Dependent as we are on fossil fuels to power our homes, streets and businesses, they are a finite resource. It’s therefore been a strategy over the last few years for the government to incentivise domestic home owners and businesses to find alternative sources of energy to depend upon.
The Renewable Heat Incentive (RHI) goes some way to helping us cut the dependency ties with fossil fuels. This is a scheme that makes payments back to you based on the output of your renewable heat system.
What is the Renewable Heat Incentive (RHI)?
There are two RHI incentives available: one for residential homes and another for the non-domestic sector (industrial, commercial, public sector and not-for-profit organisations). The overall goal for the RHI scheme is to help the UK achieve its target of generating 12% of renewable heat by 2020.
For those in the non-domestic sector, the RHI acts as a subsidy. Should your UK-based organisation fulfil the criteria of becoming a non-domestic renewable heat generator or producer of biomethane for injection, then the subsidy payments will be made to you over a 20-year period.
For more information on the detail behind the scheme’s criteria and how to meet the requirements to receive payments, see our website information page here.
What Type of Renewable Heating Can You Claim For?
Within the scope of the Renewable Heat Incentive scheme, there are several different types of heating that you can claim for:
- heat pumps (ground source, water source and air source)
- deep geothermal
- solar thermal collectors
- biomethane and biogas
- combined heat and power (CHP) systems.
Eligible outputs of your renewable heating system include space heating, hot water, and numerous commercial, industrial and agricultural processes.
How are Payments Received?
Implemented and administered by Ofgem on behalf of the Department of Energy and Climate Change, once you have had a renewable heat system installed and accredited, payments are then made once a quarter. At this stage, you will be put onto a tariff level dependent on your individual circumstances. The type of tariff level awarded is affected by the renewable heat technology you’re using, its scale and volume. A more in-depth look at payment scales can be found on Ofgem’s Non-Domestic RHI website.
Why Should You Take Advantage of the Renewable Heat Incentive?
The RHI is aimed at everyone, both domestic and commercial. Whether the renewable heat system is just intended for a single residential home’s heating supply or used and shared across whole communities, businesses or public buildings, it’s a way of coming together to invest in a renewable, long-term scheme. Equally importantly, it’s a way not only of sharing heat usage but also of sharing the income generated.
For commercial users of the RHI, whether installing a system in an existing building or in a new-build project, the benefits can be substantial when looking to the longer term; in particular, for grid-connected energy reductions, the payments you receive for heat generated and, for larger organisations, exposure to the government’s CRC Energy Efficiency Scheme.
The RHI essentially offers a financial reward for reducing your carbon emissions over the twenty-year life of the renewable heating technology installed. The RHI tariffs have been calculated to offer a rate of return of 12% on the initial investment across the tariff bands. This impacts positively on the business case for delivering on-site renewable heat, not only in reducing your energy bills and carbon emissions, but also in delivering energy-related cash flow into your building.
Since the government’s RHI scheme for non-domestic users was first launched in November 2011, it has undergone a number of reforms. The chancellor announced reductions in the Autumn 2015 Spending Review, however March 2016 saw a consultation document published, constituting more fundamental changes to the scheme.
Following warnings from the Committee on Climate Change that more effort is required on renewable heat, it’s calculated that less than 5% of the UK’s heat is currently generated from renewable resources.
The Department of Energy & Climate Change, through this recent consultation document, is proposing to reduce RHI tariffs for biomass systems by up to 61%, resulting in an estimated drop of nearly 98% in deployment in the installation of non-domestic biomass boilers. This, along with the removal of support for solar thermal hot water heating from 2017, is intended to increase and maximise the contribution the RHI will make to the UK’s 2020 renewable heat sources target, currently in danger of not being achieved.
If you would like to find out more about how your organisation can benefit from applying for the non-domestic RHI, please talk to one of our experienced consultants on 01344 874446.