Renewable Heat Incentive
The Renewable Heat Incentive (RHI) is a financial incentive scheme set up by the UK Government to encourage people to use renewable heat technologies in homes, businesses and local communities.
The Renewable Heat Incentive (RHI) is a financial incentive scheme set up by the UK Government to encourage people to use renewable heat technologies in homes, businesses and local communities.
In order to meet its Renewable Energy Directive target of generating 15% of energy from renewable energy sources by 2020, the UK Government “anticipates that around 12% of heat will need to come from renewable energy”.
The domestic renewable heat scheme opened for applications on 9 April 2014. Everyone who has installed an eligible heat system since 15 July 2009 is entitled to apply.
Current and historical tariffs for the Domestic RHI are logged on the Ofgem website.
The Department for Business, Energy and Industrial Strategy (BEIS) has an online domestic RHI calculator which will help you work out how much money the different technologies could earn in your particular home.
What technologies are eligible for the domestic RHI?
What are the domestic RHI scheme rules?
To be eligible you must use an installer who is MCS certified and a member of the Renewable Energy Consumer Code (RECC).
The heating system you choose must also be MCS certified or equivalent (for example, Solar Keymark) and meet relevant required standards. NB not all MCS certified products are eligible. You can check for eligible products on the Ofgem website.
To be eligible for the RHI, householders will have to have an Energy Performance Certificate (EPC) for their property which is less than 2 years old , and install loft and cavity wall insulation where required by the assessment. Self-builders must get an RdSAP EPC.
The domestic RHI has been designed as a ‘boiler replacement scheme’. The payments are intended to bridge the installation and running costs between fossil fuels and renewable alternatives. Unlike the feed-in tariff or the non-domestic RHI, it is not intended as a form of investment or payback.
Your fuel supplier must be on the Biomass Suppliers List for you to be eligible to receive RHI, even if you are already registered or register as a self supplier.
Payments will be made quarterly to householders over seven years for each kWh of heat produced for the expected lifetime of the renewable technology and based on deemed heat usage. Any money received upfront from other grants will be deducted from the RHI payments.
How do I apply for domestic RHI?
You can apply online at the Ofgem website. To do so you need your MCS certificate and EPC less than two years old. If you are applying for a biomass boiler you will also need an air quality certificate.
There are companies offering to do the application for you for a fee. This is not necessary as the system has been designed to be user-friendly. The date that you press submit on your online application is the date from which RHI will be paid.
A degression scheme, similar to the one introduced for the Feed-in Tariffs scheme, will be put in place to manage the RHI budget. This means that tariff levels will decrease by a set percentage once specified levels of deployment have been reached.
If you have questions about any of this, or there is something we haven’t answered, you can ask it under this blog.
DOMESTIC RHI ELIGIBILITY CRITERIA
Am I eligible for the domestic renewable heat incentive?
The following people are eligible to apply for the RHI:
The scheme is for a system that heats a single domestic property. Systems that heat more than one dwelling (ie a block of flats or a house with a self-contained outbuilding) may be able to apply to the non-domestic scheme. Payments go to the owner of the scheme. You will be paid from the date you submit your application form. DECC expects the domestic RHI scheme to be open until March 2021.
I’m a private landlord, can I apply?
As long as you own the heating system, you can apply, and you will receive the RHI payments. But you will be expected to get necessary permissions from your tenants, both to install the system, and so you can comply with the requirements on maintenance and possible site visits.
What do they mean by self-builder?
Someone who has built or commissioned a home for their own use, either by building the home themselves or by working with builders.
I have already installed renewable heat. Can I get the RHI?
Yes, as long as you installed it after 15 July 2009, and you have not received any government support since then (other than from the renewable heat premium payment scheme which will be deducted from the RHI payments). You come under the heading legacy installation.
What are the eligibility criteria for legacy installations?
Legacy applicants are people that installed renewable heating systems between 15 July 2009 and 8 April 2014. There are two exceptions to the eligibility criteria for legacy applicants:
What safety regulations are required to be eligible for the domestic RHI?
To be eligible the heating system must be MCS (or equivalent scheme) certified and the installer must be MCS certified and a member of the renewable energy consumer code (RECC) or Home Insulation and Energy Systems (HIES). However since launch, MCS (or equivalent) certification does not guarantee eligibility alone. A full list of RHI-eligible products can be viewed on the Ofgem website.
