Energy secretary Chris Huhne has launched the Renewable Heat Incentive in a bid to increase green capital investment by £4.5 billion over the next nine years.
RHI tariff payments will start for homes in 2012, while 25,000 installations from July will be supported by an RHI Premium Payment to help people cover the purchase price of green heating systems.
The incentive will encourage installation of equipment such as renewable heat pumps, biomass boilers and solar thermal panels to reduce emissions and support the existing 150,000 jobs in the heating industry.
The government estimates that by 2020, the renewable heat sector will have grown to include about 13,000 industrial installations and 110,000 commercial and public sector installations.
Chris Huhne said: “Renewable heat is a largely untapped resource and an important new green industry of the future.
“This incentive is the first of its kind in the world. It’ll help the UK shift away from fossil fuel, reducing carbon emissions and encouraging innovation, jobs and growth in new advanced technologies.”