From the coalface……..the RHI

Amidst all the fuss about the revision in Feed in Tariffs for PV, Government released more detail on the Renewable Heat Incentive……

The final details for RHI are to be signed off at the end of Nov 2011. The hold-up was EU state aid objections to the rate for large biomass (1MW+) which is now 1.0p, down from 2.6p. Other tariffs are broadly unaffected (although GSHP and smaller biomass saw a slight rise).

• Why no air source heat pumps?

Government has thrown the findings of an EST field trial into the face of manufacturers with the instruction to get their house in order. Government needs ASHPs to work but are unwilling to support them if they actually create more CO2 than they save. ASHPs will be covered by the RHI for domestic installations from Oct 2012 AS LONG as satisfactory evidence is produced.

• None of this sounds like earth shattering news…..why all the fuss?

Maybe it’s just me…..but the news regarding ground source heat pumps is amazing. In the worked examples issued by OFGEM, the RHI is shown being paid for EVERY kWh of heat generated by a heat pump……even the units of heat that have been generated by the electrical input to the compressor. So with the rate for sub 100kW GSHP being 4.5p/kWh…..they’ve effectively increased the RHI payments for a heat pump by a third!

• Claiming RHI will be complicated and there is no guarantee of success by ticking boxes.

• RHI payments cannot be assigned like FIT payments. This means that third party finance must be raised by either a loan to the building owner or via the formation of an Energy Supply Company.

• The domestic sector will receive its good news in October 2012…..but make sure that you adopt a low risk approach if you’re proceeding now and keep COPs up and flow temps down for heat pumps.
• ASHPs will be introduced BUT running an ASHP at high temperatures WILL NOT be eligible irrespective of what the manufacturer says or implies.
• Large scale solar and biomass offer an excellent return but only if you need the heat and you have somewhere to store the plant.

and for domestic RHI…………..

What’s the story about domestic installations?

When the RHI was first trailed, it was clear that stage 1 was to be aimed at non domestic users. What wasn’t made clear was that the tariffs announced weren’t necessarily applicable to the domestic sector. Now it is clear. Sort of. Government is now saying that the stage 1 tariff levels are not necessarily the tariff levels that will be used for RHI in the domestic sector.

I needed another acronym…. so what is RHPP?

The Renewable Heat Premium Payment is meant to compensate domestic installations for the delay in the introduction of RHI. It’s also clear that just because you might get RHPP, doesn’t mean you’ll automatically get RHI…….Government is giving itself room to tighten up regs and standards between now and Autumn 2012.

……..and the Green Deal?

No matter what you hear about the Green Deal…this is what it really is in essence…….The Green Deal established the idea in law that a building occupier and/or owner can buy now and pay later for an energy efficiency measure and/or renewable. What makes the Green Deal special is two things……

• the “pay later” bit…..this comes out of a levy on the fuel bills.
• The second special thing……..this green levy is tied to the building rather than the person.

So a homeowner can elect to have insulation, a new boiler and some solar thermal…..the homeowner pays for this from a surcharge on their gas/electricity and when they move, the new occupier inherits this tariff regime. The golden rule is that the fuel saving must always be greater than the levy on the fuel bill, so the occupier must always be better off. This financial mechanism and obligation will allow banks etc to provide large scale upfront finance.

Many of you are being asked to build financial business cases for a renewable device….FITs and RHI do offer a payback but the real business case for  renewables is that it offsets the right amount of CO2 to enable building compliance and it does this in a way that’s right for the building and right for the way it’s used……. No renewable, no compliance, no building.

I have an updated RHI and FIT tariff calculator (shows the effect of tariffs, fuel inflation etc over 20/25 years) which reflect these changes (if you’ve received one from me for a heat pump, then this needs updating)….. please email me for a copy for your project.

Mark

Policy background

How the scheme will work