How long will they be paid for?
The tariffs will be paid for 7 years. Payments will be quarterly, in arrears, by Ofgem. While paid over a seven year period, the rates have been calculated over the expected 20 year life of the systems.
Is the RHI index-linked?
Yes, for applicants accredited before 1st April 2016 the tariff will change annually in accordance with the Retail Price Index (RPI). For applicants accredited on or after 1st April 2016 tariffs will change annually in line with the Consumer Price Index (CPI). Changes will come into effect on 1 April each year
When will rates change?
A degression scheme, similar to the one introduced for the Feed-in Tariff scheme, has been put in place to manage the RHI budget. This means that tariff levels for new applicants will decrease by 10 per cent once specified amounts of the budget have been spent. The government will check every quarter to see if triggers are met. If they are, a month’s notice of the tariff reduction will be given. The eligibility date for RHI is the date you press submit on your online application. So when a tariff is about to reduce you must put your application in before midnight the day before the change is due to get the higher rate. Degression will be per technology, not for the scheme over all, so that one technology is not allowed to dominate the budget.
What will the tariffs be applied to?
Tariffs are paid per kWh of renewable heat generated. The amount of heat generated from your installation will be ‘deemed’. This is an estimate of the property’s expected annual heat usage. You multiply the deemed heat load of renewable heat by the tariff rate to calculate the annual payments.
For biomass, hybrid systems and heat pumps the estimated heat use of a property will be calculated after the installation of required energy efficiency measures (see below). This figure will be taken from the energy performance certificate (EPC).
For heat pump installations, the heat use figure will be combined with the heat pump’s expected efficiency to estimate how much renewable heat should be generated.
For solar thermal, the deeming figure will be the estimated contribution of the solar thermal to the property’s hot water demand. This calculation is part of the MCS installation process.
What’s the thinking behind the tariff rates?
Rates are based on technology and installation costs; technology efficiencies; technology lifetimes, the cost of financing; and the costs of off-gas-grid fuels such as electricity and oil. It factors in a 7.5% compensation for finance of the capital cost of buying and installing the system.
How soon will my investment pay back?
The domestic RHI has been designed as a ‘boiler replacement scheme’. As such, the payments are intended to bridge the costs between the installation and running costs of fossil fuel heating systems and the renewable alternatives. Unlike the feed-in tariff it isn’t talking in terms of investment, or payback (do you expect a gas or oil boiler to ‘payback’?).
HOW DO I CALCULATE THE POTENTIAL INCOME FROM THE DOMESTIC RHI?
The RHI will be paid on each kWh of renewable heat generated, for seven years. For most heat pump and biomass heating systems this will be an estimated figure (to avoid the cost of metering). It will be taken from the heat demand figures for space heating and hot water on your EPC. The solar thermal figure will be calculated by your installer.
Biomass calculation of RHI payments:
You install a biomass boiler (tariff rate is 4.21 p/kWh) in a home with expected heat demand of 18,000kWh (15,000 for space heating, 3,000 for water heating).
The calculation is 18,000 x 0.0421p = £757 RHI payment per year, for 7 years = £ 5304.
Heat pump calculation of RHI payments:
For this example we’ll assume a heat demand of 18,000kWh, and an air source heat pump (tariff rate is 7.51 p/kWh). The heat pump has an efficiency rate averaged over the whole year (SPF) of 3, that means it generates an average of 3kWh of heat for every kWh of electricity used.
The RHI is only paid on the renewable element of the heat, not the electricity used. To find that figure divide the heat demand by the SPF:
18,000 / 3 = 6,000
In this case 2/3 of the electricity will be renewable
6,000 x 2 = 12,000kWh x 0.0751p = £901.2 per year x 7 years = £6,308
Solar thermal calculations:
Hot water demand of 2,000kWh, tariff rate 19.74p
2,000kWh x 0.1974p = £394.8 x 7 years £2,763.6
Because there is only one tariff rate, whatever the size of heating system installed, and there are economies of scale on installation costs, larger systems will tend to get a better rate of return.
As well as the RHI payments, you will also want to consider any energy savings you get from installing a renewable system in your decision making. These vary considerably between technologies.
