The scheme’s fund has been increased from £15M to £25M and also allows the introduction of social housing schemes. Eligibility for RHPP for domestic is fairly straightforward, although there are additional measures for heat pumps (monitoring will be installed at EST’s expense and heat pumps installed where gas ins available are not eligible).

It seems that DECC is buying time to see how the new MCS standards for heat pumps affect the quality and performance of installations…..the inclusion of metering will provide some hard and fast data and enable DECC to reward effective CO2 savings. It’s also worth pointing out that so far DECC are still wrestling with the problem of how to cost effectively police domestic installs…..unlike PV where surplus power can be exported, DECC dont want to reward people who use their renewable heat inefficiently.

• PV installed between 12th December 2011 and 3rd March 2012 will receive FITs at the higher rate (43p/kWh for domestic sub 4kWp installs)
• there’s clarity for ongoing PV installs. No one’s appealing any more decisions, so from 3rd march onwards, the new 21p rate applies.

PhotoVoltaic Modules <4kW new build       0.21
PhotoVoltaic Modules <4kW retrofit            0.21
PhotoVoltaic Modules 4-10kW                        0.168
PhotoVoltaic Modules 10-50kW                     0.152
PhotoVoltaic Modules 50-100kW                  0.129
PhotoVoltaic Modules 100-150kW                0.129
PhotoVoltaic Modules 150-250kW                0.129
PhotoVoltaic Modules 250kW-5MW             0.085
PhotoVoltaic Modules stand-alone               0.085

Because module and inverter prices have fallen though over the last 12months or so, the new FIT rate makes the payback the same as it was at the introduction of the Feed In Tariff.

Some interesting stats too:

• Commercial installations account for less than 2%
• By November 2011, installations were proceeding at about 14,000 per month compared to 400 in it’s first month.

Read the full report here

Mark

• If you registered for FITs before Dec 12th 2011 then you will have the higher rate…..
• If you register after for FITs after March 3rd 2012 you will get the lower rate… see Chris Huhne’s statement here
• If you register after April 2012, you’ll get the lower rate….

What no one is sure of is what the rate will be for installations between Dec12th 2011 and March 3rd 2012.

The 21p rate is very workable, it offers good rates of return particularly with falling module prices but what what we all really want is certainty and confidence.

Mark

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

For many in the green economy, it’s not a happy read, particularly those focussed on the domestic retrofit sector.

Government are proposing to reduce FIT rates to the following levels from 12 December 2011. Please note, that these are still proposals and subject to consultation……which is not me wishful thinking that they might change their minds, but more an urging of caution to attach a caveat that these proposed rates may be different when the consultation is finished.

What does this mean? All the confusion does appear to knock confidence and there are undoubtedly many projects that will be affected in the building services sector, particularly those projects that have focussed on the financial benefits of installing PV. For many though, this interest in PV came about because of a need to reduce CO2 for compliance reasons (BREEAM, PartL, SAP, CfSH etc). This CO2 reduction requirement will still exist and PV remains a very effective way of achieving this. PV is stand alone, discreet, requires little annual servicing and performs irrespective of building occupation levels; those proposing PV should now re-emphasise these engineering and building services benefits.

If PV is a solution that you have considered, then the financial benefits will have diminished (payback time seems to have increased by about 50% on the schemes i have reviewed so far) but there remain sound engineering reasons for that choice and weighed against the cost of missing a CO2 target, then PV is still very cost effective.

All in all…..these proposed tariff rates will hit you:

• if financial return was the sole justification for your project…..we should talk –  can you get your project signed off in the next week?
• if you run a domestic retrofit PV business / “PV for free” business

for everyone else, this news brings the UK’s PV market into line with Germany (Europe’s largest PV market) whilst leaving PV a very viable option for reducing CO2  that still offers a good payback.

If you’d like to discuss any projects in more detail and/or consider an alternative renewable heat solution, then please do contact me.

Mark