatively low running costs. Bioenergy heat plants can be similar where the source of biomass is free-on-site but the fuel usually needs to be collected or purchased, often resulting in higher running costs. Capital grants are a straightforward incentive to reduce the up-front investment costs. This is a very common type of support relatively easy to administer. Grants, or subsidies, may be offered either to the developers or owners of the renewable heating installations, or directly to the manufacturers of the renewable heating technologies. It is recommended that grants are offered in support of the demand-side market as grants for manufacturing may interfere with competition. For the plant owners, grants may be offered in terms of: 1) capacityinstalled(€7/MW)directlytargetingthecapitalinvestmentcostsforplantandinstallation; 2) subsidiessetasapercentageoftotalinvestment; 3) afixedpaymentincentiveperinstallation; 4) rebatesintheformoftherefundofaspecificpercentageofthecostofinstallation;or 5) therefundofacertainamountofmoneyperunitofcapacityinstalled(Sawin,2006). Where a budget limit is imposed, grants may be awarded on a first come, first served basis or auctioned. A risk lies in providing grant funding for the installation as this does not guarantee how much heat energy, if any, will be generated. Moreover, limited funding per grant may provide a disincentive for investment in higher quality technologies. Operation grants Such heat production incentives provide cash payments based on an energy generation basis, typically on a €/kWh basis for the production of renewable electricity. However, targeting the end energy product of heat is also a possibility, normally in terms of €/GJ. Payments based on energy generation and hence plant performance, rather than on capital investment, may place more emphasis on choosing better quality installations. Moreover, funding the energy generation ensures that renewable heat is actually generated. The distributed nature of heat supply complicates the implementation of operation grants due to a lack of cost-effective metering and monitoring procedures often only cost-effective and practical for larger systems. 7. The currency used is country specific. 63PDF Image | RENEWABLES FOR HEATING AND COOLING
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