DOMESTIC RHI SCHEME REQUIREMENTS
All heating systems and installers must be accredited by MCS (the microgeneration certification scheme) or an equivalent scheme. In addition, installers must be members of the Renewable Energy Consumer Code (RECC).
What does it mean by MCS or equivalent?
MCS is the UK’s accreditation scheme. DECC will also recognise certification schemes that meet standards such as European standard EN 45011, or ISO/IEC 17065 which has replaced EN 45011. Your installer must issue you with an MCS compliance certificate. You will need this certificate when making your application for RHI.
What are the energy efficiency requirements?
Everyone has to have an Energy Performance Certificate less than two years old. This records the energy performance of your property, and will give you a list of measures that you could consider installing to increase its energy efficiency. It will include guidance as to how much they are likely to cost, and what savings they will generate on your energy bills. You will be eligible to apply for the RHI even if your chosen renewable energy system is not recommended on your green deal advice report.
If loft and/or cavity wall insulation are recommended by the assessment you must install them and obtain an updated energy performance certificate (EPC) before applying for the RHI. If installing them is not feasible, you will need to present valid evidence of why not. Self-builders will have to get an RdSAP EPC on completion of the property, and the deemed heat load figure will be taken from that.
Why has DECC set energy efficiency requirements?
Installing energy efficiency measures, such as cavity and loft insulation is the most cost effective way to reduce energy consumption and carbon emissions. If you increase energy efficiency, you will be able to install a smaller (and cheaper) heating system, and it will run more efficiently.
Are there any conditions I must meet?
You must have your heating system maintained regularly. You will have to confirm that your system is operating correctly as part of the application process, and will need to confirm annually that it is being maintained according to the manufacturer’s instructions.
Will I have to install a meter?
For biomass and heat pumps, meters will be required in two situations:
a. If the renewable heating system is installed alongside another fossil fuel or renewable space heating system (this includes hybrid systems);
b. in second homes.
You can also choose to install a meter under the metering and monitoring package, and this cost will be covered by an additional payment of £230 per year for heat pumps, £200 per year for biomass boilers. This is just for your peace of mind, so you know your system is performing as expected. Your payments will still be on the ‘deemed’ figure from your EPC.
Why do installations have to be ‘meter-ready’?
DECC wants to check its assumptions about fuel bill savings and renewable energy generation. Selected installations will have DECC’s metering equipment fitted, so all applicants will have to agree to this as part of the application process. DECC is working with MCS to make it an MCS standard to make all new domestic systems meter-ready where possible. It will not apply to legacy installations. This is not the same as getting a metering and monitoring package, and data will not be available for installers and householders to view in the same way.
DOMESTIC RHI BIOMASS CRITERIA
What biomass heaters are eligible?
You can install either a biomass-only boiler, fuelled by wood pellet, wood chip or logs, or a biomass pellet stove with a back burner (these are sometimes referred to as boiler stoves). It must meet the air quality and fuel sustainability criteria set out by DECC. Condensing biomass boilers are not eligible initially, but this will be kept under review, and may change.
What are the air quality requirements?
Systems must not exceed the maximum permitted emissions limits of 30g per gigajoule (g/GJ) net thermal input of particulate matter (PM) and 150g/GJ for oxides of nitrogen Nox. You will need an air quality certificate when you apply. You can find a list of eligible boilers and stoves on the Ofgem website. Legacy installations (those installed between 15 July 2009 and the start of the scheme) do not need to meet these requirements. Installations will also need to comply with national air quality and planning legislation.
What are the fuel sustainability requirements?
Fuels must be sourced from a supplier registered on an approved list (this will be mandatory from autumn 2014, recommended prior to that). You will have to make an annual declaration that you are doing so, and keep receipts as evidence.
I’ve got my own wood supply, can I use that?
Yes you can, as long as you do not also supply to other biomass installations. “Woody biomass feedstocks” (this includes perennial energy crops such as miscanthus as well as wood) grown on the same “estate” as an eligible biomass system will be automatically treated as meeting the sustainability criteria. DECC is also looking at a ‘proportionate approach’ for local suppliers of wood fuel.
DOMESTIC RHI HEAT PUMP CRITERIA
Can I use my heat pump for cooling too?
No. Any cooling from heat pumps is not eligible.
How do I calculate the ‘renewable heat’ generated by a heat pump?
