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Renewable Heat Incentive: A homeowners guide

Posted by Cathy Debenham on 22 March 2010 at 2:09 pm

Heat is the biggest use of energy in the UK. Just under half of the UK's CO2 emissions and 60% of domestic energy bills are used on heating space and water. Heat in the UK is currently supplied predominantly by fossil fuels - less than 1% comes from renewable sources. The proposed renewable heat incentive (RHI - also known as clean energy cashback) aims to change that. Its ambitious goal is that 12% of heat is generated renewably by 2020. The Government is currently consulting on the proposals, which (if it survives the election), will be the first such scheme in Europe. It should give a stable framework for the industry to expand and develop.The aim is to introduce the scheme from April 2011.

This article concentrates on the aspects of the scheme that apply to the domestic market (and also smaller businesses). It looks at the proposals, what they will mean for homeowners, and issues you might want to consider if you feel moved to respond to the consultation.

How much will I be paid for heat I generate?

Proposed tariff levels for small installations (up to 45kW, except solar thermal which is up to 20kW):
Solid biomass, 9p per kWh for 15 years
Biodiesel, 6.5p per kWh for 15 years
Biogas on-site combustion, 5.5p per kWh for 10 years
Ground source heat pumps, 7p per kWh for 23 years
Air source heat pumps, 7.5p per kWh for 18 years
Solar thermal, 18p per kWh for 20 years

Which technologies are included in the scheme?
Air, ground and water heat pumps, solar hot water panels and biomass boilers are the main technologies that will be used in the domestic market. The government proposes omitting wood burning stoves, air heaters and open fires from the heat incentive, as they are generally used as optional secondary heating, and because it's difficult to monitor to what extent they are used with non-renewable fuel such as coal. We would argue that they should consider including wood pellet stoves with and wood burners with back boilers where this is the main method of heating water; and wood pellet stoves used for space heating more than just one room.

People who have oil-based heating systems will be eligible for the renewable heat incentive if they convert their boiler to run on a blended fuel that is part renewable oil/part heating oil. Bioliquids (ie oils made from arable crops such as rapeseed) will not generally eligible, apart from this special case. The blended fuel will have to be certified to be eligible.

What return on investment will I get?
The payments are intended to give a 12% rate of return. This is a better return than under the feed-in tariff because the government sees renewable heat as a priority area for growth; and also because it thinks the hassle factor involved in the installation of technologies such as ground source heat pumps will mean people need more incentive to do it. The rates have been set so that they cover the higher cost of installing and running new technologies.

How will it work?
To qualify for the RHI payments, you will have to use an accredited installer and product. The main accreditation scheme is the Microgeneration Certification Scheme (MCS), and equivalent European schemes will also apply. Once a system is in place, your installer will issue a certificate that will enable you to register the installation with Ofgem. Once it has accredited the installation it will pay the incentive - this is likely to be an annual payment into your bank account.

How is the payment calculated?
The payments will be 'deemed' rather than metered. Although it is possible to meter heat the technology is in the early stages of development. The final methodology for how it will be done is yet to be decided. It is likely to be based on a table of average energy needs for space heating broken down by property type and size. For example, a 2-bedroom flat, with 61m2 of floor space, and cavity wall construction may be deemed to need 4,441kWh/year for space heating. A 3-bedroom semi, with solid wall construction may be expected to need 16,390kWh/year. The useful energy requirement for hot water will be assumed constant across property types and sizes at 3,742 kWh/year. This is based on an average occupancy of 2.9 people.

Are there any energy efficiency requirements?
You will need at least 125mm of loft insulation and cavity wall insulation, where appropriate, to qualify for the heat incentive. DECC does not propose to make more stringent requirements, as a deemed tariff system will encourage people to make their home as energy efficient as possible. The more efficient it is, the less energy will be needed for heating, so energy bills are lower, and more of the incentive payment is available to be saved or spent on other things.

Who can receive the payment?
The 'owner' of the heat installation is the only person who can receive the payment under the Energy Act 2008. This will usually be the person who bought and paid for the installation of the equipment. However, where there has been a hire purchase or similar agreement to fund the purchase, the payment can be made to the person who has taken out the loan even if they are not the legal owner. There may also be times when the person who owns the equipment is not the person who benefits from the heat it produces - ie if a landlord installs it in a rented property. In this case the landlord can receive the payment.

To receive the payment the owner may be asked to sign a declaration that they agree to keep the equipment working and well maintained to qualify for ongoing payments. Ofgem may want evidence of ongoing maintenance and repair by an approved person.

What installations are covered?
People who installed their heat generating equipment after 15 July 2009 are eligible for the renewable heat incentive. Only the installation of new equipment is eligible - refurbishment , repair or conversion will not be. There is considerable weight of feeling that existing microgenerators (who installed prior to the cut off date) should also be included in the scheme, as installers are being asked to rip out kit that works well, and install new, so people can claim. There is also strong feeling that a lot of education is needed for the RHI to really work, and that pioneer users with good stories to tell are vital to that education process.

What about fuel?
To qualify for the RHI payment, fuel needs to come from an approved sustainable source. It's not clear yet whether people with their own source of wood (or other biomass) will be able to use that in a biomass boiler - or whether they have to buy from an accredited source. This is something that we will be chasing up on in our response to the consultation

What if I live in rented accommodation?
Private landlords will be able to claim the RHI payments on renewable heat equipment that they install in their properties, with the aim that it is a logical financial decision to install it.

