Renewable Heat Incentive (RHI)

The Renewable Heat Incentive (RHI) announced in March 2011, is aimed at encouraging people to install renewable heating technologies and is  the first financial support scheme for renewable heat in the world.

The scheme is being introduced in two phases:

In the first phase long term tariff support is focussed on the non-domestic sector (industrial, business and public sector) as it accounts for 38% of the UK's emissions.  But for the domestic sector a one off incentive has been put in place, the Renewable Heat Premium Payment (RHPP) to provide householders with financial support to install renewable heating technology.

The second phase is likely to see the scheme expanded to include additional technologies as well as long term support for house holders. DECC announced in March 2012 that proposals on Phase 2 will be consulted upon after September 2012 and that the scheme will be up and running by Summer 2013, which represents a significant slippage from the original intended start date of October 2012. To accommodate this slippage a second phase of RHPP has been put in place, effective from 2 April 2012.

Phase 1 - Non-Domestic

This phase of the scheme opened for applications on November 28,  2011 and currently only supports technologies listed within the EU Renewable Energy Directive, as listed below:

• solid biomass and solid biomass contained in municipal waste (including CHP),
• ground and water source heat pumps,
• geothermal (including CHP),
• solar thermal (at capacities of less than 200 kWth),
• biogas combustion (except from landfill gas but including CHP; at capacities of less than 200 kWth) biomethane injection.

Note: Air source heat pumps are not currently supported.

Participants also need to meet several other eligibility requirements which are explained in the Guidance document. These include demonstrating that the heat is used for an eligible purpose, that metering arrangements are appropriate, and that grants have not been received for certain purposes.

The tariffs will be paid for 20 years to eligible technologies that have been installed since 15th July 2009 with payments being made for each kWh of renewable heat which is produced. Once in the scheme the level of support an installation will receive is fixed and adjusted annually with inflation - click here to see the latest announcement from ofgem . However, as with the feed-in tariffs, it is expected that the levels of support available for new entrants to the RHI scheme will decrease over time as the costs of the equipment and installation reduce through economies of scale. £860m of funding has been allocated for the first 4 yearsof the scheme.

Tariff rates for Dimplex eligible technologies - applicable from 1 April 2012:

Ground Source Heat Pumps  

• 4.7p/kWh for systems up to 100kW
• 3.4p/kWh for systems over 100kW

Solar Thermal Systems

• 8.9p/kWh

March 2012 RHI update - DECC announcements

• RHI Phase 2 proposed to be up and running by Sumnmer 2013
• Proposals on Phase 2 (including the addition of further commercial technologies such as Air Source Heat pumps) to be consulted on from September 2012
• Proposals (for consutlation closing 23 April) for an interim budget control mechanism for RHI Phase 1

The key aspect of the budget control proposal is that:

"The RHI would be suspended until the next financial year should estimated spending - based on applications and accreditations - reach a level where the budget could be breached"

Likely introduced to avoid a repeat of the Feed-in Tariff debacle, the cost control proposal is a short-term solution as DECC plan to consult on  a longer-term flexible degression-based cost control mechanism to automatically reduce tariffs should spending against the overall budget or uptake of certain technologies exceed forecasts. As it stands the cost control measures propose:

• The terms of suspending the scheme wil lbe set out clearly in advance, including timing and use of any triggers. Accredited installations will not be affected and owners of accredited installations will continue to receive tariff payments at the same rates (adjusted for RPI)
• Applications submitted to Ofgem prior to suspension will be processed as normal

RHI budget

The table below shows the budgets allocated for each year and includes the budget for RHPP in 2011/12 and a spend of up to £25M for phase 2 (expected to be spent primarily in 2012/13 but with flexibility for some spend in 2013/14).

DECC states that the budgets are not flexible and so spending less than the allocated budget in one year does not permit that underspend to be transferred to subsequent years.

For more information regarding the RHI visit the DECC website.