Select one option

Click here to close this box

The Renewable Heat Incentive Explained

The Renewable Heat Incentive (RHI) is a government scheme to reward those producing heat from renewable energy. Labour planned it in 2010, but the Coalition Government completely revised the concept and in March 2011 set out the first details of how the scheme will work. This page explains the funding for solar water heating (also called solar thermal) from what's been announced so far. In our view it's very welcome and much needed.

The Government has committed £860 m to the RHI during this parliament, and expects it to lever investment in renewables of £4.5 billion. It will be funded from general Government spending, not through a levy on fuel bills as proposed by Labour. As well as solar water heating, it also includes support for ground-source heat pumps, biomass boilers and creating energy from waste.

Heating accounts for 47% of UK final energy consumption and 46% of UK carbon emissions. With the RHI, the Government intends that 12% of heating will come from renewable sources by 2020, saving 44 million tonnes of carbon emissions.

The scheme is modelled on the Feed in Tariffs for electricity from renewable sources. However, whereas many countries have Feed in Tariffs, the government claims the UK is the first nation in the world to introduce a similar system for renewable heat.

Key points

Solar water heating is included;
All installations commissioned after 15 July 2009 are eligible;
Payments on commercial systems to start in November 2011;
Payments on domestic systems to start from October 2012;
Payments will be made quarterly for 20 years, and adjusted each year according to the Retail Price Index;
Domestic installations will also receive Premium Payments of £300 each (from 1 August 2011) from a pot of £15 million;
Only systems put in by MCS-accredited installers, using MCS-approved panels, will be eligible.

How will it be implemented? In two phases ...

The first phase, starting in November 2011, covers the non-domestic sector – meaning industrial and commercial users, the public sector, not-for-profit organizations and communities.

The tariff for solar thermal is set at 8.5p per kWh (kilowatt-hour) generated, but this is based on 2010 prices and will be increased to reflect 2011 prices. Systems can be up to 200kW in size but anything over 45 kW will need certification other than through the Microgeneration Certification Scheme (MCS).

The heat provided must be useful, and not created just to claim the RHI. It must be used in a fully enclosed structure (presumably to exclude outdoor swimming pools). A new installation can replace an earlier one, but tthe equipment used must be new.

The heat will have to be metered and the meter calibrated and made tamper-proof, but details of how this will be achieved for solar water heating are not yet known.

Applicants will be able to apply for preliminary accreditation, i.e. submit plans before the system is installed. This would enable large users to be sure the scheme would be eligible once installed.

Phase 2

The second phase, starting in 2012, adds the domestic sector. But this sector also gets special Premium Payments in 2011, see below. Solar thermal installations (commissioned after 15 July 2009) will receive quarterly payments for 20 years. The tariffs have not yet been announced but it reasonable to assume they will be somewhere between the 8.5p for commercial schemes and the 18p in the original Labour proposal. (A typical Soltrac solar water heating system with 2 panels generates about 2000 kWh per year.)

Domestic is taken to mean "a single private residential dwelling". It excludes multiple dwellings served by one heating system, and single dwellings that have been significantly adapted for non-residential use (e.g a shop or a bed-and-breakfast).

About both phases

The first review of the scheme will start in January 2014, with a view to setting tariffs for new entrants from 2015. Tariffs are likely to be reduced for new entrants in future years (called 'degression') to allow for falls in installation cost, but once an investment has been made, the tariff is fixed and will not decline. This concept, called 'grandfathering' (see box), provides certainty for an investor by setting a guaranteed support level for projects for their lifetime in a scheme, regardless of future reviews.

The intention is that payments will only be made to the owner of the installation. Unlike FITs they cannot be assigned to others. When a property with an installation is sold, the payments would then be transfered to the new owner.

The RHI will be administed by Ofgem, who will accredit the installations and make the payments.

'Grandfathering'

"The Government is committed to the principle of 'grandfathering', where support levels for existing installations are guaranteed. The intention of grandfathering is to provide certainty to those investing in renewable heat installations about the level of support they will receive under the RHI. This means that any changes to support levels resulting from a review would only affect new projects accredited on or after the date that new tariff levels are implemented. For example, if an installation is accredited from March 2015 and the tariff level received for that technology is changed in April 2015 following a review, that installation will continue to receive the same tariff level regardless of any change made. However, an installation accredited in May 2015 would be given the new tariff level." (Extract from the Government's publication "The Renewable Heat Incentive, March 2011).

The 2011 "Renewable Heat Premium Payments"

The Government's 'Renewable Heat Premium Payment' scheme opens for applications on 1 August 2011 and will run till March 2012.

A domestic solar water heating installation commissioned after 1 August will receive a one-off grant of £300.

The Government has set aside £15m for the Scheme (but of this £3m is set aside for registered social landlords). It will be run on a first come, first served basis till the money runs out. They estimate that the scheme will support up to 25,000 installations.

This is a short-term scheme of one-off payments. From 2012, the Renewable Heat Incentive (RHI) will cover the domestic sector, providing regular payments (see our separate Factsheet on this).

Participants will be asked to provide detailed feedback to the Government on their experience through a set of surveys.

Am I eligible?

Individuals who own their own property and live in England, Wales or Scotland can apply for installations at their primary residence.

The solar water heating system must supply a permanent residential building (systems heating mobile homes, caravans, house boats are not eligible, nor are systems heating swimming pools alone).

You must have loft insulation to 250 mm and cavity wall insulation, "where these measures are practical".

The solar product installed must be listed under the Microgeneration Certification Scheme (MCS), and be installed by a company registered under that scheme; all Soltrac systems fulfill these criteria.

People who have received a Premium Payment will still be eligible for support through the RHI, providing they meet the eligibility criteria of the full RHI scheme (not yet released), as will anybody else who has installed eligible equipment since 15 July 2009.

Notes:

1. The application form refers to "Getting a minimum of three quotes from MCS certified installers", but we are assured this is a recommendation not a requirement.

2. For other forms of renewable heating, eg biomass boilers, grants will not be available for houses on the gas network.

How do I apply?

The Premium Payment scheme is run by the Energy Saving Trust (EST). Their website and information line are now live.

Go to: www.energysavingtrust.org.uk/RHPP

If you don't have access to the internet, apply by phoning their help line on 0800 512012.

Applications open on 1 August 2011. If you meet the conditions, you will receive a voucher. You then have 3 months to redeem the voucher by returning a signed version with a copy of the invoice from the installer and a certificate from the Microgeneration Certification Scheme (which we will give you). The money will then be paid into your bank account.

You will be asked to submit information about how the technology you have installed is performing in your home.

You might be selected to have some monitoring equipment installed at the same time as your technology (not at your expense!).

These grants are cash-limited. Once the £15m is committed, there will be no more vouchers!

Link to the Government's page on the RHI

Printer-friendly versions of the above text: Renewable Heat Incentive, Premium Payments.