The Government’s proposed Renewable Heat Obligation (RHO), intended as a key policy to decarbonise Ireland’s heating sector, has come under heavy criticism from yet another industry body.

With only 6.3% of Ireland’s heat demand currently met by renewable sources (well below the EU average of 22%), the RHO, which will force the inclusion of renewables in the heating fuel, is seen as one of the most important policies for energy decarbonisation to be developed by the State.

However, the policy has been crippled by years of delays due to its complexity, with many industry bodies unhappy with its currently proposed form. First proposed in 2019, as of mid-2025, legislation is not expected until the end of the year, with implementation pushed to early 2026 at the earliest.

The Alliance for Zero Carbon Heating (TAZCH), a group representing Ireland’s home heating sector, has become the latest body to join that queue with a new report criticising the upcoming scheme. It warns the scheme, in its current form, is unambitious and unfair.

While the RHO is seen as a key policy for the AD industry, many other liquid fuels will be eligible too, including biofuels and hydrotreated vegetable oil (HVO), and suppliers of them spot a big opportunity.

Low rates

At the heart of the criticism is the proposed obligation level: just 1.5% in its first year, increasing to 3% in year two and eventually 10%. TAZCH argues this will barely move the needle on emissions and will likely create a paper-based trading system for certificates, rather than driving the actual supply and use of renewable fuels.

TAZCH also argues that there is lack of meaningful support for renewable liquid fuels and the focus for home-heat decarbonisation is wrong. Currently, over 700,000 homes in Ireland rely on liquid fuel, mostly kerosene, for heating. The majority of these are in rural areas, with Census data showing 59% of people living rurally, 65% in detached houses.

For these households, the Government’s continued focus on replacing oil boilers with heat pumps is increasingly seen as unrealistic, it argues. TAZCH points out that while the Government wants 400,000 heat pumps installed by 2030, just 20,000 have been fitted since 2020. Retrofitting, even with grants, can cost over €37,000, well beyond the means of most rural households, especially older ones it said.

Liquid versus biomethane

One of the major frustrations by the group is the Government’s clear preference for incentivising biomethane, a renewable gas set to be produced domestically from AD plants.

The report states that the low obligation rates are a recognition of the gas sector’s limited ability to embrace renewables.

TAZCH further argues that the RHO’s structure has been skewed in favour of the fledgling biomethane industry, which is being granted “multipliers” to help make Irish biomethane more attractive.

This will not be available to the liquid fuel companies which is inequitable, the group said.

Split fuels

TAZCH has proposed a new approach to the troubled RHO by splitting it into two distinct schemes, one for gas and one for liquid fuels. A new liquid fuel obligation of 20% could be set which the industry say they are ready to supply.

A 20% blend of renewable liquid fuel, such as HVO, could be used in existing boilers with no retrofits needed. This, they say, could reduce emissions by 0.5 million tonnes of CO2 annually, equivalent to installing 160,000 heat pumps, but achievable almost overnight using current infrastructure. This approach, they argue, would reflect the reality of how each fuel is supplied and eliminates cross-sector certificate trading.

It would allow the allow the gas industry to pursue indigenous biomethane, while liquid fuel suppliers peruse indigenous biofuels and imported HVO, the report states.

HVO fraud

HVO use in Ireland has grown significantly in recent years, with the transport sector being the key target. Last year, Ireland saw a 20% rise in demand for biofuels in transport, in line with the increase in the Government’s biofuels obligation, where renewable fuel is blended with transport fuel. Data from the National Oil Reserves Agency (NORA) shows that Irish-made biofuel use fell by 21% to 46 million litres, despite a 20% rise in overall consumption.

HVO supply grew by 74% in Ireland, as it is proven to be an easy, readily available, and cost-effective alternative to diesel.

However, serious concerns remain about fraudulent mislabelling of the feedstocks used to produce HVO. Three-quarters of HVO used comes from non-EU countries with significant fraud risks related to used cooking oil and palm oil mill effluent, including Indonesia, China, and Malaysia.

EU countries, including Ireland, are introducing stricter measures to combat biofuel fraud, with outright bans being considered in some cases.

From 1 July 2025, fuels produced from palm oil mill effluent in Ireland will no longer qualify for additional certificates under the transport scheme.