Renewable Heat Incentive (an update)

"This incentive is the first of its kind in the world. It'll help the UK shift away from fossil fuel, reducing carbon emissions and encouraging innovation, jobs and growth in new advanced technologies."
Secretary of State, Chris Huhne

On 10th March, DECC (the Department for Energy and Climate Change) announced the details of the first phase of the Renewable Heat Incentive, or RHI.

Main points of the RHI

Firstly, be aware that this is my current understanding based on the DECC announcement, and whilst I've done my best to check its accuracy, I don't know how much this is likely to change over the coming months. Check back regularly for updates!

Domestic users will have to wait a bit longer

Homes which install renewable heat installations won't benefit from the tariff payment until 2012, as the scheme is being introduced in phases with the first phase covering commercial buildings only. To compensate for this delay, DECC have introduced a one-off payment, the RHI Premium Payment, which is available to homes that install a qualifying system. This will help towards the installation costs, and those taking it up will then be eligible for RHI tariff payments from October next year. The tariff payments may also be claimed by anyone who has installed eligible equipment since 15 July 2009. The tariff should be paid for twenty years, so perhaps it's worth waiting for!

Because domestic clients are not included until Phase two, I still don't have concrete details of how the scheme will operate for them. DECC say that more information on this will be issued in May of this year.

RHI Premium Payment for homes

DECC say that the likely levels of support for RHI Premium Payments are as follows:
Solar Thermal - £300/unit
Air Source Heat Pumps - £850/unit
Biomass boilers - £950/unit
Ground Source Heat Pumps - £1250/unit

Possible conditions on domestic users

There will be clear eligibility criteria in order to qualify for a Premium payment, including: A well-insulated home, based on its energy performance certificate; although the DECC announcement didn't specify what this would be, WOOF! WOODFUEL has heard that this will mean a minimum of 150mm loft insulation, plus wall insulation for cavity walled homes. There also appears to be a condition that will place some responsibility on the user to give feedback on how their installation performs (but I have absolutely no idea how this would work).

A key focus will be on people living off the gas grid, where fossil fuels like heating oil are both more expensive and have higher carbon content. Wood fuel customers should therefore be well placed to benefit from this offer.

Commercial Buildings

Non domestic customers will be able to benefit from the RHI from phase one. DECC state that

"Anything from a pub to a public library, a school to a power plant will be eligible under the RHI to install technologies like biomass boilers, heat pumps and solar thermal. Community projects will also be eligible, provided a single installation is providing heat to more than one house."

I don't yet know the exact start date, but the tariffs will be paid for 20 years to eligible technologies installed since 15th July 2009, with payments being made for each kWh of renewable heat which is produced. "Deeming", which was proposed for domestic installations in order to avoid the need to meter the heat produced, does not apply to commercial installations which will have to be metered to claim the payment (quite a challenge!).

I think as this is the first scheme of its kind in the world, it will no doubt have its teething troubles. All the same, it's a welcome idea that should go some way to promoting the use of more sustainable fuels.

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The Renewable Heat Incentive

As part of the drive to reduce carbon emissions that cause global warming, the UK has set targets for using renewable energy, such as wood fuel. Heat generated from renewable energy sources currently meets 1 percent of the UK's total heat demand. To reach the first renewable energy target, set for 2020, around 12 percent of the UK's heat has to be generated from renewable sources.

This is why the Government is introducing a Renewable Heat Incentive, or RHI, which will reward users of renewable heat installations, in effect paying them to use their own heating systems. Reportedly, £860m will be made available, up to 2014/15. Although this is a 20% cut on the figure first proposed, it passed the Comprehensive Spending Review last Autumn and looks set to go ahead this year.

Full details of the scheme are being worked up and as a result we don't know exactly what the payment will be, how it will be made, or when it will start (currently the Government says it will start in June). However, we are told that anyone who intends to install a qualifying renewable heat system doesn't have to wait until June to have it installed. So long as it meets the scheme requirements, the payment will be made.

So what are the scheme's requirements? Well, of course we don't know for certain, but fortunately we do have a good idea of what type of systems will receive payments under the RHI. We also know that only installations carried out by accredited installers are eligible - DIY will not count, nor will a system installed by anyone who hasn't got the right credentials.

