Domestic RHI and Non-Domestic RHI : Renewable Heat Incentive

The Government’s Renewable Heat Incentive scheme make tariff payments for up to 20 years for installing renewable energy heating systems including biomass boilers.

The RHI, or to give it it’s full title, the Renewable Heat Incentive, is a Government initiative which was introduced to encourage householders and businesses to install renewable energy heating systems instead of those which use fossil fuels.  The Department of Energy and Climate Change (DECC) referred to the RHI as “the world’s first long-term financial support programme for renewable heat”. It went on to say that the “RHI pays participants of the scheme that generate and use renewable energy to heat their buildings” and “by increasing the generation of heat from renewable energy sources (instead of fossil fuels), the RHI helps the UK reduce greenhouse gas emissions and meet targets for reducing the effects of climate change”.

RHI pays a quarterly tariff to participants of the scheme who generate and use renewable energy from the renewable energy heating systems they have installed.  RHI tariffs are payable for 7 years in the case of domestic properties and 20 years for non-domestic properties.  The RHI is the first scheme of its type in the world in providing such long term financial support and prompted the DECC to refer to it as “the first step in transforming the way we heat our homes”.

Domestic RHI

Domestic RHI, the Domestic Renewable Heat Incentive was launched on 9th April 2014 and is available to owner occupiers, private landlords, social housing, third-party owners of domestic heating systems and those who self-build new homes.  Although the Domestic RHI is available to all households it is primarily aimed at those homes which are ‘off mains gas-grid’ as they are the ones with most to gain by switching to renewable heating systems. There are approximately 4 million households in the UK which do not have access to mains gas.  Domestic RHI offers financial incentives with a target of up to 750,000 domestic renewable heat installations by 2020, the vast majority of which are expected to be biomass boilers.

Renewable heating technologies which attract tariff payments under the Domestic RHI include:

Biomass boilers (which use only wood pellets)
Biomass wood-pellet stoves with integrated back boilers
• Solar thermal water heating systems (flat plate and evacuated tube systems producing hot water only)
• Ground source heat pumps
• Air source heat pumps

For more information on solar thermal water heating systems, ground source heat pumps and air source heat pumps, please visit www.domesticrenewableheatincentive.co.uk.

Most domestic renewable energy technologies such as biomass boilers provide both space heating and hot water but solar thermal water heating systems must only be capable of providing hot water to be eligible for the Domestic RHI scheme.  Also, although some renewable energy systems can provide heat for warm air heating systems, only those which operate through a ‘wet’ system such as central heating radiators will attract tariff payments under Domestic RHI.

Domestic RHI Tariff Payments

The Domestic RHI scheme makes tariffs payments to the owner of the eligible renewable energy technology installation at a rate per kilowatt hour of renewable energy generated. It is paid quarterly for seven years and although future rates may change, once an applicant has registered with the Domestic RHI scheme their tariff payments will be guaranteed. Tariff rates will rise or fall in line with changes in the Retail Price Index (RPI), with adjustments made on 1st April each year.

Domestic RHI tariff payments reflect the cost of installing and maintaining the different types of renewable heating technology and are:


Renewable Heating Technology Domestic RHI Tariff
Air Source Heat Pumps 7.3p /kWh
Biomass Boilers and Stoves 12.2p /kWh
Ground Source Heat Pumps 18.2p /kWh
Biomass Boilers and Stoves 19.2p /kWh

domestic rhi tariffs - cost per kilowatt of biomass energy

Example – Domestic tariff payments for a typical four bedroom detached property using 20,000 kilowatt hours of heat per year:

In this example if you install a biomass boiler your annual Domestic RHI tariff payable will be 20,000 kWh x 12.2 pence = £2,440 per year, paid quarterly.

You also need to take into account the installation cost and maintenance costs of the biomass boiler plus any savings in heating costs achieved as a result of the installation.  If you are switching from LPG, according to the Energy Saving Trust you could save around £1,435 in heating bills and over 7 tonnes of carbon dioxide emissions. At 2014 prices, taking the savings in heating bills together with the Domestic RHI tariff receipts over seven years, the total would be £27,125. This compares well with current estimates of the installation cost of a biomass boiler for a 4 bedroom property, at around £15,000.

