INCENTIVES

Solar Thermal - Renewable Heat Incentive (RHI)

To meet the 2020 15% renewable energy target, we need to develop new ways of generating renewable energy in all sectors, including heat. Heat generated from renewable sources accounts for approximately 1% of total heat demand – this may need to rise to 12% to hit our binding EU targets.

In April 2011, the Government funded Renewable Heat Incentive (RHI) will offer further financial support for a range of technologies, including air- and ground-source heat pumps, biomass boilers, solar-thermal water heaters and combined heat and power (CHP) plants which use renewable fuels.

The Government aims to make the RHI as accessible, flexible and user-friendly as possible to potential investors in renewable heat at all scales.

It is envisaged that you will earn a fixed income for every kilowatt hour (kWh) of heat you produce. Solar thermal is expected to receive the following tariff:

• Up to a 45 kW system will attract an RHI of 18 pence per kWh for 20 years*
• 45 kW to 500 kW will attract an RHI of 17 pence per kWh for 20 years*

NOTE: It is pretty pointless putting in a renewable heat system without addressing the property's general energy efficiency first. The RHI payments are based on the heat requirements of a well insulated property. So, it pays to make sure that your property is energy efficient. The 'deeming' approach to measuring heat will be based on calculations which assume a basic minimum level of energy efficiency. For domestic houses, the present consultation proposes that this should be at least 125mm of loft insulation and cavity wall filled where appropriate.

What is the Renewable Heat Incentive?
The RHI is a Government scheme which makes payments for every kilowatt hour (kWh) of renewable heat you produce. The level of the payment (the 'tariff') is laid down by the Government and will be different for different renewable energy sources. It's an innovative approach similar to the Feed-in Tariffs (FiT’s) for electricity. The RHI also pays a tariff for biogas fed into the gas grid.

What is renewable heat?
It is heat produced from a sustainable source such as solar, biomass or heat pumps. Heat from fossil fuels like gas, oil and coal is not renewable.

Do I have to pay tax on my Tariff income?
It was announced in the Pre-Budget Report 2009 that the income from the tariffs will be free of income tax for householders who install systems primarily for their own use.

Does the RHI only apply to heat?
The RHI applies both to heat from low carbon sources and to biomethane fed into the gas grid. A similar measure is also being introduced in April 2010 to cover renewable electricity. This will be called the Feed-in Tariffs.

Are there any restrictions to the RHI?
The main criteria are the type of renewable energy, and installation date. Both the equipment and the installer must be MCS accredited to qualify for you to qualify for the RHI.

When does the RHI start? Will my system qualify?
The RHI is due to come into force in April 2011. All eligible systems installed from then on will certainly qualify. Many systems installed before then (but after 15th July2009) should also qualify (but the payments won’t start until the tariffs come into force, and won’t be retrospective).

Does the RHI apply to all forms of renewable heat?
As follows:

• Solar thermal heat and hot water
• Air source heat pumps
• Anaerobic digestion to produce biogas for heat production
• Biomass heat generation and CHP
• Ground source heat pumps
• Liquid biofuels (but only when replacing oil-fired heating systems)
• Biogas injection into the grid

The RHI will also pay a tariff for feeding biomethane from anaerobic digestion back into the natural gas grid.

How Can I benefit?
You would benefit in three ways:

You would slash the cost of your current energy bill: For virtually every single property in the UK, heat is generated at source - i.e. in the property itself, using a gas or oil boiler for example. This results in often quite hefty energy bills for your gas, oil or electricity if you use electric heaters. By installing renewable technology, you will get paid for the heat you generate. You may still have other costs (e.g. electricity to power a heat pump or wood chip/pellets for a biomass boiler) but the RHI has been structured so that these will either be far less than or roughly the same as the payments you receive. So rather than forking out for your gas or oil and dreading those cold winter months, you will actually be financially better off with the average home expected to make a net profit of £600!

You won't be affected by fuel price changes as badly: The price of oil and gas in particular has fluctuated quite a lot in recent years. By having a renewable heat system that does not use either oil or gas, such as solar thermal, you won't be affected by such changes.

You would be making a difference to the environment: 99% of all the heat you currently generate comes from oil, gas fuel or electricity power stations. This means that a woeful 1% comes from renewable sources. Through the RHI, the aim is to get 12% of the UK's energy generated from renewable sources by 2020.

How long are the tariffs paid for?
They last between 10 and 23 years with considerable variations between systems. Solar thermal systems will receive a 20 year payback.

Is the Tariff fixed for this whole period?
Yes - once you start at a given tariff, it is guaranteed for the full period, and will compensate for inflation.

Can the tariff levels change in the future?
The tariffs are fixed when your system is registered on the scheme, and are then guaranteed.

Aren't the Tariffs expected to go down in future years?
Not once you have had your system registered on the scheme. The tariff level is set from the date the system is installed and is then adjusted only for inflation (i.e. generally upwards). There is a separate mechanism, called 'degression', which the Feed-In Tariffs use to change the level for people who install their systems in later years. The government has yet to decide if it will use something similar in the RHI.

0% interest instalment payment program available from Urban Energy for domestic solar thermal installations.