Renewable Heat Incentives Explained

The renewable heat incentive or RHI is the latest government green scheme aimed tyo encourage to UKs shift to low carbin and renewable heat technologies. Launched officially at the start of this year (2014) the scheme is set to increase the returns of those investing in renewable heat technologies. Here are some of the most widely asked questions about the RHI and some information we hope will help you understand how it all works.

ELIGIBILITY CRITERIA

Am I eligible for the renewable heat incentive?

The following people are eligible to apply for the RHI:

  • Owner occupiers (including second homes)
  • Private landlords
  • Social landlords
  • Self-builders
  • Legacy (those who have installed eligible renewable heat measures after 15 July 2009)
  • Third party owners of a heating system

Other new build housing is not eligible.

The scheme is for a system that heats a single domestic property. Systems that heat more than one dwelling (ie a block of flats) may be able to apply to the non-domestic scheme. Payments go to the owner of the scheme. DECC expects that the  scheme will be open until March 2021.

I’m a private landlord, can I apply?

As long as you own the heating system, you can apply and you will receive the RHI payments. But you will be required to get necessary permissions from your tenants, both to install the system, and so you can comply with the requirements on maintenance and possible site visits in the future.

What do they mean by self-builder?

A self builder is an individual who has built or commissioned a home to be built for their own use, wither by building the home themselves or by working with the builders during the construction process.

I have already installed renewable heat. Can I get the RHI?

Provided that you installed your system after July 15th 2009, and you have not received any government support since then (other than from the renewable heat premium payment scheme or RHPP which will be factored in and deducted from RHI payments), under the legacy installation cklause you are eligible to apply for RHI payments.

What do they mean by third party owners of a heating scheme?

This is an occurrence when a heating system is leased. Those familiar with Solar PV may be aware of the concept already through the “rent-a-roof” model. A company pays the installation cost of a biomass boiler, heat pump or another renewable technology and is paid back through the payments of the Renewable Heat Incentive.

What are the eligibility criteria for legacy installations?

The legacy clause in the scheme enables applicants who have previously installed renewable heating systems between july 15th 2009 and the launch of the scheme early this year. However, there are two exceptions to the eligibility criteria in place for legacy applicants:

1. the installation will need to meet the MCS standards that applied at the time of installation, rather than the current standards;

2. installations will not need to meet the air quality requirements that will apply from the launch of the scheme for new applicants.

ELIGIBLE TECHNOLOGIES:

What technologies are eligible for the RHI?

  • Air source heat pumps (ASHP) (initially this is only ASHP that heat water – i.e. air to water)
  • Biomass boilers and wood pellet stoves with a back boiler (these must meet 99% of the peak spacing heating load to be eligible). Biomass technologies must meet air quality and fuel sustainability standards.
  • Ground and water source heat pumps (GSHP)
  • Solar thermal (hot water) – only flat plate and evacuated tube Solar panels will be eligible.

They must be MCS (or equivalent scheme) certified (both product and installer) and the installer must be a member of the renewable energy consumer code (RECC).

TARIFF RATES

What are the RHI tariff rates?

  • air source heat pumps 7.3p/kWh
  • biomass boilers and biomass pellet stoves with back burner 12.2p/kWh
  • ground source heat pumps 18.8p/kWh and
  • solar thermal technologies 19.2p/kWh (although it is possible that this rate may increase)

How long will the tariff be paid for?

The tariff payments for RHI will be continued for 7 years following installation and registration. Payments will be made quarterly in arrears by Ofgem. These payments will be linked to rise with the retail price index(RPI). While the tariff will be paid over a 7 year period, the rates have been calculated to reflect the 20 year life of a typical system.

Is the RHI index-linked?

Yes, tariffs will change annually in line with the retail price index (RPI). Changes will come into effect on 1 April each year.

When will rates change?

The government has decided to put in place a system known as a digression scheme, this is similar to the scheme introduced to keep the Feed In Tariff Scheme in a reasonable line with market changes. This means that the entry tariff levels for new applicants will decrease by a set percentage once pre specified levels of deployment have been reached. There are formal reviews scheduled for 2015 and 2017, but the government reserves the right to stage a review at any time in case of drastic changes to the market.

What will the tariffs be applied to?

The tariffs are to be paid per kWh of renewable heat energy generated by the system. The amount of heat generated by your system will be “Deemed” which provides an estimate of the property’s expected annual heat usage. The deemed renewable heat load will be multiplied by the tariff rates in order to calculate the annual payments from the renewable heat incentive.

For systems using biomass, heat pumps or  any hybrid systems the estimated hest use of a property will be calculated after the installation of required energy efficiency measures. The figure will be taken from

How do I calculate the potential return for Solar thermal, heat pumps or biomass heating?

The RHI will be paid on each kWh of renewable heat generated, for seven years. This amount will be ‘deemed’ (an estimate) based on the property’s expected annual heat use. To calculate the annual income multiply the deemed figure by the technology’s tariff rate

Example

You install a biomass boiler (tariff rate is 12.2p/kWh) in a home with expected heat use of 15,000kWh.

