"We need to accelerate drastically the pace of the switch to renewables", Greg Barker
After a very long gestation period the Renewable Heat Incentive started on 28 November 2011. The First Phase of the RHI applies to non-domestic buildings only.
In Phase 1 of the Renewable Heat Incentive, Renewable heat installations commissioned since 15 July 2009 will receive a cashback subsidy, based on the metered heat use of a building (from the date that the RHI starts, without backdating), of around 10 pence per kilowatt hour used – for the first twenty years of use.
DECC published its Early Tariff Review in May 2013 to announce a proposed doubling of GSHP tariffs on smaller installations and tripling of the RHI tariff on larger installations. This is designed to boost the GSHP market as the number of smaller GSHP commercial installations was only 1% of the number that DECC had anticipated and almost all of the RHI payments were being made to biomass boilers.
The RHI tariff table below shows the technologies eligible for RHI and the subsidy now to be received for each technology. The RHI now provides a major incentive for owners to invest in ground source heat pumps and solar thermal renewable heat technologies. The tariffs are based on pence/kWh of renewable heat delivered. The rates vary with the technology and scale used as follows:
|Renewable Heat Incentive
|Ground source heat pumps||up to 100 kW||4.8||8.9 - 10.2||20|
|Ground source heat pumps||over 100 kW||3.5||8.9 - 10.2||20|
|Solar thermal||up to 200 kW||9.2||10 - 11.3||20|
|Solid biomass||up to 200 kW||8.6||8.6||20|
|Solid biomass||200-1,000 kW||5.3||5.0||20|
|Solid biomass||over 1,000 kW||1.0||2.0||20|
RHI rates published by Ofgem for the year from 1 April 2013 – rates change with inflation each year.
RHI rates for ground source heat pumps fall to 2.3p for use over 15% of the full rated capacity per annum.
RHI rates for medium and small biomass fall to 2.2p for use over 15% of the full rated capacity per annum.
Revised rates were published in the May 2013 consultation: but gshp increases, when finalised, will apply to accreditations from 21 January 2013.
On 20 September 2012 DECC published a Consultation on expanding the Non-Domestic RHI to include the following additional tariffs from summer 2013:
|Renewable Heat Incentive
|Scale||RHI tariffs in Sept 2012 Consultation
|RHI tariffs in May 2013 Consultation
|Air to water heat pumps||All scales||1.7||2.5||20|
|Biomass direct air heating||"Small"||2.1||2.5||20|
|Biomass direct air heating||"Large"||1.0||2.0||20|
|Deep Geothermal||All scales||5.0||5.0||20|
DECC published its revised 111 page Consultation for the Domestic Renewable Heat Incentive on 20 September 2012.
RHI for domestic buildings is expected to apply from spring 2014. Renewable heat installations commissioned since 15 July 2009 are due to receive a cashback subsidy of around 17 pence per kilowatt hour used – for the first seven years of the equipment used.
The RHI tariff table below shows the technologies that would be eligible for domestic RHI and the subsidy range being anticipated for each technology. The RHI provides a major incentive for owners to invest in ground source heat pumps and solar thermal renewable heat technologies. The tariffs are based on pence/kWh of renewable heat delivered. The rates vary with the technology used as follows:
|Renewable Heat Incentive
|Ground source heat pumps||12.5 - 17.3||7|
|Air source heat pumps||6.9 - 11.5||7|
|Biomass||5.2 - 8.7||7|
Renewable Heat is a subset of the wider category of renewable energy, which includes the generation of electricity from wind turbines and photovoltaic cells.
Greg Barker, the minister at DECC, introduced the RHI by saying: The heat used in our homes, public buildings, businesses and factories is responsible for around half of all the energy consumed in the UK, and accounts for roughly half of all UK carbon emissions. Taking action now to switch from fossil fuels to cleaner and more sustainable green sources of heat will reduce the impact that our heat requirements have on the environment and help ensure the UK has an energy supply that is safe, secure and reliable.
It is for this reason that we are introducing the Renewable Heat Incentive, making renewable heat not just an environmentally sound decision, but also a financially attractive one. This support can help drive take-up of renewables now, stimulate the renewables industry, encourage further innovation and ultimately, bring down the cost of renewable heating.
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 only 1% of heat demand.
DECC is encouraging Renewable Heat as part of the UK's commitment to aim for the very ambitious target of 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.
The RHI will be administered by Ofgem. Owners of renewable heat technologies included apply to Ofgem who will pay tariffs, on a quarterly basis, over 20 years. Owners will need to provide information on the metered heat generated and satisfy Ofgem that the equipment is used to provide space heating or hot water and that the equipment is maintained according to the manufacturer's instructions. For installations rated up to 45 kW capacity the equipment and the installers will need to be MCS certified, or equivalent.
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.
The introduction of the RHI offers a financial reward for lower carbon emissions over twenty years for 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.
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.
DECC 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 similar rate of return across the tariff bands.
Tariffs are 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.
For those using IHT, the annual clean energy cashback for heating will normally be larger than the annual running cost.