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Renewable Heat Incentive (RHI), DECC Announcement July 12th 2013

The recent announcement of increased financial support for domestic Ground Source Heat Pumps represents a major breakthrough for the domestic customer, providing for the first time a real incentive to invest in this technology, overcoming to a great extent, its only previous drawback i.e. the high, up front, installation cost.

A brief summary of how the scheme will work is set out below:

Tariff Levels and Payments

The tariff levels have been set at 7.3p/kWh for air source heat pumps; 12.2p/kWh for biomass boilers; 18.8p/kWh for ground source heat pumps and at least 19.2p/kWh for solar thermal. (Note – The solar thermal tariff is capped by reference to the level of support offered to offshore wind. The tariff will be at least 19.2p, and possibly up to 21.7p, depending on the decision on the appropriate level of the vfm cap following the outcome of the non-domestic tariff review consultation. The announcement on the final tariff will be made in the Autumn) Payments will be made on a quarterly basis for seven years.  The tariffs have been set at a level that reflects the expected cost of renewable heat generation over 20 years.  In most cases, payments will be made based on estimated heat demand of the property.  DECC will offer an extra set payment of £230 per year where consumers take out metering and monitoring support packages for heat pumps and £200 for biomass boilers. 

Eligible applicants

The scheme will be made available to homeowners, private and social landlords, third party owners of heating systems and people who build their own homes. Anyone who has installed a renewable heat technology since 15 July 2009 and meets the scheme eligibility criteria will be able to join the scheme.

Eligible technologies

RHI domestic will support air to water heat pumps; biomass only boilers and biomass pellet stoves with back boilers; ground and water source heat pumps; flat plate and evacuated tube solar thermal panels.

Scheme requirements

Applicants will need to complete a Green Deal Assessment before submitting their application and must ensure they have met minimum loft (250mm) and cavity wall insulation requirements, where appropriate. All installations and installers must be MCS certified (or certified by an equivalent scheme).  MCS certified installers are currently required to be members of the Renewable Energy Consumer Code, which is backed by the Trading Standards Institute.

Applications

Pre-application enquiries should be directed to ESAS on 0300 123 1234.  Once open, the RHI for householders will be administered by Ofgem and more details on how to apply will be published in due course. 

Non Domestic RHI

The Government continues to make progress towards finalising the details of the expansion of the non-domestic RHI – the first scheme of its kind in the world.  We intend to announce the final details of this and the Government response to the non-domestic Early Tariff Review consultation in the autumn and continue to aim to introduce support through these changes in the non-domestic scheme in spring 2014


Extract from DECC publication of 12 July 2013

The tariff for ground or water source heat pumps is 18.8p/kWh of renewable heat

63. Not all of the heat generated by heat pumps that run on electricity is renewable. RHI payments for heat pumps will only be made on the renewable portion of their heat output. This is the energy that comes from the ground, water or air, net of the electricity used to run. 

64. The amount of renewable heat generated by a heat pump depends on its efficiency – that is, how much electricity it uses to operate per unit of heat it generates. The technical term for heat pump efficiency averaged over a whole year is Seasonal Performance Factor (SPF) which is normally between around 2.5 and 4. The SPF relates to how much heat the system generates per unit of electricity it uses – for example, a heat pump with an SPF of 3 generates three kWhs of heat for every kWh of electricity it uses. The eligible heat for the purposes of RHI payment will be worked out using the following formula: 

Eligible heat demand = Total heat demand x (1 - 1/SPF) 

This means that if the heat pump has an SPF of 3, two-thirds of the heat output will be renewable and therefore eligible for RHI payments. 

65. For heat pumps installed after the scheme launches, the performance of the system will need to be estimated by an MCS installer. The rating will be recorded by the installer and given to the owner of the system as part of the installation process. We are working with MCS to develop how to do this. It will be based on the star rating system in a document called the Heat Emitter Guide, designed to be used when installing heat pump systems through MCS – this can be found on the MCS website: http://www.microgenerationcertification.org/images/MIS_3005_Supplementary_Information_2_-_Heat_Emitter_Guide_v2.0.pdf

66. Heat pumps installed before the launch of the scheme 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. 

Minimum efficiency 

67. Only heat pumps with an SPF of 2.5 and above are considered renewable under the EU Renewable Energy Directive10, and only those that are considered renewable will be eligible for the RHI. This will be based on the estimation of efficiency described above, where applicable. 

Worked examples Ground Source vs Air Source (for illustrative purposes only)

GROUND SOURCE

GSHP rated at 4* (see RHI Information sheet, link above) in the Heat Emitter Guide = SPF 3.7

Nominal heat pump rating 20kW. Run time per year 2,200 hours, e.g 11 hours per day for 200 days of the year

kWh are therefore 20*2,200 = 44,000

Eligible heat demand = 44,000kWh x (1-1/3.7) = 32,108kWh 

Total annual RHI payments = 32,108kWh x 18.8p/kWh = £6,036

Over the seven year period this will amount to £42,254

This equates to the installation cost of the GSHP, including the boreholes, which represent around 50% of the total!

In addition, the householder will benefit from a reduction in energy costs of around 60% when compared with oil/fossil fuel heating.

In a nutshell, the government pays for most of the installation and the householder potentially reduces heating bills by two thirds.

This sounds good, and it can be, but there are hoops to jump through and regulations to be observed. Synergy is dedicated to implementing the highest standards and ensuring that our clients are given the support needed to qualify for the subsidies described above.

AIR SOURCE

In comparison, a similar Air Source Heat Pump would have the calculation below

ASHP rated at 4* in the Heat Emitter Guide = SPF 3.0

Nominal heat pump rating 20kW. Run time per year 2,200 hours, e.g 11 hours per day for 200 days of the year

kWh are therefore 20*2,200 = 44,000

Eligible heat demand = 44,000kWh x (1-1/3.0) = 29,333kWh

Total annual RHI payments = 29,333kWh * 7.3p/kWh = £2,141

Over the seven year period this will amount to £14,989

An air source heat pump, although cheaper to install, is exposed to the elements and will therefore not last as long as a ground source heat pump.

It is also less efficient, particularly in winter when it is used the most.