Renewable Heat Incentive
Financial Incentives for installing Renewable Heat - RHI
Clean Energy Cashback of 5.5 pence/kWh delivered
Renewable Heat Incentive – RHI – Clean Energy Cashback
On 1 February DECC published the proposed structure of the RHI which is to be introduced from April 2011. Renewable heat installations commissioned since July 2009 are due to receive a cashback subsidy, based on the deemed heat requirement of a building, of around 5.5 pence per kilowatt hour used – for the lifetime of the equipment used.
RHI table of tariffs
The table below shows the technologies eligible for RHI, the subsidy to be received and the deemed lifetime of each technology. The RHI will provide a major incentive for owners to invest in ground source heat pumps, solar thermal and other renewable heat technologies. The proposed tariffs are based on pence/kWh of renewable heat delivered. The rates and lifetimes will vary with the technology and scale used as follows:
| RHI | Scale | Proposed tariff pence/kWh | Tariff lifetime in years |
| Solid biomass | 45 kW | 9.0 | 15 |
| Bioliquids | 45 kW | 6.5 | 15 |
| Biogas on-site | 45 kW | 5.5 | 10 |
| Ground source heat pumps | 45 kW | 7.0 | 23 |
| Air source heat pumps | 45 kW | 7.5 | 18 |
| Solar thermal | 20 kW | 18.0 | 20 |
| Solid biomass | 45-500 kW | 6.5 | 15 |
| Biogas on-site | 45-200 kW | 5.5 | 10 |
| Ground source heat pumps | 45-350 kW | 5.5 | 20 |
| Air source heat pumps | 45-350 kW | 2.0 | 20 |
| Solar thermal | 20-100 kW | 17.0 | 20 |
| Solid biomass | 500 kW | 1.6-2.5 | 15 |
| Ground source heat pumps | 350 kW | 1.5 | 20 |
| Biomethane injection | All scales | 4.0 | 15 |
Renewable Heat is a subset of the wider category of renewable energy, which includes the generation of electricity from wind turbines and photovoltaic cells.
According to BERR (the new name for the DTI), almost half of the final energy consumed in the UK is in the form of heat. Its generation accounts for 47% of UK CO2 emissions. Renewable Heat currently satisfies less than 1% of heat demand.
DECC (the new name for part of BERR) is encouraging Renewable Heat as part of the Government's commitment to aim for 15% renewables by 2020 and is introducing the Renewable Heat Incentive.
For the Renewable Heat technologies included, the energy ultimately comes from the sun. The sun provides planet earth with more energy each hour than human civilization uses over a whole year. The challenge is how to make use of this vast supply of incoming radiation to provide solar space heating and hot water.
Comment on the Renewable Heat Incentive
An investment in renewable energy usually means payment of a higher capital cost to achieve lower annual running costs (and also a lower carbon emission for the benefit for the community at large). The RHI will reduce the annual running cost of Interseasonal Heat Transfer to a very low level and allow owners to reduce the payback period from their investment to a few years.
Owners of IHT installations will benefit from the clean energy cashback for using ground source heat pumps and the clean energy cashback for using Solar Thermal when IHT is used to provide domestic hot water.
The RHI is calculated to offer a 12% return on initial investment
The introduction of the RHI will offer a financial reward for lower carbon emissions over the deemed life of the renewable heating technology installed. The tariffs for the Renewable Heat Incentive have been calculated to offer a rate of return of 12% on the initial investment across the tariff bands.
The introduction of the RHI coincides with a time of increasing wealth and demand for fossil fuels from an increasing world population: many pundits expect the price of oil and gas to increase much more sharply than general inflation over the next three years.
While there are a number of renewable energy options to be considered, ICAX believes the most practical and affordable answer to generating Renewable Heat is to use Interseasonal Heat Transfer.
The RHI provides a positive step change in the business case for delivering on-site renewable heat, not only to reduce energy bills and carbon emissions, but also to deliver a energy related cash flow into your building.
Tony Grayling, head of Climate Change and Sustainable Development at the Environment Agency said: Ground source heating is a rapidly growing technology that has the potential to produce at least 30 per cent of the country’s renewable heat needs, but it needs financial support in order to grow. We would like to see this technology given adequate financial support through the new renewable heat incentive to meet its full potential in the UK.
See the DECC consultation publication of 1 February 2010: Consultation on RHI
Feed-In tariffs for microgeneration of electricity
The government has also introduced Feed-In tariffs for microgeneration of electricity from April 2010. The tariff levels for the electricity financial incentives are calculated to offer between 5-8% return on initial investment. The tariff levels for photovoltaic (up to 36 pence per kWhour) and wind (up to 34 pence per kWh) are set at a higher level per kWh to compensate for the high capital costs and lower efficiencies of these technologies. The tariffs for the Renewable Heat Incentive have been calculated to offer a rate of return of 12% across the tariff bands.
RHI Tax free income
Tariffs will be exempt from income tax. This means that domestic users and other income tax payers will not be taxed on any income received from the Feed-In Tariffs or the Renewable Heat Incentive.
See also: Banking on IHT The Merton Rule Ground Source Energy
