The RHI (Renewables Heat Incentive)

The long awaiting RHI (Renewables Heat Incentive) was finally announced on the 12th July.

We are expecting the scheme to go live around Spring 2014 and hope that this will help re-ignite the stalling renewables industry.  We have put together a summary below of the RHI and the expected paybacks for the technologies specifically for Solar Thermal and Air Source Heat Pumps.

Tariff Levels and Payments

  • ASHP 7.3p/kWh
  • Biomass boilers 12.2p/kWh
  • GSHP 18.8p/kWh
  • Solar thermal at least 19.2p/kWh for solar thermal.

(Note – The solar thermal tariff is capped by reference to the level of support offered to offshore wind. The tariff will be at least 19.2p, and possibly up to 21.7p, depending on the decision on the appropriate level of the vfm cap following the outcome of the non-domestic tariff review consultation. The announcement on the final tariff will be made in the Autumn)

Payments will be made on a quarterly basis for seven years. 

The tariffs have been set at a level that reflects the expected cost of renewable heat generation over 20 years.  In most cases, payments will be made based on estimated heat demand of the property. 

Extra payments for heat pumps and biomass when metered

DECC will offer an extra set payment of £230 per year where consumers take out metering and monitoring support packages for heat pumps and £200 for biomass boilers. 

Eligible applicants

  • Homeowners
  • Private and social landlords
  • Third party owners of heating systems (For example where a LA’s use ALMO’s, the application must come from those who own the heating system)
  • Self builders.

Anyone who has installed a renewable heat technology since 15 July 2009 and meets the scheme eligibility criteria will be able to join the scheme.

Non Eligible applicants

New build properties

This relates to properties in which the renewable heating system was installed before it was inhabited for the first time. This includes applications from house builders and housing developers, as well as anyone who owns a new build property, including legacy applicants.

Housing developers may be eligible for the existing non-domestic RHI. This scheme offers tariffs for two or more properties that are connected to a district heat network.

Eligible technologies for RHI domestic

  • Air to water heat pumps
  • Biomass only boilers
  • Biomass pellet stoves with back boilers
  • Ground and water source heat pumps
  • Flat plate and evacuated tube solar thermal panels.

Scheme requirements

Applicants will need to complete a Green Deal Assessment before submitting their application

Must have met minimum loft (250mm) and cavity wall insulation requirements, where appropriate.

All installations and installers must be MCS certified (or certified by an equivalent scheme). 

MCS certified installers are currently required to be members of the Renewable Energy Consumer Code, which is backed by the Trading Standards Institute.

Applications

Pre-application enquiries should be directed to ESAS on 0300 123 1234Once open, the RHI for householders will be administered by Ofgem and more details on how to apply will be published in due course. 

 

RHI Calculations

Solar-thermal:

The proposed tariff is 19.2p for every kW/hr produced

  • Typical or average production from solar thermal estimated at 1,800kW/hr per annum
  • Typical CAPEX costs to install are £4,800

Therefore:

  • RHI revenue would be £345.60 per annum
  • Fuel displacement (Gas in this scenario) £83.52 per annum
  • Payback would be 11.18 years (assuming fuel costs remain static)

Life expectancy of Solar Thermal system 20 years

 

ASHP:

The proposed tariff is 7.3p per kW/hr of renewable heat

  • Standalone ASHP systems (where there is no back up fossil fuel boiler) will be deemed as opposed to metered (you can choose to join the metering programme in which case you receive an additional payments)
  • The dwelling will require an EPC (Energy Performance Certificate) to provide details on the ASHP’s SPF (Seasonal Performance Factor) and expected consumption
  • New-build is ineligible unless it’s self-build

So as an example, let’s make the following assumptions:

  1. The CAPEX costs for installing the ASHP along with system upgrades and tighter insulation are £10,000
  2. The SPF is 2.7
  3. The annual heat requirement has been calculated at 15,000kW/hr

Therefore:

  • The return via the RHI would be £689.44 per annum
  • Payback period would be 14.5 years

Or with the following assumptions:

  1. The CAPEX costs for installing the ASHP along with system upgrades and tighter insulation are £8,000
  2. The SPF is 3.0
  3. The annual heat requirement has been calculated at 15,000kW/hr

Payback would be 10.96 years

Life expectancy of an Air Source Heat pump around 12 – 16 years

The above calculations are estimations. Calculations should be made in reference to your particular project, before making any decision to proceed with installation due to the amount of variable factors that need to be considered.

Non Domestic RHI

The Government continues to make progress towards finalising the details of the expansion of the non-domestic RHI – the first scheme of its kind in the world.  We intend to announce the final details of this and the Government response to the non-domestic Early Tariff Review consultation in the autumn and continue to aim to introduce support through these changes in the non-domestic scheme in spring 2014