The renewable heat is the heat taken from the ground, air or water, net of the electricity that is needed to run the heat pump. The more efficient the heat pump, the more renewable heat will be produced.
This efficiency is measured as a seasonal performance factor (SPF). For example: for every 1kWh of electricity used, the heat pump will generate 2.5 kWhs of heat averaged out over a year. To work out how much heat is renewable use the following formula:
Eligible heat demand = total heat demand x (1 – 1/SPF)
So if the SPF=2.5, 1 – 1/2.5 = 0.6 of the heat output will be eligible for RHI payments.
Is there a minimum efficiency for heat pumps?
The minimum SPF (seasonal performance factor) allowable for a heat pump to qualify for the RHI is 2.5. This is based on an EU classification which states that only those heat pumps with a SPF of 2.5 or more are considered renewable.
THE DOMESTIC RHI APPLICATION PROCESS
How do I apply?
Applications opened on 9 April 2014. For most people application is online at the Ofgem website. There are alternatives to make it accessible to all.
Don’t be tempted by people who say they will do it on your behalf (for a fee). It’s designed to be easy, and doing so may jeopardise your eligibility as the regulations don’t allow for third party applications.
Is there anything else I’ll have to do?
You will have to declare annually that the system is still in use and meets the scheme requirements; that it is in working order and maintained in line with manufacturer’s instructions; and the current recipient is still entitled to the payments. This is to ensure that you’re not continuing to receive payments for heat that isn’t being generated.
You may be selected for spot checks. Ofgem will be checking some installations while they process applications, and some after they have been accepted onto the RHI. MCS certifying bodies will also be checking to make sure installers are carrying out work to a high enough quality. There is also a checking process in place for green deal advisors, to ensure standards are met.
Some installations will be chosen for metering to provide DECC with information about how the technologies perform.
If you refuse to comply with any of the above it may delay or prevent acceptance onto the scheme. If you are not meeting the ongoing requirements, your payments will stop.
I have already received a renewable heat premium payment, can I apply for the RHI?
You must declare that you have received the RHPP – or any other public funding you have received for the heating system – as part of your application. It will be deducted from your quarterly payments over the life time of the tariff. The deduction will also be altered in line with the RPI each April.
DOMESTIC RHI FUNDING
Is there any help with the upfront cost of installing a renewable heating system?
You may be able to get some financial support through a range of schemes which enables you to pay off the loan through the savings that result on your energy bill. This will not cover the whole cost of any of the renewable heating systems.
OTHER DOMESTIC RHI QUESTIONS
Who will benefit most from the domestic RHI?
The scheme is targeted at those off the gas grid and living in rural areas. There are about 4 million off-gas homes in the UK, evenly split between rural and urban areas.
The rural off-gas homes are generally heated by oil, LPG or electricity, and tend to be older, larger, solid walled properties that are not energy efficient. Because they are sparsely populated, and not suitable for heat networks, they are the properties that the tariff rates have been calculated for. BEIS hopes to support around 750,000 renewable systems by 2020, predominantly off the gas grid.
In 2011, the average cost of heating a three bedroom house was almost 50% higher for oil, and over 100% higher for LPG, compared with mains gas.
Can I keep a back-up system alongside my renewable heating?
You can have another heating system (either renewable or not), but if you want to claim the RHI you will have to install a meter on your heat pump, biomass boiler or hybrid system. The RHI will then be paid on meter readings (as opposed to deemed heat use). However, payments will be capped at the deemed amount of heat use. You will be responsible for the installation of any required meters, and ensuring they meet the requirements in the metering for payment technical supplement.
The exception to this is if you install solar thermal with a heat pump or biomass system. Then you can make two claims for RHI – one for the solar thermal, one for the heat pump or biomass. Both systems will be paid according to the deemed amount, and will not need to be metered.
Room heaters, such as a wood burning stove (without a back boiler) do not count as another heating system in this context.
What is the metering and monitoring package?
It is similar to a service contract. The meters will enable you and your installer to see the measured performance of your system online. The aim is to give you peace of mind that your system is working properly, and allow the installer to improve performance where possible and diagnose problems as they occur. The payment of £230 per year for heat pumps and £200 for biomass boilers is to reimburse you for the cost of the package over the 7 year life of the RHI payments. This package is not available for biomass stoves. In the first instance, it is only available to the first 2,500 applicants in the first year of the scheme.
