Friday, July 12, 2013

Renewable Heat Incentive launch set for next Spring

Solar thermal is one of the most affordable renewable technologies and the Solar Trade Association is looking forward to boom time.
Solar thermal is one of the most affordable renewable technologies and the Solar Trade Association is looking forward to boom time.
Details of the domestic Renewable Heat Incentive (RHI) and related tariff levels have been announced by the Department of Energy and Climate Change (DECC), but anticipated news about the future of the non-domestic RHI has been postponed.

The domestic RHI will launch next Spring. As has always been promised, anyone who has installed a system since 15 July 2009 can claim retrospectively, as long as they meet the Microgeneration Certification Scheme (MCS) standards that applied at the time of installation.

DECC has confirmed the tariff levels for all four eligible technologies. These will be:
  • Flat plate and evacuated tube solar thermal panels: at least 19.2p/kWh

  • Ground (and water) source heat pumps: 18.8p/kWh

  • Air to water heat pumps : 7.3p/kWh

  • Biomass-only boilers and biomass pellet stoves with back boilers: 12.2p/kWh.
Payments will be made on a quarterly basis over a period of seven years. Householders who have already received vouchers under the Renewable Heat Premium Payment scheme will be transferred to the RHI and have their value deducted from their RHI payments.

Applicants will need to complete a Green Deal assessment to reduce their energy demand to a certain level in order to qualify for the payments.

Private landlords and providers of social housing will be able to apply for a property or properties that they own (provided they own the heating system). The landlord will receive the RHI payments.

For Local Authorities who use Arm’s Length Managed Organisations (ALMOs) to manage their properties, the application must come from the owner of the heating system.

New build properties will not be eligible for the scheme. The Renewable Energy Association said this "reinforces the need for the government to set demanding carbon compliance standards in the 2013 revision of the Building Regulations Part L, due for imminent release by DCLG".

People will not be able to claim for more than one space heating renewable heating system in the same property, with the exception of installations of solar thermal and another eligible technology.

Climate change minister, Greg Barker, said: “Investing for the long term in new renewable heat technologies will mean cleaner energy and cheaper bills. So this package of measures is a big step forward in our drive to get innovative renewable heating kit in our homes.

“Householders can now invest in a range of exciting heating technologies knowing how much the tariff will be for different renewable heat technologies and benefit from the clean green heat produced. We are also sending a clear signal to industry that the coalition is 110% committed to boosting and sustaining growth in this sector.”

DECC gives an example of what an installer might receive, in the case of a biomass boiler which might cost, say, £8,000 to install. In a year, the estimated heat use could be around 15,000kWh, which, at a 12.2p/kWh tariff, would result in a payment of £1,830. This would mean it might pay for itself in around five years.

New installations of biomass systems will need to meet air quality standards in relation to particulate matter (PM) and oxides of nitrogen (NOx).

Ofgem will be responsible for administering the scheme when it launches.

The RHI is funded directly from Government spending and has been given annual budgets. There are worries that, as with the payments for Feed-in Tarriff PV systems, they might unexpectedly decrease in the future. DECC will make an announcement on this around the time of the launch.

The news was welcomed by trade body the Heating & Hotwater Industry Council, whose director, Roger Webb, said: “it gives the industry confidence to invest in renewable heating products helping to protect and create jobs. We would of course like the tariffs to be higher but we understand the difficulty of introducing a government funded scheme in the current economic climate," he added.

"We will also be urging DECC to monitor uptake and if necessary to increase tariffs if they are not driving up product sales.”

Stuart Elmes, Chair of the Solar Trade Association's solar thermal working group, called the announcement “a massive boost for the solar thermal market. The value of this incentive is on a whole new level, there’s nothing like it anywhere in the world. From now on people can install solar heating with confidence that their system will be able to join the RHI scheme, and knowing what their payments will be worth.”

Solar thermal is one of the most affordable renewable technologies for homeowners, with a typical system costing around £4,500. This includes the replacement of an old hot water cylinder with a well-insulated solar cylinder.

