RHI announcement summary

14 March 2011

The Coalition Government has released the long-awaited details of the Renewable Heat Incentive (RHI), with some major changes from the RHI proposals published by the previous government.

Key points:

• Different approaches are being taken for the domestic and non-domestic sectors and the RHI is being introduced in two phases
• RHI tariffs will be available for the non-domestic sector from sometime post-July 2011 (Phase 1)
• Details of the eligible technologies, tariff rates and tariff lifetimes for the non-domestic sector have been published
• No RHI tariffs will be available to the domestic sector until October 2012 (Phase 2)
• No details of the domestic sector tariffs have been published – a consultation document will be published on these later this year (post-May)
• From July 2011 to October 2012 one-off direct payments (called RHI Premium Payments) to subsidise the cost of qualifying renewable heat installations will be available for eligible domestic properties only
• Further details on RHI Premium Payments will be announced in May 2011
• The government will consider comments from stakeholders on the draft RHI regulations before 5 April 2011

Scheme design
The government has confirmed that, as announced in the Comprehensive Spending Review last October, the RHI will be funded with £860 million from the government budget (rather than a levy on heating bills as proposed by the previous government) over the period 2011 – 2014. The government also said that the RHI will last at least until 2020 with payments guaranteed for 20 years from entry to the scheme. Like the Feed-in Tariffs (FITs), tariff rates will be adjusted annually in line with inflation and the government intends to introduce digression in 2012. Payments will be quarterly and have to be paid to the owner of the equipment and cannot be assigned to anyone else. Formal reviews of the RHI are planned every 4 years, although the government retains the option to hold early reviews if necessary based on a number of clear to-be published criteria. The first review is scheduled to start in January 2014 and aims to make any resulting changes in legislation by April 2015. Ofgem will grant preliminary accreditation for plans submitted for installations to provide a greater degree of certainty to developers. Microgeneration Certification Scheme (MCS) certification or equivalent, such as Solar Keymark for solar thermal panels, will be required for installers and equipment for installations below 45kWth. Anyone who installed renewable heat since 15 July 2009 will qualify for RHI tariffs, provided they meet the eligibility criteria, including people who have received a RHI Premium Payment.

Scheme impact
The government is aiming for 12% of the UK’s heat demand to come from renewable sources by 2020, a major increase from the current level of 1.5%, in order to help achieve the UK’s legally binding target of 15% of its total energy coming from renewable energy. They anticipate that in 2020 the RHI will result in 11% of the UK’s heat demand coming from renewable energy sources in the non-domestic, with 1% coming from renewable energy sources in the domestic sector. The government projects that the RHI will result in £4.5 billion capital investment in the no-domestic sector by 2020, with 13,000 industrial installations and 110,000 installations in the commercial and public sectors.

Non-domestic installations
RHI tariffs will be available for non-domestic installations from sometime post-July 2011. The non-domestic sector covers industry, business and commercial, charities and not-for-profit organisations, and public sector organisations, as well as a renewable heating installation serving multiple residential dwellings, such as district heating, and residential premises that have been significantly adapted for non-residential use. Details of the eligible technologies, tariff rates and tariff lifetimes for the non-domestic sector have been published. There have been a number of changes from the proposals in the RHI consultation document published by the previous government, including the removal of Air Source Heat Pumps (ASHPs) from the list of eligible technologies and the requirement for RHI payments to be calculated on metered rather than deemed heat output. Several other technologies and/or technology scales are under consideration for inclusion from 2012 onwards, including ASHPs, direct air heating , solar thermal and large biogas above 200kWth, bioliquids and a separate tariff for deep geothermal. District heating is eligible for the RHI from the start at the rate received by the renewable energy source providing the heat – there is no uplift for district heating.

Domestic installations
Domestic installations are defined as single renewable energy heat installations serving a single domestic premises. Renewable heating installations serving multiple residential dwellings, such as district heating and residential premises that have been significantly adapted for non-residential use are both classified as non-domestic installations. No RHI tariffs will be available for domestic installations until October 2012. No details of the tariffs for domestic installations have been published yet – a consultation document will be published on these later this year (post-May). From July 2011 to October 2012 one-off direct payments (called RHI Premium Payments) to subsidise the cost of qualifying domestic renewable heat installations will be available. Further details on RHI Premium Payments will be announced in May 2011. Around £15 million from the RHI budget will be ring-fenced for these and will cover up to 25,000 installations. The eligibility criteria to qualify for these payments will include (i) a well insulated home (based on its EPC), (ii) the householder agreeing to give feedback on how the equipment performs, (iii) monitoring and (iv) a fair spread of technologies across all regions. The government says it may consider focusing these payments for primary heating systems in households off the gas grid. Likely levels of these payments are given as £300 for solar thermal, £950 for a biomass boiler and £1250 for a ground source heat pump.

Draft RHI regulations
The government has published draft RHI regulations and will consider comments from stakeholders on these before 5 April 2011. The draft regulations can be found at www.decc.gov.uk/en/content/cms/what_we_do/uk_supply/energy_mix/renewable/policy/incentive/incentive.aspx.

Links
DECC press notice
Written Ministerial Statement
RHI policy document
RHI non-domestic tariffs table
DECC’s RHI FAQs