Renewable Heat Initiative

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The Department of Energy and Climate Change (DECC) predicts that in order to meet the 2020 target of generating 15% of energy through renewable resources, then new ways are needed to be developed to generate heat. Presently, heat generated from renewable sources accounts for only 1% of the total heat demand, however this may need to be increased to 12% in order to meet binding EU targets.  Therefore, using powers from the Energy Act 2008 they plan to implement the Renewable Heat Initiative (RHI) which will incentivise the use of renewable heat technologies and will be accessible, flexible and user-friendly to potential investors at all scales (DECC, 2010). The system will work like Feed-In Tariffs; however it will be regulated by Ofgem rather than the Government.  Users will earn a fixed income for each kilowatt hour of heat produced and used; however, there is the possibility of earning extra on any surplus heat by exporting it [1].  Such support is considered by the DECC to enable more people to afford renewable heat and, by expanding the market, help to bring costs down more quickly. Therefore there is not a better time to consider renewable heat technologies.

Eligibility

Unlike Feed-In Tariffs, there is not a maximum limit to the size of the renewable heat technology implemented under the RHI.

Systems supported include:

The RHI supports heating at all scales, including households, businesses, offices, public sector buildings and industrial processes in large factories (DECC, 2010).  Presently, any systems installed before 15th July 2009 will not be eligible for the RHI and any systems installed after that will only receive payments after April 2011.  All equipment and installers must be MCS certified and work is underway to change and extend the upper limits of MCS certification as it is restricted to 45kW for all systems but biomass, which is restricted to 300kW.  Also, in order to qualify for RHI payments over the lifetime of the scheme, the system owner must sign a declaration that agrees to maintain the equipment to good working order (rhincentive.co.uk, 2010). However, as the RHI is under consultation, the eligibility criteria is subject to change before the initiative is implemented.

Tariffs

The DECC considers the tariff levels to bridge the financial gap between the cost of conventional and renewable heat systems at all scales.  This is done by compensating the financial costs associated with renewable heat by covering the difference in upfront capital and ongoing costs.  Compensation is also provided for some non-financial barriers such as the disruption of digging up gardens to install ground source heat pumps etc. Finally, the tariffs should pay an investment return which is proposed at 12% for all technologies but 6% for solar thermal.

Metering

 

The majority of renewable heat technologies will be measured on a “deemed” number of kWh or the “reasonable heat requirement” that the installation is intended to serve (DECC, 2010).  This is to discourage the generation of additional energy for export and more incentives unless it can be utilised within district and community heating networks.  Therefore, there are different methods of metering for each size level of technology:

Small scale systems:

Payment will be based on a “deemed” output based on the efficiency expected in a well insulated property.  This will be assessed through the existing Standard Assessment Procedure (SAP) 28 used for the energy rating of buildings.

Medium scale systems:

This will be the same as small scale systems generally, however there will be the option to meter solid biomass installations.  Although the same tariffs levels will apply for metering up to the deemed number of kWh for the property, when this is exceeded, an addition lower tariff per kWh will be paid to cover the excess (rhincentive.co.uk, 2010).

Large scale systems and process heat:

This will be paid by calculating the metered number of kWh multiplied by the tariff per kWh.

Biomethane injection and district heating:

This is proposed to be metered at all scales.

It important to note that as the RHI is still at the consultation stage, the tariff levels and eligibility is liable to change before April 2011.

How much money can the RHI save you?

If solar thermal panels and a biomass boiler were installed in an average household that uses 15,000kWh of heat a year, the Renewable Heat Incentive will provide:

  • 13,700kWh of heat generated would pay the homeowner £1,400 a year (the kW difference is made up through energy efficiency measures such as installation)
  • Biomass fuel costs could be up to £575 per year
  • Therefore the minimum annual benefit is £825 per year

The benefits

Overall, this initiative provides an income for the heat you generate by renewable sources and allows you to make a difference to the environment.  The cost of your energy bill will be reduced as most properties in the UK generate heat at source (your property) using a gas or oil boiler.  This usually results in high energy bills, but the RHI has been structured to not only pay for the heat you generate but also to reduce other costs.  Therefore, the average home in the UK is expected to make at least a net profit of £600 a year.  In addition to a reduction in your energy bill, the RHI will also mean that you will not be affected by the changes in fuel prices as badly.  The price of oil and gas fluctuate regularly, so installing a renewable heat system that does not rely on these fuels will give you some protection against this and will mean you are not as vulnerable as before. Finally, switching to heat generation from renewable sources means you contribute to the aim to generate 12% of the UK’s energy from renewable sources by 2020.

It is highly unlikely that you could be worse off from implementing a renewable heat technology.  The RHI will allow you to reduce your carbon footprint and energy bills, become more self-sufficient and earn some extra income. So now is the time to consider your options.

[1] rhincentive.co.uk (2010)

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