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Is third party ownership a good thing in the domestic RHI?

Posted by Cathy Debenham on 10 March 2015 at 1:10 pm

My husband is a football fan. When I mentioned that the Department of Energy and Climate Change (DECC) is exploring the possibility of third party ownership for the domestic renewable heat incentive (RHI) I didn’t need to explain what it is. He gave an immediate definition: “someone, somewhere, is making money they shouldn’t be out of someone else”. 

A quick Google search of third party ownership is topped with the headline “why TPO is the scourge of modern football”, and reveals that even that den of dodgy deals Fifa is in the process of banning the practice.

What’s this got to do with renewable energy I hear you ask? Well, there’s just a few days left to respond to the Government’s call for evidence on third party ownership in the domestic RHI. Responses must be submitted by 13 March 2015.

DECC always intended that there should be some way of overcoming the barrier of upfront cost of renewable heating systems to make them available to those who can’t add it to their mortgage or get a bank loan. Its aim is to grow the market for renewable heating and to build a solid supply chain for the industry. While the aim is good, is the proposed method going to deliver? And are we going to end up with a situation where householders don’t know who owns their heating system - or who to contact when it goes wrong - as has happened to many people with rent a roof solar systems?

The reason DECC is looking at this now is that third party ownership scheme wasn’t approved by the EU State Aid people in time for the launch in April last year. Now DECC has fleshed out some proposal about how it might work, and is calling for evidence on potential impacts, benefits, barriers and risks that introducing some form of third party financing might have. 

It offers two alternative schemes to allow RHI payments to go to third party organisations that aren’t the home owner or occupier. 

Third party ownership (TPO)

A third party organisation would fund all or part of the renewable heating system and would own all or part of it. The third party would apply for the RHI and receive all or a proportion of the payments directly. At the end of the seven years of RHI payments it would be up to the third party and the householder to agree whether ownership transfers to the householder and whether there is a cost associated with that.

Assignment of rights (AoR)

Under this system the third party would fund all or part of the renewable heating system, but ownership remains with the householder. The owner would contract with the third party to assign the rights to all or some of the RHI payments, which would then be paid to the third party.

In both cases, there would be RHI obligations for both the homeowner and the third party organisation, and they would need to agree how to meet these, as well as service and maintenance agreements for the system. 

While I’m keen that renewable heating systems should be as widely available as possible, the idea of third party ownership fills me with dread. Rent a roof schemes haven’t been a storming success. The Renewable Energy Consumer Code has had plenty of complaints. People have found they can’t sell their home; there are difficulties with mortgages; they don’t know who owns the solar panels, so they can’t get problems solved. And this is what happens when the amount of money the third party gets from the feed-in tariff is directly related to how well the solar PV system is performing.

The domestic RHI is paid out on a heat demand figure from the EPC. This gives no incentive for the third party owner to prioritise performance. The ruthless among them will be installing the cheapest biomass boilers they can, hoping they last seven years, and I predict there will be some very dismayed customers in years eight, nine and 10 when the heating system they were told would last 20 years conks out and dies. Of course, DECC could put in safeguards to make sure that payments stop if the householders report that their system isn’t working, but that doesn’t prevent the cheap boiler failing early.

There are plenty of measures that DECC is considering putting in place to minimise the risks to householders who want to get a renewable heating system this way. I may be being a pessimist, but over the past six years I’ve been horrified at some of the sales methods I’ve seen in the renewables sector. I’ve met many excellent and thoroughly honourable installers and manufacturers, but also get regularly rung by the many cowboys that exploit the lonely and vulnerable by cold selling energy efficiency and solar panels (I know they are cowboys, as I’m registered on the telephone preference service, so the good guys don’t ring).

So if it goes ahead, it’s definitely a case of buyer beware. I’m not someone who believes that we should be wrapped in cotton wool, and protected against all harm. When we’re making a big investment, such as a renewable heating system, we should do our homework and take care. But this is a strange market. It’s new, it’s unfamiliar, and even for someone like me who has been seeped in the detail of it for years, it’s still difficult to get the information you need to compare products. Add in the ability to mislead with dodgy selling based on a government incentive, and the crooks tend to win. 

That’s why I’ll be coming down strongly against third party ownership in my response to the call for evidence. I’m not wild about assignment of rights either, but I think that it probably offers a better option than the currently available schemes which are operating through a loophole in the legislation and so wouldn’t necessarily be MCS certified and a member of a Trading Standards approved consumer code if the installer was subcontracting to a finance company.

I’d be very interested to hear your views - both from installers and from householders who might buy a renewable heating system. I’m sure that DECC would be too. You can submit your views here

Photo: SuperHomes

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

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