Detailed proposals for the governments Renewable Heat Incentive (RHI) have emerged, after a long delay. Heating accounts for 47% of total UK final energy consumption and 46% of carbon emissions, so it’s not a marginal issue. The RHI cover biomass, ground source and water source heat pumps, solar thermal and bio-methane, and participants will receive quarterly payments for 20 years from the date they enter the scheme.
It will be introduced in two phases. The first phase is expected to start after the regulations have been processed by Parliament in July. It will offer long-term tariff support for non-domestic projects, i.e. for the big heat users – the industrial, business and public sector – which contribute 38% of the UK’s carbon emissions. But under this phase there will also be grant support of around £15m for households through an interim ‘Renewable Heat Premium Payment,’ for ‘well-developed’ projects, essentially as a ‘test drive’ for the more diffuse domestic sector.
The second phase of the scheme will see households also able to apply for long-term tariff support, this transition being timed to align with the ‘Green Deal’ loan system, which is intended to be introduced in October 2012.
Unlike the feed-in tariffs for renewable forms of electricity, which are paid for through higher energy bills, the renewable heat incentive will be paid for from taxes – in all, £860m government funding has been allocated. The proposed tariffs (still subject to consultation) range from 1.9 pence / kWh for small biomass projects, to 8.5p/kWh for solar thermal, but these prices will be degressed’ (i.e. reduced) in stages over time to match the development of the market and avoid a boom-and-bust situation. Details of that are promised soon.
The RHI only meets the extra costs above that for installing conventional systems, not the total costs. Even so, it should yield a rate of return on outlay of about 12%. So it could be quite popular- if participants have the upfront capital available. However, DECC says that ‘We do not intend to allow agents, such as installers, suppliers or other third parties, to apply for support from the scheme on an applicant’s behalf.’ So you are on your own!
And there are some other limits. DECC says ‘by domestic installations, we mean installations where a renewable heating installation serves a single private residential dwelling only. This does not include multiple residential dwellings served by one renewable heating installation (e.g. district heating) nor residential dwellings which have been significantly adapted for non-residential use’.
Rural areas won’t get special treatment, despite DECC accepting that ‘a higher proportion of rural than urban areas tend to lack access to the gas grid and organisations not connected to the gas grid, for example small rural businesses, tend to have higher heating costs due the use of more expensive fuels’. It simply says that ‘those off the gas grid will have the potential to benefit most from the RHI’ and ‘those in rural off-gas grid areas may have better access to biomass in particular and not face the same installation and biomass fuel supply barriers as those in urban areas.’
The RHI will operate via Ofgem, who will provide accreditation and will carry out equipment inspections. In that context there some interesting technical conditions/requirements e.g. heat pumps must have a COP of 2.9 or above (but air sourced units will not be supported initially) and biomass sources must meet eco-eligibility criteria. As a condition of receiving support, participants will also be required to maintain their equipment to ensure it is working effectively: Ofgem may check this periodically.
All biomass, ground and water source heat pumps and solar thermal plants of 45kWth capacity or less will need to be certified under the Microgeneration Certification Scheme (MCS) or equivalent schemes. The MSC , not too popular in some circles. will be upgraded.
The RHI will only support ‘useful heat’, with Ofgem determining eligibility according to RHI regulations. In outline, acceptable heat uses are said to be ‘space, water and process heating where the heat is used in fully enclosed structures’. The heat must be supplied to meet an ‘economically justifiable heating requirement i.e. a heat load that would otherwise be met by an alternative form of heating e.g. a gas boiler’. This should be an ‘existing or new heating requirement i.e. not created artificially, purely to claim the RHI’. The only exception is for bio-methane injection into the gas grid, with no specifications on how it is then used
Heat used for cooling counts towards the renewables targets under the EU Renewable Energy Directive and therefore, provided it meets all other eligibility criteria, it will be eligible for RHI support, but not passive solar or exhaust air heat pumps.
Renewable heating systems that replace an existing renewable heating system will be eligible for the RHI support, despite the risk that some people may therefore scrap old but viable systems to get the RHI. More commonly, renewable heating capacity is likely to be expanded, and the extensions are eligible for the RHI up to the (joint old/new) total capacity threshold.
And finally, the RHI is not intended as a mechanism to support ‘innovative technologies in development or early deployment’- but happily, deep geothermal is allowed.
The delay until Oct 2012 for the domestic sector scheme raised some eyebrows and some saw the solar tariffs as too low, but otherwise the RHI was generally welcomed.
It could involve some quite big schemes. Public sector and not-for-profit organisations, such as schools, hospitals and charities, can use the RHI, and DECC says ‘the support provided by the RHI will also enable communities to come together to find local solutions tailored to local energy needs. The opportunities are many, from setting up anaerobic digestion plants using local waste to establishing community- owned biomass co-operatives sourcing fuel from sustainable local woodlands’
It adds ‘In some situations, district and community renewable heating, whether as a central boiler for an apartment building, or as a network of pipes delivering heat from a central installation to a number of local households or businesses, can be a cost-effective alternative to installing individual heating systems in properties. By supporting this sort of application, the RHI will encourage investment and give developers confidence to install centralised plant’.
So we could be seeing some local district heating networks like those elsewhere in Europe, powered using renewable sources. But the RHI won’t pay for the pipes!