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Renewable Heat Incentive consultation: YouGen's response

Posted by Cathy Debenham on 26 April 2010 at 10:29 am

The Renewable Heat Incentive consultation closes today. Here is YouGen's response. If you want to respond yourself, you can email DECC's renewable financial incentives team.

Key Issues

  • We strongly ask you to reconsider your policy of excluding those who had systems installed prior to July 2009, as we believe that this will hinder the take up of the scheme.
  • Solar thermal, the only truly zero carbon source of heat, should be incentivised as much, if not more than other  technologies; not less as is the case in your proposals.
  • Energy efficiency measures should be mandatory for installations of technologies intended to deliver heating.
  • Technologies that deliver greater carbon dioxide emission reductions should be encouraged with better rewards than those which result in lower reductions.

Q1: Are there any issues relevant to the design or operation of the RHI that are not addressed in this consultation document? If so, how should we deal with them?

If, as outlined in Lord King’s introduction to the consultation document, the main point of the renewable heat incentive is to tackle climate change, then we would expect it to incentivise the technologies that make the biggest saving in carbon emissions most. However, solar thermal, the only truly zero carbon technology, appears to be treated as the poor relation, and is in danger of being overlooked in favour of alternatives that offer a better financial return but lower carbon savings as a result.

We strongly believe that the incentives should give more encouragement to the technologies that make the biggest reduction in carbon dioxide emissions. This would include considering solar thermal for heat as well as for hot water; and also covering heat for swimming pools; air conditioning and cooling – all activities that generate carbon emissions.

Q2: Do you see any barriers to such financing schemes coming forward? In particular, are there any limitations in leasing and finance legislation that you feel inappropriately restrict the development of RHI financing models?

We believe that a 12% return is adequate; however, the 6% return on solar thermal is unlikely to be, which will restrict its uptake to the minority who can afford the upfront capital cost, which a) makes no sense (see Q1 above), and b) is discriminatory.

For finance schemes to succeed it is important that the person / organisation installing the renewable heat technology can assign the tariff payment to a third party – ie council, loan provider, etc.

Q3: Do you agree with our proposed RHI registration and payment approach? If not, can you suggest how this approach can be improved?

We think there is a danger of conflict of interest if Ofgem administers the scheme and would prefer a totally independent agency – ideally one with experience in dealing with large numbers of consumers.

As energy bills tend to be paid monthly or quarterly by households the incentive should be paid at least quarterly.

Q4: Do you agree with our approach of requiring products and installers for installations up to 45kW within RHI to be accredited under MCS or equivalent?

We agree that there needs to be some form of accreditation system, especially for products, and that MCS is a good starting point. However, we feel strongly that is should not penalise sole traders and small, local companies from entering the market either by the cost or the complexity of accreditation. The system has historically been skewed strongly in favour of bigger companies.

However, we would favour opening the scheme self builders who choose to install renewable heat technologies in their homes.

Q6: Can you provide details of any UK or European standards that should count as equivalent to MCS? How should we recognise these standards for the RHI?

Solar Keymark; we see no point in duplicating effort if there is an appropriate European standard that we can adopt.

Q7: Do you agree with our proposed approach to eligibility of energy sources, technologies and sites?

You mention supporting only “useful” renewable heat under the RHI. If the aim of the RHI is to combat climate change, then surely it makes sense to use it to encourage a switch from fossil fuels that are being burned for less “useful” reasons, such as cooling, air conditioning, heating swimming pools, and to include heating with solar thermal (surely this is “useful” – and unlike heat pumps it doesn’t need fossil fuel to run it).

You say that only heat pumps which meet a minimum performance standard will be eligible, but it’s also important to take into account what the heat pump is being used for. Those heat pumps which operate at COP 4 when used at 40 degrees for underfloor heating, will become significantly less efficient if used to heat water to 70 degrees for use in radiators. There is a danger that they could end up producing more carbon dioxide emissions (through additional electricity used), than the system they replaced.

Given some of the claims being made for heat pumps at this year’s Ecobuild, there’s also a danger of significant mis-selling and disappointed consumers.

While an air source heat pump is undoubtedly an improvement for someone who is currently heating their home with electricity, I have not seen any good evidence that it will lower carbon dioxide emissions if used as a replacement for an efficient gas boiler. Yet the RHI is likely to encourage just this substitution.

We don’t agree with the proposal to exclude wood burning stoves where they have the capacity to replace a boiler, or have a back boiler that heats the water. We are also concerned about the statement on page 26 which says: ‘only equipment and fuels of suitable quality and energy efficiency should qualify for RHI support’. Where it is relatively simple to ensure that your wood pellet or chip supply is accredited to certain standard, this does not apply to wood which is often supplied by small local suppliers, or those who have land may use their own. This approach would disqualify farmers, and people with smallholdings who produce their own wood.

