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DECC sets out final policy on the domestic Renewable Heat Incentive (RHI)

Friday 12th July 2013

How does the scheme work?
Eligible recipients of RHI payments will receive payments at a set rate per unit of renewable heat generated (kilowatt hour or kWh) for seven years. The set rate is based on the technology installed.

Who is eligible?
The domestic RHI scheme provides financial support for an eligible renewable heating system that heats a single domestic property in Great Britain. Payments are made to the owner of the heating system and the property can be on or off the gas grid.

The following groups will be able to apply:

Owner-occupiers¹; Private landlords; Registered Providers of Social Housing; Self-builders²; Third-party owners of a heating system; and those in these groups who installed an eligible system after 15th July 2009 (legacy applicants)³

¹ Applications can also be made for a second home but metering equipment will need to be installed
² Self-builders building the home for their own use either on their own or working with a builder
³ Installation only required to meet MCS standards that applied at time of installation

Which technologies are eligible and what are the tariffs? 

  • Air to water heat pumps¹ 7.3p kWh 
  • Ground (and water) source heat pumps¹ 18.8p kWh (cooling not eligible) 
  • Biomass-only boilers and biomass pellet stoves with back boilers² 12.2p kWh 
  • Flat plate and evacuated tube solar thermal panels³ 19.2p kWh

¹ RHI calculated on renewable heat only and based on heat pump's Seasonal Performance Factor (SPF), normally between 2.5 and 4. Eligible heat demand = Total heat demand x (1 - 1/SPF). EXAMPLE: Heat pump has SPF of 3, two-thirds of total heat output will be renewable and therefore eligible. Heat pumps installed before the scheme launch will be given a default SPF of 2.5. Applicants can arrange a full assessment by an MCS installer to demonstrate a higher rating if they wish.
² There are air quality and fuel sustainability requirements for biomass installations.
³ RHI payments on solar thermal's deemed contribution to hot water only. Where solar thermal installed with heat pump or biomass boiler, two RHI claims can be made.

The installation must be certified under the MCS or equivalent scheme at the time of installation and installed by an installer certified under MCS or equivalent scheme. An online list of eligible products is being developed and will be accessible to applicants and installers.

What other requirements are there?
Before applying for RHI, all applicants, including legacy applicants, will need to ensure:

  1. a. A Green Deal Assessment (GDA) has been carried out to find out which energy efficiency measures are cost-effective for the property 
  2. b. Loft insulation (to 250mm) and cavity wall insulation have been installed where these measures are recommended by the GDA
  3. c. Where the GDA shows the required loft and cavity wall insulation is yet to be installed, an updated Energy Performance Certificate (EPC) is obtained following installation as proof of installation (or valid evidence is provided proving why installation was not feasible)

The exception is for self-builders, however they will need an EPC in order for Ofgem to calculate their payments.

Applicants will also need to agree to their installation being 'meter-ready' so that if their installation is selected as part of DECC's monitoring of the scheme then this can be achieved more easily.

Legacy applicants will need to confirm that their system is operating correctly as part of the application process. If accredited on to the scheme they will need to confirm annually that their system is being maintained according to the manufacturer's instructions.

How are RHI payments calculated?
The RHI support will be paid on each kWh of renewable heat the installation generates, for seven years. A 'deeming' calculation¹ that estimates the property's expected annual heat usage will be used to work out how much heat is generated. Multiplying the deemed figure by the technology's tariff rate will determine the annual payments.
¹ for biomass and heat pumps: after installation of required energy efficiency measures. Where measures already installed, figure taken from EPC done as part of GDA. Self-builders: taken from property completion EPC.

EXAMPLE:

1.  Ground source heat pump installed in a medium / large 3-4 bedroom existing home.

Total annual heat demand:    32,000 kWh

Heat Pump Seasonal Performance Factor (SPF):   

3.5

GSHP tariff:  18.8p/kWh of renewable heat

Eligible heat  demand =

Total heat demand x (1-1/SPF) so…  

30,000 x (1-1/3.5) = 32,000 x 0.715 = 22,800 kWh/year  

 Anticipated annual RHI payable =

Total RHI payable over 7 years =

22,800 kWh/year x 18.8p/kWh = £4,286.40

£30,005¹


¹ This doesn't account for changes in the RPI

See more examples here.

The deeming figure for solar thermal will be the estimated contribution by the solar thermal to the property's hot water demand that is calculated as part of the MCS process.

For biomass and heat pumps, the payments will be based on metered renewable heat usage rather than deemed usage in two situations:

  1. a.Where the renewable heating system is installed alongside another fossil fuel or renewable space heating system (includes hybrid systems)
  2. b. Second homes

 

Payments will be capped at the level of the estimated renewable heat use from the deeming calculation.

How are RHI payments received?
RHI payments are made to participants quarterly in arrears for seven years. Tariffs will change annually in line with the Retail Price Index (RPI).
Where applicant has previously received public funding for the heating system e.g. RHPP, this must be declared on the application. This amount will be deducted from the RHI payments.

How will the RHI scheme be implemented?
The government intends that the RHI scheme will open for applications in Spring 2014. The policy is subject to State Aid and Parliamentary approval. Ofgem will be responsible for administering the scheme.

All participants will be required to confirm their ongoing eligibility by completing an annual declaration confirming:

  1. a. The system is still in use and meets the requirements of the scheme
  2. b. The system is in working order and being maintained in line with manufacturer's instructions
  3. c. The current recipient is still entitled to the payments in relation to this system

 

Where can I get further information?
Information on the scheme's requirements is available on DECC's website: www.gov.uk/decc Anyone interested in applying can contact the Energy Saving Advice Service (ESAS) in England and Wales on 0300 123 1234 and Home Energy Scotland in Scotland on 0808 808 2282. Ofgem will publish detailed guidance on how to apply before the launch of the scheme and this will be available on their website ofgem.gov.uk

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