RHI stands for really happy industry
Posted by Jennifer Arran on 16 July 2013 at 8:20 am
The domestic Renewable Heat Incentive (RHI) has finally been unveiled, and the industry couldn’t be happier. This is the end of the beginning – the RHI represents the first step on the path to meeting the UK 2050 carbon targets.
The tariff rates and the inclusion of hybrid systems (combined heat pump and boiler) is great news – and will exceed the expectations of many in the industry who had started to think the domestic RHI might never happen. We strongly believe that this could be a catalyst for significant market growth, with these tariff levels providing paybacks for some technologies of less than five years.
What does this mean for people wanting to invest in renewable energy?
- Owner occupiers are a diverse group – the RHI will provide a strong financial case for investment, with paybacks of less than 5 years for some technologies. Now industry needs to innovate to deliver the propositions which they are looking for.
- Self-builders have are an important customer segment - small but central to the roll-out of low carbon heat, and with an appetite for investment. Our research shows over 25% of self-builds have some form of microgeneration.
- Social landlords have a critical role to play in growing low carbon heat. They remain committed to reducing fuel poverty. And - with funding always a concern – the RHI gives them a guaranteed revenue stream which will have increasing appeal as rent arrears are on the rise.
- Private landlords have been recognised for the first time as having a role to play in uptake of low carbon heat.
What are the next steps for industry?
- The industry needs to deliver innovative financing solutions, low cost loans, and potentially leasing options to deliver flexible options for customers. Owner-occupiers are diverse, and up-front cost will remain a key barrier for many. Already in the UK and Europe, we have seen the market react with solutions – demonstrating that with the right mix of incentive and financing, customers will really have the confidence to invest.
- Streamlined customer journey: a big challenge with the roll out of the RHI may be keeping the customer engaged through the whole process. While no-one in the industry will disagree that it is important for properties to be energy efficient before renewable heat is installed, there is a danger that the link to the green deal could lead to a long customer journey, which may prove too much hassle for some. Industry needs to plan for how to mitigate this.
- Make some noise to customers and to installers – awareness of incentives and low carbon heat technologies especially is low amongst owner occupiers according to Delta-ee customer research 2012/2013. People need to understand what technologies and incentives are available for them, and the installer will have a critical role in this. This is a challenge given that the market is full of smaller, one-man-band installers. Engaging these installers will be critical for getting the message out into the market.
I believe there are a lot of reasons to be optimistic. We have seen a crisis in confidence among potential customers over the past 18 months. In our latest in-depth interviews with owner occupiers, it was clear that low-carbon heating is considered high risk, and there was a belief that Government didn’t really have faith in the technologies.
The start of the domestic RHI will help the industry to offer reassurances to these customers, and it also provides an opportunity to develop some interesting propositions that should really get the market moving.
“The much anticipated launch of the RHI today marks a step forward for renewable heating. For installers, the launch of the domestic RHI means a growing need to embrace Green Deal assessments. In addition, installers should take steps to undertake adequate training on renewable products, in addition to credentials such as MCS accreditation, to take advantage of what we hope to be a spike in installations in the next 24 months” Jon Tedstone, BDR Thermea
“The RHI is fantastic news. The European heat pump industry has long-awaited confirmation of the scheme which is expected to drive significant growth of heat pump sales in the UK – a market which could potentially become one of the largest heat pump markets in Europe. The economic framework for growth is now in place. Hopefully the RHI will encourage the growth of financing offers, low cost loans for heat pumps to help the customer get over the initial upfront cost barrier. We have already seen examples of these sort of approaches in other markets such as France and Germany - GDF Suez and EDF in France both offer loans, and in Germany, Vattenfall is testing a model of owning heat pumps on customer sites and selling the heat back at a preferential rate.” Lindsay Sugden, Heat Pump Research Manager, Delta e-e
More about the renewable heat incentive on YouGen
About the author: Jennifer Arran is an analyst at Delta Energy & Environment
If you have a question about anything in the above blog, please ask it in the comments section below.
2 comments - read them below or add one