What about people in fuel poverty and social housing?
There is no requirement for social landlords to adopt renewable technologies, but the government thinks that the incentive will offer them a strong business case to offer this choice to their tenants. It is developing guidance to enable them increase the energy performance of their housing stock. The government is also consulting on ways to help low income households in fuel poverty to take advantage of the scheme. A lot of people in fuel poverty live off the gas grid, where switching to renewable technologies can make the most difference. The RHI includes provision for district heating systems, to encourage larger scale installations, for example in large blocks of flats, where that makes sense.

Consultation
The full consultation document can be downloaded from the DECC website. The closing date for responses is 26 April 2010.  Email responses are preferred to rfi@decc.gsi.gov.uk.

Photo by Reinante El Pintor de Fuego

More information about the Renewable Heat Incentive (RHI) on YouGen.

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Comments

4 comments - read them below or add one

Cathy Debenham

Cathy DebenhamComment left on: 10 June 2010 at 9:54 am

There's an early day motion calling on the government to end the uncertainty around the RHI. Ask your MP to sign EDM 143 which you can read at http://edmi.parliament.uk/EDMi/EDMDetails.aspx?EDMID=41062&SESSION=905


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Ian Smith

Ian SmithComment left on: 8 June 2010 at 5:53 pm

There is no mention of the RHI in the coalition agreement and there have been other hints from DECC that implementation of this programme is by no means certain - I would advise caution in respect of any investments which are dependent on RHI payments until definitive statements about its implementation are available.  Even though the Energy Act 2008, which enabled this programme (and the electricity Feed in Tariff), had the support of all three main parties, I suspect that decisions on the RHI will await the outcome of the discussions on a carbon floor price as this may have a significant impact on what needs (or doen not need) to be done to achieve the 2020 targets.

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energysavingexpert

energysavingexpertComment left on: 13 April 2010 at 9:56 pm

All interesting stuff. I'm starting from scratch with an old victorian farmhouse, and you can read about my endeavors at http://energysavingexpert.wordpress.com

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Monica B

Monica BComment left on: 24 March 2010 at 8:56 pm

I've had a think about the issues raised in the RHI Consultation and think there are compelling reasons to start a campaign asking for all renewable heating systems to qualify for the RHI, not just those installed after 15th July 2009. Although YouGen are saying they aren't taking it up as a campaign, I am hoping I can persuade you to change your mind. I have spoken to several friends who feel the issues of low FITs for existing microgenerators and no RHI payments for existing installations of renewable heat are closely linked: if one campaign wins the other is more likely to, and vice versa. And there is a genuine feeling of the unfairness of all this.

Below I summarize some compelling reasons why it is to the Government's advantage to change the proposals for the RHI. I am only putting forward reasons for the domestic market, as I know nothing about larger installations, but I am sure there are equally valid reasons there.

1. Those with renewable systems already are likely to be those keenest on renewable heating and therefore its best advocates, so to alienate them is bad news for the scheme. To recruit them by paying them the same as new installations would at a stroke recruit an effective group to advertise the scheme, able to show the payments were a reality. They also understand issues like the kind of lifestyle changes often necessary to utilise the system optimally; they often promote renewable heating by showing people round their installation; and they are likely to be knowledgeable on measures to cut energy consumption such as increased insulation.

2. Those with installations already in place were pioneers for an infant industry often suffering greater upheaval, and higher costs. Hence they were in reality guinea pigs for the industry (and hence for the government,) and have brought the renewables industry to it's present position.

3. If the proposals are going to make any impact, there will need to be a major expansion in retro-fitting renewable heating to domestic property. There is still a huge learning curve here, so those who have already retro-fitted systems need to be on board feeding back information to their installers on how their systems are working so that best practice can be easily disseminated.

4.The scheme excludes self installers. I feel this is a mistake as self-installers usually are careful to ensure value for money. Hence it would be a good reality check for the rest of the renewable heating market. Some means of validating the standard of their installations should be found so that they could join the scheme.

5. The scheme will only make payments for new or replacement systems, but not repair, conversion or refurbishment. How are these often suble differences going to be decided in practice? - this will be costly to administer and would be unnecessary if all owners were entitled to the scheme.

6. The scheme will only make payments if the system replaces one using fossil fuels. Hence, if we added solar thermal to our already existant heat pump system we would not even be eligible for the solar thermal payments. Nor would we be eligible for the RHI if we extended our system.

6. We have evidence that having a renewable heating system actually lowers the market value of a house. Applying the RHI to already existant schemes will tend to reverse this, but without this we lose out yet again.

7. There have been several comments that it makes financial sense to rip out any existing schemes, then re-install them again. I am sure this will happen even though it makes no sense in terms of use of resources or carbon footprint. It will be very bad publicity for the scheme (headlines such as "householder had to rip out installation and replace it with the same") and that means bad publicity for renewable heating in general.

I urge anyone reading this post to respond to the consultation - this is the consultation document, which is well written and the response sheet easy to fill in

This is the response sheet - we used questions 4, 7 and 28 to put many of these points across.

 

Lets make the RHI a success rather than either a damp squid or the laughing stock of the media - so lets tell the Government what it should do to make it work!

Monica Bolton

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