RHI: The Facts

RHI: The Facts

Alastair Murray gives an overview of the Renewable Heat Incentive.

The majority of people in the UK construction industry have heard of the Renewable Heat Incentive (RHI). Architects and consultants appear to have got to grips with the general concepts and have an idea of the tariffs for each technology.
For those of you that don’t already know, the RHI is a government incentive which pays the owner of eligible renewable installation (heat pump, biomass or solar thermal) over time for the heat that is produced. The RHI is run by Ofgem who manage the application process and also make the payments (from a pool of funds allocated by the treasury).
It was introduced in order to increase the number of renewable heat installations in the UK and so help the country to achieve its carbon reduction target for 2020.

You are probably aware of the RHI’s predecessor, the Feed-in Tariff (FIT), which incentivised the installation of renewable power generation in the UK. The scheme has been a huge success and resulted in over 260,000 installations of solar PV. However, the success of the scheme gave the newly elected coalition a fright when they realised that there were no safeguards in place to monitor and adjust the payments as the cost of solar PV installations fell. This meant that the scheme had become too generous and was not providing good value for money.

In an effort to tackle the problem the government announced huge cuts to the tariffs. In November 2011, when the tariffs cuts were announced, the tariff for a typical 4kWp solar PV installation was 43.3p p/kWh; by August 2012 this had been cut to 15.44p p/kWh- a fall of almost 65% in less than a year.
All this was extremely damaging to the growing renewable power industry and damaged confidence in the scheme. The industry was in uproar and the fiasco enjoyed widespread coverage in the UK mainstream media.

Unfortunately, November 2011 was also the month that Phase one (non-domestic) of the Renewable Heat Incentive started operating. The opening became an almost inaudible whimper against the battle that was raging over the FIT cuts. It has been 16 months since the first RHI application was submitted and it is still struggling to achieve the uptake that was hoped for. The government started a consultation in September 2012 to investigate the reasons for the lower than expected uptake and have devised a plan to boost the scheme. This plan has been explained in two updates which have been released in the last two months.

The first was released on 27th February. The updates to the non-domestic RHI include:
1. To ensure that the scheme is financially sustainable and operates within the allocated budgets until 2020 (and to avoid a similar situation as the FIT debacle…) the government has set ‘triggers’ for uptake. If the uptake of one renewable heat technology reaches this trigger point the tariff will likely be cut to reduce uptake.
2. Technologies which are lagging behind eg. heat pumps are likely to have their tariffs increased (this has been confirmed in the second press release). Installations accredited from 21st January 2013 will benefit from the increase once the new tariffs come in to force.
3. Sustainability requirements will be introduced for all existing and new installations using solid biomass as a feedstock.
4. Air quality requirements will form part of the RHI for all solid biomass installations including CHP installations which burn biomass and this will apply to all new installations only.
5. Metering requirements will be simplified to reflect feedback received from participants and to reduce burdens on industry.
In relation to the second point, the second update that the government released contained a table showing their plans for the RHI tariffs for the various technologies. There are a number of changes, most notable is the confirmed increase to the tariff for ground source heat pumps and the intention to extend the RHI to cover additional renewable technologies. Most important of these is the plan to include air source heat pumps which are already one of the most popular options for renewable heating.

The February announcement reaffirmed the government’s intention to open the RHI to individual domestic households in summer 2013. This makes it all the more strange when, less than a month later, they release their second announcement and very quietly mention at the bottom of the page that the opening of the RHI for domestic properties has been pushed back to spring 2014.

With this in mind they have extended the Renewable Heat Premium Payment scheme until the end of March 2014. This scheme, first launched in July 2011, offers money off the cost of renewable heating installations such as heat pumps and solar thermal and is largely targeted at households which are off the gas grid. The scheme had been due to close in March 2013.

Nevertheless, the key proposals announced in the first update included:

• Indicative tariff ranges for air source heat pumps (6.9-11.5p/kWh), biomass boilers (5.2-8.7p/kWh), ground source heat pumps (12.5-17.3p/kWh) and solar thermal technologies (17.3p/kWh) that are MCS certified and meet relevant required standards, including specific emission limits for biomass systems.
• Payments for householders over seven years for each kWh of heat produced for the expected lifetime of the renewable technology and based on deemed heat usage.
• Tariff levels set to provide a better return for householders living off the gas grid.
• Minimum energy efficiency requirements based on Green Deal assessments.

In addition to the above, the second update also contained some specific measures targeted at the renewable heating industry including:
• A £9m package to help local authorities get heat network schemes up and running in towns and cities across the country, with a new Heat Networks Delivery Unit to sit within the DECC providing expert advice.
• £1m for the cities of Manchester, Leeds, Newcastle, Sheffield and Nottingham to help them develop heat networks
• 100 green apprenticeships to be funded primarily for young people in small scale renewable technologies
• Up to £250,000 for a new first come first served voucher scheme for heating installers to get money off the cost of renewable heating kit installation training, with up to £500 or 75% of the cost of the training course per person
• Working with individual industrial sectors to design long term pathways to cut carbon across UK industry

Alastair Murray is from The Renewable Design Company.

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