The Renewable Heat Incentive (RHI) is a government-funded initiative for those who use renewable energy to heat their homes and businesses. These payments come from taxpayers’ money and therefore the onus is on the government to ensure that the budgets surrounding the incentive are sustainable. Index-linked, the RHI offers annual payments for 20 years to the owners of the equipment for the heat they generate and use.
During the last quarter, the tariffs dropped dramatically. However, with only a 5% decrease in the small commercial biomass (less than 200kW) for any installation on or after October 1, 2015, this has been the lowest degression in a while.
This basically translates to mean that if you got your biomass systems installed and running by September 30, 2015, you were the many who acted quickly before the new rates kicked in. However, with this low degression, all is not lost and you might still be able to benefit from the attractive tariff and therefore secure better RHI payments for years to come – but only if you are quick enough.
What is RHI degression?
Some technologies linked to renewable energy are likely to become cheaper as the years progress. This is true of any relatively new and developing industry, and RHI degression was introduced to protect the incentive and allow it to prosper.
However, contrary to traditional degression, RHI degression is triggered by deployment levels. This means that only particular movements and developments in the market will set off a degression. Reviewing the scheme’s expenditure forecast, the Department of Energy & Climate Change (DECC) announces any changes to the tariffs that will apply. These announcements occur quarterly. Although anyone who’s already registered in the scheme won’t be affected by a drop in tariff.
Beat the clock
The current commercial RHI rates mean that you will need to get your system ordered and installed before the end of December 2015 to ensure you will be able to receive RHI payments at the current levels. Making the most of these higher rates now can mean a difference of thousands of pounds to your annual RHI income. If you’ve been thinking about installing a biomass heating system, there has never been a better time.
Ease your burdens
When you’re trying to achieve something by a certain date, paperwork can be your biggest enemy. RHI applications are, by their very nature, a little complicated. If you want to implement a commercial biomass boiler project but aren’t sure about how to get RHI accreditation, you can talk to companies who also specialise in successfully handling your RHI applications for you. Utilising a company that boasts an in-house RHI application team who have managed hundreds of successful applications means you’ll be able to get your applications signed off far more quickly and successfully due to their years of experience and industry know-how.
What can you expect?
If you’re still considering whether to start your project now or to wait until next year, it might be helpful to have a look at the figures to better put everything into context.
Let’s take a 100kW project as an example. At the current rate of 4.18p per kWh, it will yield a commercial enterprise around £5,493 in annual RHI payments, and a total of approximately £147,586 in total index-linked over 20 years. Because no one is sure of what the next quarter’s degression will be, we can only make assumptions based on previous degression patterns as well as worst case scenarios. Assuming the tariff drops by 10% to 3.76 per kWh, this will result in RHI payments of £4,941 a year and a total of £132,757 – an average loss of a little over £700 a year. However, if we were to experience a 25% degression (as happened in the last quarter), this will bring this figure down to approximately £4,113 a year. That is a loss of nearly £1,400.
Looking at a bigger scale, a 199kW project would bring in around £10,930 per annum and a little shy of £300,000 over 20 years on the current RHI tariff. After a potential 10% drop, said commercial enterprise would be looking at around £9,832 RHI payments, and only £8,185 with a 25% degression – that is a loss of a little over £2,700 a year and nearly £80,000 over the 20-year period. A significant difference I’m sure you’d agree.
If you want to see some specific figures relating to your proposed project, you can use this RHI payment calculator to see how your RHI payments could stack up.
You can start planning your biomass heating project today and beat the next drop in tariff. There are companies who can take care of the entire project from start to finish, streamlining the process and ensuring that you’re home and dry before the next quarter RHI degression hits. And if the last quarter is anything to go by, you really want to get in there quickly before the order book fills up.
So, what are you waiting for?
The annual and total RHI payments only refer to the current tariff set by the DECC on October 1, 2015 for the period starting and including October 1-December 31, 2015. All RHI payments quoted are approximate and not a guarantee of what you will receive. Actual payments will be based on heat required.
This article has been written and contributed by Treco Ltd. October 1, 2015.