Not only should the forecast energy bill savings increase over time, as energy prices rise but so will the Domestic RHI tariff payments as they rise in line with the RPI.  Also, whilst savings and tariff receipts are expected to rise, many industry experts feel that the installation costs of biomass boilers will fall as the volume of installations rises due to the introduction of Domestic RHI.  When the Solar PV systems feed-in tariff was launched by the UK Government, the installation prices of solar pv systems fell dramatically.

Domestic RHI – FAQs
Domestic RHI can be applied for by owner occupiers (including owners of ‘second homes’), private landlords, social landlords and self-builders (those who are building their own home) as long as the heating system is owned by the applicant and only heats a single domestic property.

 

Domestic RHI is available to all households in England, Wales and Scotland but those who are off the mains gas grid will benefit the most due to the relative inefficiency and higher cost of fossil fuels such as oil, LPG, coal and electricity.

The cost of heating a typical three or four bedroom house can be as much as 50% more for oil and 100% more for LPG than for mains gas. Consequently, when savings in energy bills are added to RHI tariff payments, those switching from more expensive fossil fuels will benefit the most.

 

The Department of Energy and Climate Change has announced that it expects the Domestic Renewable Heat Incentive to be open until 2021. The Renewable Heat Incentive scheme is set for a formal review by the Department of Energy & Climate Change in 2015 and again in 2017 but it has reserved the right to review the RHI scheme at any time.

 

Only biomass boilers which use biomass fuel such as wood pellets, biomass pellet stoves with integrated back boilers, solar thermal water heating systems (evacuated tube and flat plate panel systems), ground source heat pumps and air source heat pumps will qualify for Domestic RHI tariff payments. Only renewable heating systems which distribute heat through a ‘wet’ system such as central heating radiators will comply with the Domestic RHI criteria. Biomass renewable energy heating systems must meet air quality standards and solar thermal systems must only be capable of providing hot water, not heat for the home.

Also, your chosen renewable heating system must comply with the Microgeneration Certification Scheme (MCS) which is a quality assurance scheme recognised by the Department of Energy & Climate Change (DECC).

For more information on solar thermal water heating systems, ground source heat pumps and air source heat pumps, please visit www.domesticrenewableheatincentive.co.uk.

• What are the Domestic RHI tariff payments? At the introduction of the Domestic RHI, tariff payments are:

Biomass boilers – 12.2 pence per kilowatt hour (p/kWh)

Biomass pellet stoves with integrated back boilers – 12.2p/kWh

Solar thermal water heating systems – 19.2p/kWh

Ground source heat pumps – 18.8p/kWh

Air source heat pumps – 7.3p/kWh

Domestic RHI tariff payments will be paid by Ofgem, quarterly in arrears for seven years.

Non-Domestic RHI tariff payments will be paid for a period of twenty years.

Domestic RHI tariffs may fall over time to new applicants (this is referred to as the degression scheme to help control costs) but once you have registered with the scheme, payments will only change in line with the retail price index RPI and the changes will occur on 1st April each year.
Domestic RHI tariffs are paid per kilowatt hour (kWh) of renewable heat generated, which is based on an estimate of the property’s expected annual heat usage to avoid the cost of installing a meter. The tariff rate for the type of renewable heating system installed is multiplied by the expected annual heat usage to calculate the annual tariff payment. This is divided by four and paid quarterly in arrears.

Example: If a biomass boiler is installed and the expected heat demand of the property is 20,000 kWh, the annual Domestic RHI tariff will be 20,000 x 12.2p = £2,440. This will be paid at the rate of £610 per quarter but to calculate the total financial benefit of installing the biomass boiler you need to add the savings in energy bills by switching from a fossil fuel heating system.

When the Renewable Heat Incentive was first launched the then Chancellor of the Exchequer said that tariff payments would be exempt from taxation but that is not to say that it could change. It is worth checking with your local tax office as this could affect your decision to install renewable heat technology
All applicants to the Domestic RHI will require a Green Deal Assessment to prove that their property has sufficient loft insulation (250 mm thick) and cavity wall insulation to satisfy energy efficiency requirements.

New self-build properties are exempt from this requirement as recent Building Regulations would have applied instead. If you have already had a Green Deal Assessment carried out on your home you do not need to obtain another one, you will simply need your Green Deal Advice Report number.