What happens if I sell my property?
You must inform Ofgem, so payments can be transferred to the new owner.
What do I do if things go wrong?
If you can’t sort it out with your installer, then the process for complaints is available on the Renewable Energy Consumer Code website.
Can I install a log boiler stove that connects to the heating system?
No, these are not allowed, as there’s nothing to stop you burning coal in them too. The only boiler stoves that are eligible are those burning biomass pellets.
The RHI is open to all non-domestic installations of renewable heat. All systems must be metered. The incentive will be paid for 20 years to eligible technologies that have installed since 15 July 2009, with payments made for each kWh of renewable heat produced. The payments will be index linked.
The following technologies are eligible:
Tariff rates for the Non-domestic RHI:
Current and historical tariffs for Non-Domestic RHI are logged on the Ofgem website.
I understand the non-domestic RHI is only available for ‘useful’ heat. What does that mean?
The heat must be supplied to meet an economically justifiable heating requirement – ie one that would be otherwise met by another type of heating, such as a gas boiler. (At risk of stating the obvious) it shouldn’t be a heat load that is created artificially, just to claim the RHI. Acceptable uses are for space, water and process heating where the heat is used in fully enclosed structures. Ofgem is responsible for deciding what is and isn’t eligible according to the RHI regulations.
What about heat used for cooling?
It is eligible as long as it meets all the other eligibility criteria. Cooling through absorption chillers is supported. Ground source heat pumps capable of simultaneous heating and cooling will have to measure heat drawn from the ground and provide quarterly meter readings. They must also provide a capacity value based on the heating function only.
Are there any on-going obligations?
Yes, you will have to agree to a number of obligations to receive the RHI, and you will be asked to re-declare that you are meeting them at regular intervals. These include:
How does the metering work?
All payments of the non-domestic RHI will be made on the basis of heat meter readings. You can install any meter that meets the class 2 requirements listed in Annex MI-004 of the EU measuring Instruments Directive 2004. You will need to check whether your installation needs just a generation meter, or also needs to be metered at the point of usage.
I’m replacing an existing renewable heat system. Am I eligible?
Yes (although the government may review this if they see lots of people scrapping fully functioning systems just to get the RHI).
Can I use any installer?
If your system is of 45kWth capacity or less then all installations of biomass, ground and water source heat pumps and solar thermal must be installed by an MCS certified installer, using MCS certified products (or an equivalent EU approved scheme such as Solar Keymark).
I run a business from home. If I install renewable heat does it count as domestic, or non-domestic?
The definition for domestic installations is where a renewable heating installation serves a single private residential dwelling only and is currently classed under the local council tax banding as a “self-contained” unit. However, if a house has been significantly adapted for non-residential use, and if it may be considered non-domestic. An example might be a house converted to a shop or bed and breakfast. If landlords install renewable heat in one or more residential dwellings it counts as domestic. In practice the decider tends to be whether or not you pay business rates. If you don’t it will probably count as domestic.
How will I be paid?
Payments will be made quarterly, over a period of 20 years. You will have to submit a quarterly meter readings to Ofgem. They will be calculated by multiplying the appropriate tariff by the eligible heat use (in kWh).
Can I get a grant as well as the non-domestic RHI payments?
No. RHI support will only be available if the installation has not received (and will not receive) any other public funding (for those commissioned after the Regulations came into force), or where it has received public funding before the RHI regulations came into force, it has paid that back.
What happens if I sell the system?
The new owner will receive the RHI payments for the remains of the eligibility period, as long as they can prove to Ofgem that the ownership has been transferred validly, and that they are meeting the eligibility criteria. It is illegal for the previous owner to attempt to continue receiving payments.
Can I get an agent or my installer to apply on my behalf?
No, you must do it yourself. The preferred route is to apply online at the Ofgem website.
Why aren’t air to air heat pumps included?
The government says that although these do produce renewable heat, it does not want to risk incentivising the installation of separate heating and cooling AAHPs in order to claim the RHI, rather than the more energy efficient reversible air to air heat pumps. It will revisit the potential to include reversible AAHPs in the 2014 review.
How have the tariff levels been set?
They are based on the additional costs of each technology over the fossil fuel alternative, plus a 12% internal return on capital (except for solar thermal which offers a lower rate of return). The aim is to provide sufficient support while avoiding over-subsidising.