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Renewable Heat Incentive (RHI) – RegenSW Feedback

Following of the government’s announcements on the Feed in Tariff and our online question and answer session (to read the debate, visit http://ow.ly/14aLF), the team at Regen SW has scoured the reports and pulled out the key points for you (below).

There are still some unanswered questions on the Feed in Tariff, which we will be feeding back to DECC, and even more on the Renewable Heat Incentive that we expect to come out of our consultation event on 16 March (to sign up, visit http://ow.ly/14aTI), but the points below should give you a good overview of the key elements.

To read the government’s full report, visit: http://ow.ly/14XZG

To see the below information as a word document, visit: http://www.regensw.co.uk/downloads/RegenSW_425.doc

 The proposed Renewable Heat Incentive is similar in design to the feed in tariff, with some distinctive features, due to the differences between producing heat and generating power.  It is a consultation document at this stage, so it is subject to change.

 Tariff payments

  • Tariff levels are proposed to provide a rate of return of 12 per cent on the additional capital cost of renewables, with a lower rate of return of 6 per cent for solar thermal (see table of tariff rates at the end of this document)
  • RHI will remain open to new projects until at least 2020. Its design and tariff levels will be reviewed from time to time for new projects, to adapt to changes in technology costs and other circumstances.
  • Annual payments will be made for installations below 45 kW and quarterly for those above this level.
  • The number of years of support proposed varies depending on the technology, from 23 years for small ground source heat pumps to 10 years for biogas onsite combustion. 
  • The issue of tax on the payments is still to be determined by the Treasury
  • It is unclear whether the payments would be index-linked to inflation or not. 
  • It is proposed that payments are ‘grandfathered’, meaning that a project installed in year one of the scheme continues to receive payments at the level set in year one throughout the time that it is eligible for RHI support.  Tariffs are reduced for new projects installed in later years. 
  • The market is expected to develop up-front financing schemes.  Central government is unlikely to provide products (outside of the Pay as You Save scheme that is currently being piloted). 

Calculating payments

  • Payments will be calculated on the annual amount of heat output, expressed in kilowatt hours (kWh). At the small and medium scale (see the tariff level tables for details of what is classified as small or medium), the amount of heat generated by the equipment is proposed to be estimated (or “deemed”) when installed, in most cases. This will allow the beneficiary of the incentive to receive a set amount based on the deemed output, to encourage low0energy consumption and discourage wasting heat.
  • Deemed payments for small-scale installations will be based upon the estimated heat demand for a building, calculated for each property using the Standard Assessment Procedure (SAP) rating for domestic properties or Simplified Building Energy Model (SBEM) for nondomestic situations, as well as the assessments carried out to create Energy Performance Certificates (EPCs) for new buildings in particular.
  • Medium-scale installations will follow the same approach as small scale, with solid biomass installations being allowed to choose between deemed payments and metering.  Installations choosing this approach would still receive the same tariff for the same deemed number of kWh, but where the metered number of kWh used exceeds the deemed number, an additional lower tariff per kWh would be paid for the metered excess.
  • Large-scale and process-heating (and medium-scale, where not covered by SAP/SBEM/EPC) support would be calculated as the metered number of kWh multiplied by the tariff per kWh.  Biomethane injection and district heating would be metered at all scales.

 Eligibility

  • The scheme should support a range of technologies, including air, water and ground-source heat pumps (and other geothermal energy), solar thermal, biomass boilers, renewable combined heat and power, use of biogas and bioliquids and the injection of biomethane into the natural gas grid.
  • Woodstoves are not included, though the issue of backboilers needs to be clarified  
  • To ensure that the incentive is paid only to installations that function correctly, regular evidence of ongoing maintenance and repair may be required within a fixed time period, or payment of the incentive would be at risk.
  • As announced in the RES, eligible installations completed after 15 July 2009, but before the start of the RHI, will benefit from the scheme as if they had been installed on the date of its introduction.

Accreditation

  • In small and medium-sized installations, both installers and equipment must be certified under the Microgeneration Certification Scheme (MCS) or an equivalent standard.
  • For larger installations, it is proposed that similar standards are not imposed.  The government would instead expect those involved with larger projects to have or obtain the necessary expertise to make appropriate choices and ensure they get value for money.

 Auditing

Ofgem will administer the RHI, making incentive payments to recipients and taking responsibility for auditing and enforcing the scheme. DECC will work with Ofgem to devise a simple process for accrediting smaller installations. This is to ensure that standards are met and payments can be made.

 Funding of the scheme

Following informal consultation with stakeholders and appraisal of the issues associated with raising funds for RHI payments, the government is considering what would be the most effective way to fund the RHI, including reviewing the levy provisions in the Energy Act 2008. The government plans to make a further announcement at Budget 2010. Work to assess options for funding the RHI scheme will not impact on DECC’s intention to launch the scheme in April 2011.

 Small installations

 Technology    Scale   Proposed tariff (pence/ kWh) (2)   Deemed or metered (3)   Tariff lifetime (years)  
Solid biomass   Up to 45kW   9 Deemed   15
Bioliquids (7)   Up to 45kW   6.5 Deemed   15
 Biogas on-site combustion (5)   Up to 45kW   5.5 Deemed   10
Ground source heatpumps (8) (9)   Up to 45kW   7 Deemed   23
Air source heatpumps (9)   Up to 45kW   7.5 Deemed   18
Solar thermal   Up to 20kW   18 Deemed   20

 Medium installations

 Technology    Scale    Proposed tariff (pence/ kWh) (2)   Deemed or metered (3)   Tariff lifetime (years)    
Solidbiomass    45-500 kW 6.5 Deemed   15  
2 (fueltariff)   Optional:  for metered kWh  above deemed  number of kWh 15  
 
 Biogas on-site combustion (5)   45-200 kW   5.5 Deemed   10  
Groundsource heat  pumps (8)(9) 45-350 kW 5.5 Deemed   20  
Air source heat  pumps (6)(9) 45-350 kW 2 Deemed   20  
Solar thermal (6)   20-100 kW   17 Deemed   20  

  Large installations 

Technology   Scale    Proposed tariff (pence/kWh) (2)  Deemed or metered Tariff lifetime (years)
Solid biomass (4)   500 kW and above 1.6-2.5 Metered 15
Groundsource heat pumps (8)(9)  350 kW and above 1.5 Metered   20