The Renewable Heat Incentive

The Renewable Heat Incentive (RHI) is a UK government scheme set up to encourage the conversion, or application of renewable heat technologies amongst British households, communities and businesses. This is through using financial incentives, paying those who join for the amount of clean heat it is estimated their system produces. It is claimed to be the first scheme of its nature in the world and it was introduced to help the UK reach its European Union 2020 targets.

There are two main branches to the scheme, the Domestic and the Non-Domestic, each having different tariffs, joining conditions, rules and application processes. Applicants may only apply to one or the other in cases where buildings have dual purpose. Applications must also be received within a year of the technology’s commission.

What it covers

From its launch in 2014 it was designed to support its members financially for seven years after the installation. The scheme was only launched in Great Britain and excluded Northern Ireland. It also targets off-gas supplied households.

Technologies which the scheme covers are limited to Biomass wood fuelled boilers, Biomass pellet stoves with integrated boilers providing space heating, ground to water heat pumps, Air to water heat pumps and solar thermal panels providing hot water for your home or building. There are other technologies that are potentially eligible, such as water source heat pumps, as they could be listed as ground source in some cases. The Government however made some changes to the scheme in December 2016.

The table below is a simple depiction of what the tariffs one would receive if an application was sent today (21/2017)

Technology Air Source Heat Pump Biomass Ground Source Heat Pump Solar Thermal
Tariff per kWh of renewable heat 7.51p 4.21p 19.33p 19.74p

 

Changes (Domestic)

In December 2016 there were a number of changes suggested for the domestic RHI. These are, at the moment, subject to parliamentary approval, thus will only come into effect in Spring 2017. There have been previous changes as well. Below is a simplified table of the changes:

Year/Month What Changed?
November 2014 Amendment to scheme eligibility
October 2015 Sustainability requirements for those with biomass technology, are use of fuel that meets with specific sustainability requirements.
March 2016 Further amendments to scheme eligibility
July 2016 Biomass tariff digression (new tariff taken in place from 2017)
January 2017 Biomass tariff digression – the tariff of 4.68p per kWh of biomass heat, reduced to 4.21p for new applicants. Existing members stay the same.

 

Non-Domestic

The non-domestic changes to regulation are more complicated due to the nature of them. They need to be understood by professionals representing businesses or businesses themselves, which are assumed to have more diversity in requirements and a need for greater and more fine-tuned regulation. As such there are two volumes of changes made to the non-domestic RHI, the latest version being published in 2015, although the more recent domestic regulations on biomass also affect non-domestic biomass.

The general rule with heating is, the larger the space which you have to heat, the greater the savings which can be made by switching. This is for two main reasons. The first is that the energy bill being paid before the switch to cheaper sustainable energy, would have been greater as the energy requirement would have been greater. The second is that efficiencies can be maximized by heating the core of the premises and using wall or floor heating to heat two rooms, where in the past it would have been two separate systems.

The scheme, in this case, aims to reduce the payback period and make the sustainable technologies financially more attractive to individuals on a small scale. On a large scale, the scheme aims to make cost reduction the incentive to those corporate bodies which may not think of sustainability as a social need.

Problems?

Because the incentive aims to artificially create the market to move to a sustainable source, it becomes a necessity for the survival of the projects under the umbrella. If changes were to be made, or if the scheme was to be cut, then many of the projects could collapse. This volatility causes concern in the time of government cuts as, especially for domestic RHI users, making economic sense from a simple cost savings perspective may not be an option.

The introduction of many sustainable and renewable heat systems also requires a lot of initial capital investment around the actual technology. For instance, the heat pumps which are covered under the scheme work best with well insulated houses with under floor or wall heating. So while eligibility for the scheme may be a start, for many, RHI cannot be a realistic investment due to the costs associated with installing and preparing for the new system. By the end, the financial securities after installation are outweighed by the prior costs.

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