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Renewable Heat Incentive (RHI) Scheme

A preciséd version of the DECC consultative paper

PHASE 1 - From July 2011, tariffs only available to NON-DOMESTIC installations (commercial, industrial & community heating only).

PHASE 2 - DOMESTIC tariffs not to be included until Sept / Oct 2012.

As part of the first phase of the scheme, the Government will introduce Renewable Heat Premium Payments for the domestic sector. A funding of around £15 million has been ring-fenced to make premium payments to households where renewable heating has been installed. These direct payments will subsidise the cost of installing qualifying renewable heating systems. In return for the payments, participants will be asked to provide some feedback on how the equipment works in practice and suppliers will be asked to provide a follow up service on any issues that are raised. This will boost confidence in the technology and the information received will help enable Government, manufacturers, installers and consumers to better understand how to maximise performance of the various technologies.

The Renewable Heat Premium Payments will support a spread of technologies across all regions of Great Britain and will cover households using gas and other fossil fuels. DECC may consider focusing support for primary heating systems, such as heat pumps and biomass boilers, on households off the gas grid, where fossil fuels like heating oil are both more expensive and have a higher carbon content. DECC aim to launch the Renewable Heat Premium Payments in July 2011 and will announce further details in May 2011. 

Local Authorities and Housing Authorities will not be eligible for the tariffs for their tennents until 2012 (except district heating).


ELIGIBILITY


Summary

  • RHI will cover England, Scotland and Wales;
  • Only non-domestic installations supported from the outset;
  • Installations completed and first commissioned on or after 15th July 2009 eligible for support providing they meet the eligibility criteria;
  • Heat must be usable and useful heat used for space, water or process heating to be eligible for support; and
  • RHI participants will be required to meet a number of ongoing obligations, including maintaining equipment, providing information to Ofgem and allowing installations to be inspected.

There are several parts to a renewable heating installation which are required for it to deliver heat to the premises or industrial process. For example, a ground source heat pump will need the ground loop, the heat exchanger, potentially auxiliary pumps to move the fluid in the system as well as the parts required for most heating systems such as the water cylinder, radiators and piping to distribute the hot water. All of these elements will have to be in place for a heating system to operate and so provide a date for when the installation is first commissioned. However, adding non-essential elements to the system, such as extra radiators, will not affect the first commissioning date.

Replacing existing renewables
Renewable heating systems that replace an existing renewable heating system will be eligible for the RHI support. Some stakeholders have claimed that owners of older installations, which are not eligible for the scheme (e.g. completed and first commissioned before 15th July 2009) would replace them, despite being fully functioning, with new installations in order to claim the RHI.
Clearly this would go against the intent of the scheme and would not represent value for money. However, this has been deemed as low risk given the up-front capital that would be required and the disruption caused. Furthermore, making replacement of renewable technologies ineligible would be difficult to enforce and would exclude those with a genuine need to replace old or failing equipment. However, this situation will be kept under review and the types of installations claiming the RHI will be closely monitored. If there is evidence that a significant number of new installations are replacing well functioning renewable heating systems, action will be taken.

Maintenance
DECC need to ensure that the RHI represents value for money, with a clear return in terms of the amount of renewable energy produced for the money spent. As a condition of receiving support, participants will therefore be required to maintain their equipment to ensure it is working efficiently.

Clearly, there is a natural incentive for a participant to keep their equipment maintained without any specific requirement, given it will provide their heating or be crucial to their industrial process, however there is a risk, albeit low, that some may not. There is a risk that poorly maintained equipment will be less efficient and may have a more harmful impact on the environment. DECC therefore believe a specific requirement is needed.

Views from stakeholders have been mixed as to what maintenance requirements should be put in place, ranging from those who felt an annual service carried out by a certified installer should be required, to those who warned against a ‘one size fits all’ approach, stressing that maintenance requirements varied considerably. Given the wide range of technologies, DECC do not think it is practical to specify in legislation a particular level of maintenance or frequency of servicing; what would be appropriate for a biomass boiler may not be for a solar thermal system. Including such a provision risks being excessively burdensome or possibly misleading. Therefore, at this stage, there is no intention to specify a particular level of maintenance and the requirement will simply be that the equipment is maintained in line with any manufacturer instructions where available.


Fossil fuel fired CHP
Some stakeholders have argued that gas-fired CHP should receive support under the scheme as it represents a more efficient use of energy. The Energy Act 2008 only allows the RHI to support renewable energy and therefore we will not support gas-fired CHP under the RHI.

Exhaust air heat pumps
Exhaust air heat pumps use air extracted from inside the building, for example from kitchens or computer server rooms, as their air source. They are particularly useful in very well insulated buildings which require mechanical ventilation. However, they are not classified as renewable under the RED as they do not rely solely on outside air and therefore will not be eligible for the RHI.

Air-source heat pumps
Air source heat pumps will not be supported from the outset because more work is needed to better understand the costs associated with the technology and, for air to air heat pumps, work is ongoing to develop a robust methodology for measuring heat delivered in the form of hot air.

Subject to successful conclusion of this work and other factors (such as the role of cooling as opposed to heating in such systems) we intend to extend eligibility to this technology from 2012.

Tariff duration
All tariffs will be paid for a 20-year period, in line with evidence suggesting that all technologies should have an operational lifetime of this length.