The calculation is 15,000 x 0.122 = £1,830 RHI payment per year.

What’s the thinking behind the tariff rates?

Rates are based on technology and installation costs; technology efficiencies; technology lifetimes, the cost of financing; and the costs of off-gas-grid fuels such as electricity and oil. It factors in a 7.5% compensation for finance of the capital cost of buying and installing the system.

How soon will my investment pay back?

The domestic RHI is designed as a “boiler replacement scheme”. Like replacing and older fossil fuel boiler with a newer much more efficient model the scheme is aimed at increasing uptake of renewable alternatives. The main object of providing RHI payments is to bridge the gap between the installation and running costs of fossil fuel systems and their renewable counterparts. Unlike the Feed-In-Tariff the RHI payments aren’t intended as a “return on investment”  but a helping hand, after all would you expect a gas or oil boiler to ‘pay back’.

RHI SCHEME REQUIREMENTS

All heating systems and installers must be accredited by MCS or an equivalent scheme. In addition, installers must be members of the Renewable Energy Consumer Code (RECC).

What does it mean by MCS or equivalent?

MCS (the micro-generation certification scheme) is the UK’s accreditation scheme. DECC will also recognize certification schemes that meet standards such as European standard EN 45011, or ISO/IEC 17065 which has replaced EN 45011.

What are the energy efficiency requirements?

With the exception of those undertaking a self build project, everyone who is looking to pursue Renewable Heat Incentive payments will have to undergo a green deal assessment, this includes legacy applicants. This records the energy performance of your property, and will provide you with a list of suggested methods you as the owner could consider installing to following to improve the energy efficiency of your property. This will also include some guidance as to how much the improvements are likely to cost, and more importantly, what savings you could be looking to make on your energy bills.

If loft and or cavity wall insulation are listed amongst your recommendations, then you must get them installed and obtain and updated energy performance certificate (EPC) before applying for the RHI. If installation is not feasible then you will need to present valid evidence of why not. Those involved in a self build project will have to apply for an EPC upon completion of the project and their deemed load figure will be ascertained from that.

Why has DECC set energy efficiency requirements?

The requirements have been set to ensure that those properties where renewable technology is being installed are at least partially efficient. The main focus of the incentives is to increase efficiency and lower carbon usage and emissions. If a prospective site is wildly inefficient in its energy use then implementing a renewable technology source would not be practical as the site would still be operating on a large deficit. The more efficient the target building the less a renewable heat source will have to work to heat it, therefore the system will be more efficient.

Why do I have to have a green deal assessment?

To find out which energy efficiency measures are cost effective for your property and to ensure that loft insulation (to 250mm) and cavity wall insulation have been installed where they are recommended by the green deal assessment.

Are there any other conditions I must meet?

You must have your heating system maintained regularly. You will have to confirm that your system is operating correctly as part of the application process, and will need to confirm annually that it is being maintained according to the manufacturer’s instructions.

Will I have to install a meter?

For biomass and heat pumps, meters will be required in two situations:

a) If the renewable heating system is installed alongside another fossil fuel or renewable space heating system (this includes hybrid systems)

b) In second homes. You can choose to install a meter under the metering and monitoring package, and this cost will be covered by an additional payment of £230 per year for heat pumps, £200 per year for biomass boilers. However, systems must be meter-ready.

Why do installations have to be ‘meter-ready’?

DECC wants to check its assumptions about fuel bill savings and renewable energy generation. Selected installations will have DECC’s metering equipment fitted, so all applicants will have to agree to this as part of the application process. DECC is working with MCS to make it an MCS standard to make all new domestic systems meter-ready where possible. It will not apply to legacy installations. This is not the same as getting a metering and monitoring package, and data will not be available for installers and householders to view in the same way.

BIOMASS CRITERIA

What biomass heaters are eligible?

You can install either a biomass-only boiler, fueled by wood pellet, wood chip or logs, or a biomass pellet stove with a back burner. It must meet the air quality and fuel sustainability criteria set out by DECC. Condensing biomass boilers are not eligible initially, but this will be kept under review, and may change.

What are the air quality requirements?

Systems must not exceed the maximum permitted emissions limits of 30g per gigajoule (g/GJ) net thermal input of particulate matter (PM) and 150g/GJ for oxides of nitrogen oxide. Legacy installations (those installed between 15 July 2009 and the start of the scheme) do not need to meet these requirements. Installations will also need to comply with national air quality and planning legislation.

What are the fuel sustainability requirements?

Fuels must be sourced from a supplier registered on an approved list (this will be set up before the scheme launches). You will have to make an annual declaration that you are doing so, and keep receipts as evidence.

I’ve got my own wood supply, can I use that?

Yes you can, as long as you do not also supply to other biomass installations. “Woody biomass feed stocks” (this includes perennial energy crops such as miscanthus as well as wood) grown on the same “estate” as an eligible biomass system will be automatically treated as meeting the sustainability criteria. DECC is also looking at a ‘proportionate approach’ for local suppliers of wood fuel.