Solar thermal systems are relatively small and appropriate for partially shaded roofs or those with limited space. A typical system will provide over half the hot water needs of the average home.

Paul Barwell, Chief Executive of the STA, said: “This announcement today is a major success for the STA. Our team has worked very closely with DECC over an extended period in an effort to ensure that the benefits of solar thermal are adequately recognised in the domestic RHI.

"In particular we have helped to drive a deeming calculation based on true occupancy that better reflects hot water usage in the home. The exceptional technical expertise of Stuart Elmes has been invaluable to our efforts.”

Ground source heat pump manufacturer Kensa's Managing Director, and Chairman of the Ground Source Heat Pump Association, Simon Lomax, said that the "Domestic RHI announcement made today, three and a half years after the initial consultation, is disappointingly short on detail."

Tim Minett, chief executive of CPL Industries, a supplier of biomass systems and wood pellet distributor, said he was “surprised the Government is offering more for other technologies but still expect biomass systems will be the most popular by far.

"They are the easiest to retrofit to properties, simple to use and work in all weather conditions – a big factor in the UK – while 12.2p/kWh will cover the cost of installation, lower people’s fuel bills and provide regular income for years to come. What’s not to like about that? “The domestic RHI should be hugely popular as a fifth of the UK’s housing stock is not connected to the gas grid," but he added, "the chief stumbling block is lack of awareness among the public so what we desperately need now is for the Government to step up and promote the scheme vigorously.”

Brian Smithers, European Director, Rexel, agreed, adding: "it is also in the industry’s interest to drive awareness by educating consumers".

Non-domestic RHI decision postponement

At the same time as making the announcement about the domestic RHI, the Government said it was delaying a decision on expanding the non-domestic RHI scheme, which has been operating for over two years, until the autumn, a full year after the proposals were originally released in September 2012.

Industry response was to express disappointment. The Combined Heat and Power Association said the continuing lack of clarity and certainty is "unhelpful for the hundreds of millions of pounds of renewable heat projects currently under development".

Last year the CHP industry welcomed the proposals to expand the RHI scheme to include tailored support for heat produced from biomass and bioliquid CHP. The proposals highlighted recognition within Government that biomass CHP is the most optimal use for limited biomass resources.

Dr Tim Rotheray, Head of Policy and Communications at the CHPA said: "It is absolutely crucial that the Government now provide clarity and certainty. The Government’s proposals for a CHP-specific rate under the RHI is driving renewable heat projects around the country, and a clear, quick decision will help lock in these investments, lock in the jobs these investments will provide, and lock in our ability to meet our renewable heat targets with highly efficient renewable CHP.”

He did, however, welcome the boost to investor confidence given by the Government's decision, also just announced, to grandfather existing renewable CHP schemes from changes to its quality assurance programme.

The biofuel-industry trade body, the Renewable Energy Association, called the delay "disappointing", but welcomed the announcement on the domestic RHI.

The same response came from the Anaerobic Digestion and Biogas Association's chief executive, Charlotte Morton, who called it "very disappointing for AD developers and operators. Making good use of heat from AD plants makes sense for operators, and will help the government deliver renewable energy targets," she added.

"The (non-domestic) RHI is currently well below its projected budget and another delay will simply make it harder for our members to deliver the projects government wants to see.

"DECC could help resolve this by giving developers clarity over the eligibility date, which would allow projects to start generating and using renewable heat if they have commissioned their plant within a set period," she concluded.


GothBoyUK said...

It's all well and good using this 'cash back' incentive, however, those who really could benefit don't have the cash upfront for installation.

We need a proper scheme whereby the installation is free and the RHI deducted for a set period until payback occurs. Afterwards all RHI goes to the property owner. Any losses would be borne by the initial lender who would be permitted to borrow at a fixed rate at the current BoE base rate.

Never going to happen unfortunately.

DavidKThorpe said...

You can always take out a loan, repaid from the savings. Some banks and building societies are offering very low interest deals for this purpose, and they are also attractive alternatives to the Green Deal. See this post I already wrote about them (though I haven't checked if these deals are still available):