To qualify for the Domestic RHI a property must be capable of having a domestic Energy Performance Certificate as evidence that it qualifies for the Domestic RHI. Biomass boilers and stoves qualifying for RHI payments do have to be ‘meter ready’ when they are installed as the Department of Energy and Climate Change (DECC) will select a number of installations on which to check its own assumptions about fuel saving and renewable energy generation. To do this the DECC will install its own meter which means that all Domestic RHI participants will have to agree to this as part of the qualifying criteria.

Also, in calculating Domestic RHI tariff payments payable to an applicant installing a biomass boiler, the tariff rate is based on the estimated heat demand of a property and this is obtained from the EPC. In other words, an EPC report is required in order to calculate the value of the Domestic RHI tariff payable to a participant in the scheme.

• Will I have to install a meter to measure the amount of renewable heat my system generates? For biomass boilers, biomass stoves and heat pumps meters will have to be installed if the renewable heat installation is not the only source of heating for the property or if the appliance is installed in a ‘second home’. RHI payments will still be based on the results of the EPC however, not on the results of metering.

For those who choose to install a meter under the ‘metering and monitoring’ package, additional payments of £230 per year for heat pumps and £200 for biomass boilers will be made in addition to tariff payments.

The Domestic RHI metering and monitoring package applies to biomass boilers and heat pumps and works like a service contract to allow you to monitor (but not control) the performance of your renewable heating system by logging on to a website. For those who choose to install a meter under the ‘metering and monitoring’ package, additional payments of £230 per year for heat pumps and £200 for biomass boilers will be made in addition to tariff payments.
Biomass boilers which use wood pellets only and biomass wood pellet stoves qualify for tariff payments under Domestic RHI. The fuel must also be sourced from a biomass supplier of the RHI Biomass Suppliers List to ensure that it comes from sustainable sources. Biomass boilers and biomass stoves must also meet air quality requirements.

Additionally, to meet Domestic RHI criteria your biomass boiler must be accredited by the Microgeneration Certification Scheme (MCS) or an equivalent scheme such as those that meet European standard EN 45011, or its replacement ISO/IEC 17065. A certificate confirming compliance with these standards must be issued by your installer and it will be required to support of your application to receive tariff payments from the Domestic RHI.

Applications for the Domestic RHI opened on 9th April 2014 and applications have to be made through Ofgem, though your biomass boiler or stove installer would normally deal with this on your behalf.
To continue receiving tariff payments under the Domestic RHI, applicants must:

1. Keep the renewable heating system and any meter in good working order.

2. Advise Ofgem if the renewable heating system has broken down or is not working in any other way.

3. Advise Ofgem of any major changes to the renewable heating system.

4. Inform Ofgem if you sell your property so that they can pay future Domestic RHI tariff payments to the new owner.

5. Inform Ofgem of any change in personal circumstances which affect your eligibility to be paid under the scheme.

6. Complete an annual declaration confirming that you have abided by the rules of the scheme, including sourcing biomass fuel only from suppliers who are on the RHI Biomass Suppliers List. You should keep receipts for your biomass fuel to back this up as a number of renewable heat installations will be chosen for spot checks.

Before the introduction of the Renewable Heat Incentive, grants were available under the Renewable Heat Premium Payment scheme towards the cost of installing a renewable heating system but this scheme closed on 31st March 2014 to be replaced by the Domestic RHI.

You may be able to obtain a Green Deal loan which would contribute to the installation cost but it probably would not cover the full cost. Loans obtained under the Green Deal are repaid out of future savings in energy bills achieved as a result of switching from fossil fuel to renewable energy and this route can be very attractive financially.

If you sell your home during the seven year period when you are receiving Domestic RHI tariff payments you will need to inform Ofgem so that they can make future payments to the new owner.
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Non-Domestic RHI

Non-Domestic RHI includes the installation of renewable heat generators by industrial, commercial, public sector and not-for-profit organisations, as well as producers of bio-methane. It also includes schools, hospitals and community heating projects where a group of local householders join together to install a renewable heating system from which they all benefit by sharing both the renewable energy generated and the Non-Domestic RHI tariff income.

Renewable heating technologies which attract tariff payments under the Non-Domestic RHI include solid biomass, ground source heat pumps, air source heat pumps, geothermal, solar thermal, bio-gas combustion and combined heat and power systems (CHP).

More information relating to the Non-Domestic Renewable Heat Incentive can be found at: www.domesticrenewableheatincentive.co.uk/non-domestic-rhi

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