Renewable Heat Incentive
The Renewable Heat Incentive (the RHI) is a payment system for the generation of heat from renewable energy sources introduced in the United Kingdom on 28 November 2011. The RHI replaces the Low Carbon Building Programme, which closed in 2010.
The RHI operates in a similar manner to the Feed-in Tariff system, and was introduced through the same legislation - the Energy Act 2008. In the first phase of the RHI cash payments are paid to owners who install renewable heat generation equipment in non-domestic buildings: Commercial RHI.
The RHI went live on 28 November 2011 for non domestic buildings. The Coalition Government confirmed its support for the RHI in the October 2010 Spending Review and published details on 10 March 2011. The RHI is due to be extended to domestic buildings in spring 2014 after a further series of delays. Three consultations were launched which included proposed domestic tariffs and a long discussion on eligible technologies along with changes to the Commercial RHI which include the proposed addition of Air Source Heat Pumps.
Through the RHI, generators of renewable heat for non-domestic buildings can be paid up to 10p/kWhr for hot water and up to 8.7p/kWhr for heat which they generate and use themselves. The RHI tariff depends on which renewable heat systems are used and the scale of generation. The annual subsidy lasts for 20 years for non-domestic buildings, and seven years for domestic buildings. As such, users may earn enough money from the tariffs to pay off their installation costs in five to ten years. According to the Government, which has set the tariff levels, users will earn a return of 12% per annum. This will be tax free for individuals. The equivalent for Feed-In Tariffs is 5%-8%.
The RHI provides support for community and district heating schemes where a single renewable heat system provides heat or hot water to more than one property.
Eligibility for Non Domestic RHI
The renewable heat technologies which are eligible under the Commercial RHI are solar thermal (hot water) panels, ground source heat pumps, water-source heat pumps, biomass boilers, and biomethane. See table of tariffs for the Commercial RHI.
The introduction of Domestic RHI has been delayed many times following a series of tardy consultation processes. The latest delay is from summer 2013 to spring 2014. It should be available for eligible installations commissioned from 15 July 2009 onwards. Any installation taking place between September 2011 and 31 March 2014 is eligible for the Renewable Heat Premium Payments which consisted of a small upfront payment prior to the RHI being introduced. This limited RHPP scheme has been extended up to 31 March 2014. Premium payments for heat pumps and biomass boilers are payable to households that do not have access to mains gas, but any household can apply for the solar thermal premium payment. The RHPP are as follows:
The RH Premium Payments were originally limited to just £12 million for single domestic buildings, but the time restrictions have limited uptake to £4.8 million. Uncertainties on the timing of introducing of the full Domestic RHI have led to speculation that DECC might extend the RHPP before it terminated on 31 of March 2012. In the last days of March 2012 DECC announced that there would be an extension for the RHPP in which the same sums shown above would continue to be available for domestic buildings in a scheme limited to £7 million. At the same time DECC announced that the domestic RHI would be delayed until summer 2013. Following the latest postponement of the introduction of the full Domestic RHI to spring 2014, the RHPP scheme has been extended to 31 March 2014. See table of tariffs for the Domestic RHI.
Criticism of the Domestic RHI
Although based on the Energy Act 2008, DECC has taken six years before introducing the Domestic RHI. Delays have been very damaging to the renewable energy industries – which DECC claims to be supporting.
DECC has suppressed innovations in renewable energy sectors by excluding from incentives any technologies which are not already well established.
The effect of DECC’s policies has been to encourage inefficient technologies and to suppress efficient technologies because the subsidies are based on complex and ill understood calculations of the cost of each technology in order to provide more subsidy to the more expensive technologies and lower subsidies for the less complex technologies.
The three consultations published by DECC on 20 September 2012 include a proposal to link the minimum energy efficiency requirements under the RHI to the Green Deal which was launched on 1 October 2012. This could mean that any property not meeting the minimum requirements might be able to use the Green Deal to achieve this level.