Q9: Do you agree with the proposed emissions standards for biomass boilers below 20MW? If not, why, and do you have any evidence supporting different ones, in particular on how they safeguard air quality?

It is important that there are strict standards on air quality.

Q10: Do you think the RHI should be structured to encourage energy efficiency through the tariff structure (in particular the use of deeming), or, additionally, require householders to install minimum energy efficiency standards as a condition for benefiting from RHI support?

We support the use of deeming to encourage energy efficiency. In addition, where an installation is being used to generate heat, we believe that having more than the basic minimum standards of energy efficiency should be mandatory for anyone who wants to receive the heat incentive payments. This should be a minimum of 270mm of loft insulation, plus cavity wall insulation where appropriate. This is currently a requirement for anyone receiving low carbon building programme grants, and we see no reason why it should not continue in the same manner.

Q12: Do you agree with our proposals on where we should meter and where we should deem to determine an installation’s entitlement to RHI compensation?

Yes.

Q13: Do you agree that a process based on SAP or SBEM for existing buildings or the Energy Performance Certificate for new buildings is the best way of implementing deeming? Do you have any suggestions on the details of how this assessment process should work?

For the domestic market, the most important thing is that the scheme is simple and easy for people to understand. If your plan is to base it on a table of averages, such as the standard house set that was included in the consultation document, then that seems reasonable and easy to understand. However, if there are going to have to be individual calculations done for each house, this seems a complex and expensive.

Q14: Do you agree that at the large scale/in process heating, where we propose metering, the risk of metering resulting in a perverse incentive to overgenerate is low? How could we reduce it further within the constraints of using metering, to ensure only useful heat is compensated? Do you see any practical difficulties concerning use of heat meters (such as on availability, reliability or cost of heat meters) and, if so, how should we address them?

Yes

Q18: Do you agree with the proposed approach to setting the RHI tariffs, including tariff structure and rates of return? Do you agree with the resulting tariff levels and lifetimes? If not, what alternatives would you prefer, and on the basis of what evidence?

We agree that 12% rate of return is likely to make renewable heat financially attractive option, but don’t agree with the lower rate of return for solar thermal, as this is the cleanest, and only truly renewable, technology and so should be encouraged most.

Q20: Do you believe that we should provide an uplift for renewable district heating?

Yes.

Q22: Do you agree that RHI tariffs should be fully fixed (other than to correct for inflation) for the duration of any project’s entitlement to RHI support? Do you agree that we should include bio-energy tariffs, including the fuel part of those tariffs, in such a grandfathering commitment?

Yes

Q23: Do you agree with our proposal not to introduce degression from the outset of the scheme but consider the case at the first review?

Yes

Q24: Do you agree with our proposed approach on innovative and emerging technologies?

No. To encourage new renewable energy technologies to develop all renewable heat technologies that are effective at reducing carbon dioxide emissions should be included from the start.

Q25: Do you have any views on how we should encourage technology cost reductions through the RHI, particularly on solar thermal heat?

As the market develops, the costs should fall.

Good rates of return to encourage take up is one way of doing this – and already covered above. More significant, and more difficult, is the challenge of educating people about renewable heat and making it an attractive proposition.

While district heating is attractive to developers, it’s not understood by consumers who like the security of their own back up system; not having a gas boiler in an urban dwelling is very unusual and treated with suspicion.

By excluding the pioneers of renewable heat from this scheme you are likely to alienate the very people who can (and are already) help to educate people about the benefits of renewable heat, begin to normalise it, and encourage its take up. Their stories will be much more powerful and effective in communicating the benefits than any government advertising campaign – and given the low numbers of pioneers, will probably be cheaper too.

Q26: Do you agree with our proposed approach to reviews, and the timing and scope of the initial review?

Yes

Q28: Do you agree with our proposed approach to allow access to RHI support to new projects where installation completed after 15 July 2009, but not before? Do you have any evidence showing that in particular situations RHI support for installations existing before this date would be needed and justifiable?

See our answer to Q25 above.

While we understand the pressures you are under not to include them, but we believe that the challenge to communicate the benefits of renewable heat, and ween people off their attachment to their gas boiler and on to less well understood technologies and communal (district) heating schemes is going to be huge. This is something that seemed to have support from all sides of the industry at the consultation event at Bristol. We need these people’s help. Not them angry, disillusioned and sending out messages that you can’t trust government. Why not look at it / justify it as part of the marketing/communication budget?

Below is an example of the comments we have received from early adopters:

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.”

This approach also encourages people to take out perfectly good systems and have a new one installed just to claim the tariff; or to leave existing systems idle. I have heard from a number of installers that they have been approached by people asking about doing this.

Q29: Are there any parts of the proposals set out in this consultation that in your view would allow for unacceptable abuse of RHI support, or other unintended consequences? If so, how could we tighten the rules while keeping the scheme workable, and avoiding an overly high administrative burden?

See our answer to Q7.

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