The Renewable Heat Incentive

To Commence April 2011 - The Countdown has begun!

To meet our 2020 15% renewable energy target, we need to develop new ways of generating renewable energy in all sectors, including heat. Heat generated from renewable sources accounts for approximately 1% of total heat demand – this may need to rise to 12% to hit our binding EU targets.

We will not be able to expand renewable heat without some form of financial assistance because other forms of heat are currently cheaper. Such support will enable more people to afford renewable heat and, by expanding the market, help bring costs down more quickly.

On 1 February 2010, the Government published a consultation on the introduction of a Renewable Heat Incentive (RHI) scheme, which it aims to introduce in April 2011. The Renewable Heat Incentive (RHI) will provide financial support for the domestic and commercial private sector along with public sector organisations who install renewable heating and qualifies for support under the scheme.

These proposals have been developed with input from the Department of Energy & Climate stakeholders - energy industry trade associations, Ofgem and NGOs – At this stage the proposed consultation constitutes a more formal opportunity for all interested parties to have their say on the details of the RHI mechanism.

The Government proposes the following key aspects of the RHI:

• The scheme should support a range of technologies, including air and ground-source heat pumps (and other geothermal energy), solar thermal, biomass boilers, renewable combined heat and power, use of biogas and bio liquids and the injection of bio methane into the natural gas grid.
• Support heating at all scales, including households, businesses, offices, public sector buildings and industrial processes in large factories.
• Tariff levels have been calculated to bridge the financial gap between the cost of conventional and renewable heat systems at all scales, with additional compensation for certain technologies for an element of the non-financial cost and a rate of return of 12% on the additional cost of renewables, with 6% for solar thermal.
• The Energy Act 2008 provides the statutory powers for a renewable heat incentive scheme to be introduced across England, Wales and Scotland. The detailed legal framework will be set out in secondary legislation.
• The RHI is proposed to be in place for April 2011.

RHI – An indicative example – Based on a Heat Pump capacity below 45kW.

• 7.5 pence is the figure stated in the consultation document for systems of less than 45kW in capacity.
• A 10kW heat pump operating over a 30 week heating season with an average of 35% heating production over this period would generate approximately 17,640kW hours of thermal energy (to satisfy a property with a commensurate heating demand), which when multiplied by the proposed 7.5 pence per kW would potentially deliver £1,323 per annum to the end user.
• Therefore even if the RHI payments were to come in at a reduced 5.5 pence per kW once the consultation period is complete, the user would still benefit to the tune of £970 per year for 15 years plus. Hence providing a potentially very attractive rate of return to the user.
• Please note - Until the RHI is agreed and finalised it is not possible to guarantee or confirm any level of return to the user, this example of use is intended to be used for illustrative purposes only.

The RHI and Heat Pumps - The Proposed Tariffs

Ground Source
Scale kW	Proposed tariff (pence/kWh)	Deemed or Metered	Tariff Life time Yrs
> 45	7	Deemed	23
45-350	5.5	Deemed	20
350 <	1.5	Metered	20

 

Air Source
Scale kW	Proposed tariff (pence/kWh)	Deemed or Metered	Tariff Life time Yrs
> 45	7.5	Deemed	18
45-350	2	Deemed	20
350 <	N/A	N/A	N/A

 Please note these figures are indicative and subject to change. They are quoted to give you an idea of what could be achieved. It is as likely these numbers will rise as well as fall.

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