So here are a few pointers...

Be aware that this is our current understanding, and whilst we've done our best to check its accuracy, we don't know how much this will change between now and the scheme starting up. Check back regularly for updates - this will be a lucrative opportunity you won't want to miss out on!

USE AN ACCREDITED INSTALLER AND SYSTEM

For the installation to qualify for payment, both the system itself, and the installer, must be accredited. The main accreditation scheme is the Microgeneration Certification Scheme (MCS), and equivalent European schemes will also apply. The idea is that only accredited installers will be able to issue a certificate that will enable you to register the installation for payment.

INSTALL A BOILER NOT A ROOM HEATER

Current proposals exclude wood burning stoves, even where they are fitted with a back boiler for heating domestic hot water, as well as air heaters, open fires and similar applications. The proposed payments were calculated for dedicated biomass boilers only.

BUY FUEL FROM AN APPROVED SUSTAINABLE SOURCE

Only fuel bought from an approved sustainable source will qualify for the RHI payment.

WHAT IF YOU ALREADY USE A WOOD FUEL BOILER?

You may still be eligible to receive payments. This depends on whether your system was completed after 15 July 2009, the date the Government's Renewable Energy Strategy was published. If before, then you cannot claim; if after, then so long as the scheme's conditions are met, you will be able to claim the payment.

HOW MUCH WILL YOU BE PAID?

The proposed payment for small installations (up to 45kW) using solid biomass was originally 9p per kWh (kilowatt hour) for 15 years, although this is yet to be confirmed and may change. This payment (called the tariff) is higher for solid biomass than for any of the other space heating systems being supported, which include biogas, bioliquids and heat pumps; only solar water heating has a higher proposed tariff. The tariff is intended to give a 12% rate of return, helping to compensate for the extra cost of installing a renewable heating system compared to, say, gas heating. To give you an idea, a small flat might use 5000kWh/year for space heating and be paid about £450 per year; an older detached house with solid uninsulated walls might use 16,000kWh/year and receive almost £1500 annually.

HOW WILL RENEWABLE HEAT BE MEASURED?

Simple answer is, it won't. Unlike electricity, there are no convenient "heat meters" that could be used to monitor the amount of heat used. Even if there were, and payment was made as an amount per kWh used, there would be a perverse incentive to waste fuel by burning more than you need. Government is wise to that one and has got round it by "deeming". So each installation's entitlement will be calculated by multiplying the payment per kWh by the number of kWhs per year that the property is 'deemed' to require, to cover its space heating and hot water needs.

HOW WILL DEEMING WORK?

The deemed amount will probably be calculated using SAP, the Standard Assessment Procedure. This is the model that underpins the Energy Performance Certificate, required by law whenever a home is sold or let. SAP has been used for almost 20 years for estimating home heating requirements. Created in Milton Keynes in the early 1980s, and based on monitoring the energy used in real homes, the model has undergone much refinement since then. For instance, the assumptions it makes about how we use energy in our homes have been updated to fall in line with modern patterns of energy use. SAP has been part of the Building Regulations for new homes since 1995, so it's got a long pedigree.

HAVE YOUR HOME INSULATED, IF IT ISN'T ALREADY

The deemed amount, on which your RHI will be paid, will be assessed assuming that your home is already insulated, where practical to do so. This means a minimum amount of loft insulation of 125mm (this isn't very much: for comparison, the amount of loft insulation in a new house would be about 300mm) and cavity wall insulation, if you have them. If you don't have this amount of insulation, you lose money in two ways; firstly, by paying for heat that you don't use because it is lost through the walls and roof, and secondly, by missing out on the RHI tariff payment for that lost heat. So to get the most benefit from the payment you'd be wise to check out the offers for home insulation available to you.

WATCH THIS SPACE

According to the government, the RHI scheme is also intended to remove non-financial barriers to installing renewable heat systems, such as air quality issues and building regulations. We must wait for the final details before we learn what this means, but if one of these restrictions has stopped you installing a wood fired heating system up to now, perhaps there is some help on its way.

Article by Linn Rafferty
© 2011 Copyright WOOF! Wood Fuel
Linn is an accredited Domestic Energy Assessor and a partner at JTec Energy and Automation Services