Rhi – Renewable Heat Incentive

Steve Lucas from Paul Robinson Partnership (UK) LLP

The Government opened non-domestic applications for the RHI scheme in November 2011 and look set follow-up with domestic applications later this year, coinciding with the launch of the Green Deal.

So what is the Renewable Heat Incentive?
To meet EU targets for Carbon reductions the government introduced the National Renewable Energy Plan, aimed at meeting a 15% renewable energy target for all energy supply by 2020, this includes electricity, heating and transport needs.

Around 80% of domestic energy use can be attributed to water and space heating, this equate to 44% of the total UK energy demand across all sectors.

The RHI has been introduced to encourage the use of renewable technologies for the production of water and space heating, enabling users to benefit from tariff payments to help reduce paybacks, which previously had been considered a major obstacle in utilising such technologies due to high capital investment.

The scheme effectively pays for heat generated via renewable sources, and one of the major hurdles to overcome in the setting up RHI’s was to eliminate the misuse of the scheme; for example: running the heating constantly and opening windows to then burn more fuel and thus receive more payment!

To overcome such anomalies a system should meet all the requirements set out by the scheme and be eligible for inclusion; applications will be assessed and administered by Ofgem, more information can be found at their website: ofgem E-Serve website

What comprises an eligible system?

Eligible loads:

  • Must be a building, defined as enclosed and long lasting, includes glass houses
  • Applies to water and space heating
  • Includes process heating, i.e. heat generated for a production purposes
  • Systems first commissioned on or after 15th July 2009

Non eligible loads:

  • External distribution losses, i.e. piped supply between external plant and supplied building
  • Heat used for generating electricity
  • Underground heating of external surfaces, i.e. heated football pitches
  • Temporary structures, such as polytunnels

An eligible load must also be measurable with the aid of approved and compliant meters to Class 2 accuracy.

Equipment and plant of 45kW or less must be MCS (Micro Generation Scheme) certified and installed by MCS approved installers to qualify for RHI’s, larger plant will be assessed by Ofgem for eligibility.

Which technologies are currently supported by the RHI?

Biomass boilers

Biomass boilers generate heat through burning organic matter, primarily wood. The heat is usually used to produce hot water or steam, the latter being more suitable for industrial applications. The wood, derived directly from forestry or as a forestry by-product is commonly supplied in the form of wood chips, logs or pellets.

Energy from waste combustion (the biomass proportion of municipal waste)

“More than half of the rubbish households throw away is organic, renewable matter, such as food or paper products. Although it is usually better from an environmental perspective to reuse, recycle or produce biogas from these materials, this is not always possible and combustion can offer a better option than disposal to landfill, which generates harmful greenhouse gas emissions. Due to its renewable biomass proportion, currently around half the heat produced by burning municipal waste is renewable heat.”

Heat pumps (ground, water source)

Heat pumps are electrically (or occasionally gas) driven heat exchangers that extract renewable solar heat from the air, ground or water. The heat pump extracts low level heat from outside and upgrades the temperature so that it is warm enough to heat space and water inside the building.

Deep geothermal

Geothermal systems use energy stored in the form of heat deep underground. Normally this heat has to be extracted from several hundred metres below the surface. Hot water or steam is produced by extracting the underground heat using pipes carrying water. Geothermal systems are large scale and can have a variety of heat uses, including district heating.

Solar thermal

Solar thermal technologies collect heat from the sun onto a collector which transfers the heat energy to a working liquid. This liquid can then be used directly to provide hot water within a building, or an exchanger can transfer the heat from the working liquid to the water.

Biogas Combustion

Biogas is gas produced from renewable materials such as food waste, commercial waste, farm waste or sewage, most commonly through the anaerobic digestion of those materials. For the purpose of heat generation, biogas can be burned and used to create heat directly or to boil water and produce steam.

To date there is no facility to include Air Source heat pumps; however that is not to say this form of technology will not be included in the future as further research is ongoing to determine methods of metering and data collection.

What are the tariffs and how are they claimed?

The tariffs are set dependant on the heat output and technology used and an eligible system will provide a return, indexed link to RPI, for 20 years. Typically one can expect a capital expenditure paypack on most systems within 8-10 years, which means up to 10 years of income stream to follow, which would typically cover fuel costs.

As a method of dissuading fraudulent misuse, biomass boilers are split into two tiers of tariff, the first tier providing a higher tariff for the first 1314 peak load hours, a lower tariff being set for the remainder.
The owner of the plant is the recipient of the RHI scheme and will be required to make quarterly meter readings to Ofgem who will then administer the whole process. Ofgem retain the right to carry out inspections of plant.

The following link below will display current tariff information:

Table of tariffs

A typical case study for a non-domestic installation:

  • A 38kW biomass boiler, delivering 95,103kW/h
  • Consuming 23 tonnes of pellet fuel, at £170 per tonne, equating to £3910 per year
  • Comparison cost of oil would be 7,800 litres at £0.64 per litre, equating to £4,992 per year
  • Installation cost: £60,000
  • Tier 1 return:

                    o Installed capacity x 1314 peak load hours
                    o 38 x 1314 = 49,932kW/h
                    o Rate x 49,932
                    o 0.079 x 49,932 = £3,944.63

  • Tier 2 return:

                    o Rate x Remaining kW/h
                    o 0.002 x 45,171 = £903.42

  • Total tariff returns: £4,848.05
  • Annual fuel saving: £1,082
  • Total annual return: £5,930.05
  • Capital investment payback: ~ 10 years
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