Renewable Heat Incentive reforms come into force
Posted by Sam Tonge on 16 May 2018 at 9:31 am
During February 2018, the Department for Business, Energy and Industrial Strategy (BEIS) published a second round of draft regulations which covered plans to reform aspects of both the Domestic and Non-Domestic Renewable Heat Incentive (RHI) schemes.
It's been announced this week that these reforms have been approved following a debate in Parliament, and are to come into force on 22 May 2018. As expected, these changes include the introduction of an Assignment of Rights, mandatory electricity metering for heat pump technology, changes to degression rules and new enforcement powers for Ofgem.
The RHI is a scheme designed to pay homeowners and businesses for heat produced from their renewable sources of energy. The scheme is designed to incentivise the switch to greener heating systems is designed to help the UK reduce its carbon emissions and meet its renewable energy targets.
In this article we look at how the acceptance of these proposed changes will affect users of the domestic RHI, i.e. homeowners and landlords.
Introduction of Assignment of Rights (AoR)
This option is designed to help householders overcome the need to find the funds to pay for a renewable heating system upfront. Through an AoR, an investor can fund the purchase, installation and maintenance of a system, in exchange for receiving the householder’s or landlord’s RHI payments.
Although expensive to install, renewable heat technologies can be a desirable and good investment as a result of the RHI payments as well as savings on fuel costs (depending on the fuel to be replaced). If your fuel costs with a renewable heating system would be higher than the system currently installed (likely if you currently heat your home with mains gas) please do think carefully before entering into an AoR as your bills will go up and you will not receive the RHI payments to counter the impact of this.
The draft regulations stated that the introduction of an AoR will come into effect on 27 June 2018. It will be interesting to see how many investors take up this opportunity and market an offer and likewise, what the uptake from householders will be.
Introduction of mandatory electricity metering for heat pumps
As set out in the new regulations , all new applications for the Domestic RHI scheme will be required to have dedicated electricity metering arrangements installed with their air or ground source heat pump.
This will help households monitor the performance of their heat pump and to provide a better understanding of the heat pump system’s electricity usage as not all installed heat pumps have been working as efficiently as they should. Enhanced monitoring of ground and air source heat pump efficiency will also help to improve the development of the technologies.
Consumers can choose between electricity meters, on-board electricity meters, or a Metering and Monitoring Service Package (MMSP) for their heat pump.
Note: This change will also apply to those domestic properties on shared ground loop systems that benefit from the non-domestic RHI.
Changes to degression rules
Degression is used by Ofgem to manage the RHI budget through lowering of tariff rates on new applications, if uptake of the RHI for that technology is higher than anticipated. The previous rules have allowed degression to occur, even when there has only been limited uptake of the scheme.
This includes revision of the degression thresholds to 2020/21 as well as amending the methodology used to calculate the amount the RHI should have degressed. The new rules aim to ensure growth is always taken into account, meaning degression will no longer be able to occur when the number of accreditations for a particular technology has been lacklustre.
Extra enforcement powers
Ofgem administrator both the domestic and non-domestic RHI scheme. These changes will provide Ofgem with further powers as well as clarification of their existing powers.
These powers include (but are not limited to) ensuring grant funding received post-accreditation is deducted from future payments, as well as the ability to withhold payments for a MMSP in cases of non-compliance, and to reject applications where it is not fully satisfied that the installation will operate within ongoing obligations set out within the scheme.
Enforcement provisions have been amended to make it clearer where Ofgem can impose sanctions for non-compliance, putting a greater onus on participants to show evidence that their installation complies.
Ofgem have also been granted new powers where they have been refused access to a site, and to ban applicants from the scheme where they have been misled. Ofgem have also received clarification that they can carry out an unannounced audit on an RHI participant, as and when required.
Some concluding thoughts
It’s encouraging to see a stronger degression mechanism in place to ensure a fairer tariff rate is implemented to applicants depending on the number of accreditations. It’s also helpful that homeowners with a heat pump will now have to have an electricity meter installed (as it will be a useful asset helping them to monitorand understand its electricity consumption).
The AoR is a novel way of allowing homeowners and landlords to enjoy the feel-good factor of green heating, unaccompanied by the upfront installation cost. However, this will of course mean there is less of a financial reward for them, as all payments would be made to the investor. The worry is that some householders will pay higher energy bills with no RHI to help compensate them for this.
If you’re thinking if installing a renewable heating technology to receive the RHI, the rate of payment you’re on upon applying will remain locked in for you during the seven years you benefit from the scheme.
Will you be affected by any of the above changes? Let us know in the comments section.
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Sources51% Studios Architecture. ASHP at Dungeness, Kent.
About the author: Sam joined YouGen in 2017 as a Project Officer, after having achieved a BSc (Hons) degree in Geography from Royal Holloway, University of London.
He is passionate about renewable energy and sustainability and has undertaken a variety of placements focused in these areas.
Sam coordinates the YouGen blog, newsletter and recommendation service on behalf of installers, as well as driving the platform forward through an active social media presence.
If you have a question about anything in the above blog, please ask it in the comments section below.
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