News - The Renewable Heat Incentive (RHI)

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What:
The Renewable Heat Incentive is the UK Government’s revolutionary idea to reduce Carbon Emissions and increase Energy security by paying building occupants for installing heat raising technologies such as Solar Thermal.  This is a heat version of the Feed In Tariffs.  It is intended to drive a seven fold increase in renewable heat over the next decade thereby bringing these technologies firmly into the mainstream.

It includes all technologies that we expected it to, except Air Source Heat Pumps which have not been included.  It includes solar thermal systems up to 200 kW (about 130 collectors) with plans to look at larger systems in 2012.

Why:
The Government is serious about trying to achieve its target of 80% Carbon reduction by 2050.  The Feed In Tariffs have been very successful in Europe and it is logical to expect the RHI to be as effective.  It has been launched in two phases because they do not feel that enough research has been carried out on some technologies, such as ASHPs, but they do not want to hold up the other technologies while they continue the research.  They have opened it up to commercial business at first because they are the highest consumers of energy.

Where:
The RHI includes England, Scotland, Wales, but not N. Ireland.

Who:
Initially this will now only cover non-domestic premises including industrial, business, and public sector; it will also include community-wide schemes and any building that is not a single private residence.  There will be a program for households to get some assistance in this first phase called the Renewable Heat Premium Payments which will be paid if the homeowner is willing to provide feedback on their system. 

The second phase will include households in the same manner as the non-domestic sector, it will also include other technologies that are not included yet such as ASHPs.

Payments will only be made to the Owner of the heat raising installation – this seems to be included to reduce the number of ‘free’ installations where the installation company will take all the payments.  The owner is considered the person who pays for the equipment, even if they took a loan or got a grant to pay for it.  There is no way for the owner to assign the payments to another person.

Change of ownership will be allowed and the new owner will receive the RHI for the remaining eligibility period.

When:
The first phase of the RHI will be launched following parliamentary approval, which is aimed for Summer 2011.  The hope is for July 2011.

The second phase will be launched in 2012.

All installations completed since 15 July 2009 will be eligible, if the equipment and installer was MCS approved at the time of installation. This date is relevant for phase 1 and 2.

It is the Government’s intention that the scheme should remain open until at least 2020.

How:
The scheme will be funded by the treasury.  They have dumped plans to fund this by levying the energy suppliers as they have done with the Feed In Tariffs. 

The system will be administered by Ofgem.  Applications will be made directly to them for the RHI by the owner – third party applications will not be allowed.  It is proposed that the application process will be online and  user-friendly and easy for a non-energy professional to complete.  Preliminary accreditation can be granted for installations in the design stage.  Upon completion, as long as the project actually meets the eligibility standards, full accreditation will be granted.  This is to reduce the risk for investors.

In order to be eligible for the RHI smallscale installations must be done with MCS approved equipment (or Solar Key Mark) and by MCS approved installers.  For systems over 45 kW peak (about 30 collectors) the installer does not need to be MCS approved but eligibility will be determined through documentation required for the application process.  At this time we do not know what that actually means. 

Systems cannot be double funded. If any grant or public funding is received the installation will not be eligible for the RHI.

Solar thermal systems will pay 8.5p/kWhr for 20 years.  It is intended to meter this energy, but the method is not fully determined yet. It looks as though an approved Class 2 Annex MI-004 of the EU Measuring Instruments Directive (MID) 2004 heat meter will cost about £400-£600 installed to the end customer.  It has been recommended to the government that smallscale solar thermal systems less than 32kW (about 20 collectors) should be deemed for ease instead of metered, however they have not allowed for that at this time.  In the case of metered installations the owner will have to supply Ofgem with regular readings.

Other renewable heat incentives are paying based on a 12% return on investment.  Solar thermal has been downgraded because its heat output vs. outlay costs is not considered as high as some of the other technologies. Payments for new installations will digress as equipment costs go down; and RHI reviews will take place 4-yearly, but existing systems shall be Grandfather claused to continue with their original agreements in place.

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