HEAT PUMP CRITERIA

Can I use my heat pump for cooling too?

No. Any cooling from heat pumps is not eligible.

How do I calculate the ‘renewable heat’ generated by a heat pump?

The renewable heat is the heat taken from the ground, air or water, net of the electricity that is needed to run the heat pump. The more efficient the heat pumps, the more renewable heat will be produced.

This efficiency is measured as a seasonal performance factor (SPF). This means that for every 1kWh of electricity used, the heat pump will generate 2.5 kWhs of heat. To work out how much heat is renewable use the following formula: Eligible heat demand = total heat demand x (1 – 1/SPF)So if the SPF=3, 2/3 of the heat output will be eligible for RHI payments.

Is there a minimum efficiency for heat pumps?

The minimum SPF (seasonal performance factor) allowable for a heat pump to qualify for the RHI is 2.5. This is based on an EU classification which states that only those heat pumps with a SPF of 2.5 or more are considered renewable.

THE APPLICATION PROCESS

How do I apply?

Applications will open in spring 2014, and you will be encouraged to apply online at the Ofgem website. There will be alternatives to make it accessible to all.

Legacy applicants (who installed between 15 July 2009 and the launch of the scheme) are likely to have a staggered application process to manage the large volume. The intention is to deal with those who have not received funding through the RHPP first. Recipients of RHPP may be staggered on the basis of when they received the funding. There will be a cut-off date, by which legacy applications must be made.

Is there anything else I’ll have to do?

To ensure that you’re not continuing to receive payments heat that isn’t being generated you will have to declare annually that the system is still in use and meets the scheme requirements; that it is in working order and maintained in line with manufacturer’s instructions; and the current recipient is still entitled to the payments.

You may be selected for spot checks. Ofgem will be checking some installations while they process applications and some after they have been accepted onto the RHI. MCS certifying bodies will also be checking to make sure installers are carrying out work to a high enough quality. There is also a checking process in place for green deal advisers, to ensure standards are met.

Some installations will be chosen for metering to provide DECC with information about how the technologies perform.

If you refuse to comply with any of the above it may delay or prevent acceptance onto the scheme. If you are not meeting the ongoing requirements, your payments will stop.

I have already received a renewable heat premium payment; can I apply for the RHI?

You must declare that you have received the RHPP – or any other public funding you have received for the heating system – as part of your application. It will be deducted from your quarterly payments over the life time of the tariff. The deduction will also be altered in line with the RPI each April.

FUNDING

Is there any help with the upfront cost of installing a renewable heating system?

If you install before 31 March 2014 you will be able to claim the renewable heat premium payments (RHPP):

Air source heat pump: £1,300
Biomass boiler: £2,000
Ground or water source heat pump: £2,300
Solar thermal: £600

You may also be able to get some part-finance through the green deal, which enables you to pay off the loan through the savings that result on your energy bill.

OTHER QUESTIONS

Who will benefit most from the domestic RHI?

The scheme is targeted at those off the gas grid and living in rural areas. There are about 4 million off-gas homes in the UK, evenly split between rural and urban areas.

The rural off-gas homes are generally heated by oil or LPG, and tend to be older, larger, solid walled properties that are not energy efficient. Because they are sparsely populated, and not suitable for heat networks, they are the properties that the tariff rates have been calculated for. DECC hopes to support around 750,000 renewable systems by 2020, predominantly off the gas grid.

In 2011, the average cost of heating a three bedroom house was almost 50% higher for oil, and over 100% higher for LPG, compared with mains gas.

Can I keep a backup heating system alongside my renewable heat one?

You can have another heating system (either renewable or not), but if you want to claim the RHI you will have to install a meter on your heat pump, biomass boiler or hybrid system. The RHI will be paid on meter readings (as opposed to deemed heat use). However, payments will be capped at the deemed amount of heat use. You will be responsible for the installation of any required meters, and ensuring they meet the requirements in the metering for payment technical supplement.

The exception to this is if you install Solar thermal with a heat pump or biomass system. Then you can make two claims for RHI – one for the Solar thermal, one for the heat pump or biomass. Both systems will be paid according to the deemed amount, and will not need to be metered.

Room heaters, such as a wood burning stove (without a back boiler) do not count as another heating system in this context.

What is the metering and monitoring package?

It is similar to a service contract. The meters will enable you and your installer to see the measured performance of your system online. The aim is to give you peace of mind that your system is working properly, and allow the installer to improve performance where possible and diagnose problems as they occur. The payment of £230 per year for heat pumps and £200 for biomass boilers is to reimburse you for the cost of the package over the 7 year life of the RHI payments. This package is not available for biomass stoves. In the first instance, it is only available to the first 2,500 applicants in the first year of the scheme.

What happens if I sell my property?

You must inform Ofgem, so payments can be transferred to the new owner.

What do I do if things go wrong?

If you can’t sort it out with your installer, then the process for complaints is available on the Renewable Energy Consumer Code website.