Category Archives: RHI

RHI cost control consultation

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Alongside yesterday’s announcement from DECC of the extension for RHPP was the launch of a consultation on their proposals to introduce an interim cost control mechanism for the RHI budget, pending the setting up of a more structured measure in the future.

This proposes to simply suspend the scheme should the current year budget be spent and represents a return to the style of operation that destroyed the Low Carbon Building Programme (LCBP) grant funding mechanism that the RHI and FiTs was designed to replace. One of the options under consideration is for the scheme to be closed down with no notice period at all.

Can DECC really be serious about this? Just check that April 1st hasn’t come early.

But just maybe it isn’t anything to really worry about. If you look at the budget versus actual figures so far (included in the consultation document) then the RHI is not proving to be attractive in the non-domestic sector.

Financial year     Budget (£m)
2011/12            56
2012/13            133
2013/14            251
2014/15            424
Total              864

This includes the £15 million allocated to RHPP in the present year and the announced £25 million for the coming year. The actual spend in the current year is less than £5 million representing a total underspend of £51 million and DECC are predicting a total spend in the coming year of only £55 million against the budgeted £133 million – another underspend of some £78 million.

The only problem here is that if a budget is underspent in any financial year then that money disappears and is lost from the RHI budget as there is no carry-forward of unspent cash.

So in its first two years the RHI will have underspent a total of £129 million. Not exactly a major success story and if this was to continue then the budget control mechanism would never actually be used.

DECC stumble on with RHI

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DECC today announced an extension of the Renewable Heat Premium Payment (RHPP) scheme for domestic heating. With the first phase scheduled to end on 31st March and the full RHI not expected to start until October, there has been widespread concern over what would happen to cover the interim period.

Less than £5million of the originally budgeted £15million for RHPP has been spent to date.

Alongside this DECC will also put in place control measures to contain the potential total costs of the RHI. Although, with the poor take-up so far at the non-domestic level, it remains to be seen just how necessary this will be.

Greg Barker said: “Looking at the scheme’s current spending it’s unlikely we will need to use these short-term measures, however Ofgem will hold a series of conferences for potential applicants over the next few months so it is right for us to be cautious and have the ability to act should we need to.”.

FiTs, RHI, ECA, AIA and FYA

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HM Treasury have published the final proposed Finance Bill 2012 changes that will affect businesses who wish to make use of the First Year Allowances (FYA) of Enhanced Capital Allowances (ECA) and Annual Investment Allowances (AIA) in relation to plant and machinery that can also benefit from Feed-in Tariff (FiT) and Renewable Heat Incentive (RHI) subsidies.

A short explanation of the changes is: you can’t have both a tariff income, from either FiTs or RHI, and also claim a FYA write-down for the same plant.

The relevant section starts on page 480 of this document: Finance Bill 2012 – draft clauses and explanatory notes

RHPP – more clarity

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Here are some more answers from EST to clear up a couple of follow-up questions:

1. Is this only available to houses not connected to the gas grid (I know solar is excepted). There is some ambiguity of wording where “gas used as main fuel” is mentioned. What happens where gas is only a backup fuel (gas fire in lounge) and where oil is used for central heating?

You can still claim RHPP. As mains gas is not the primary heating fuel they will be displacing.

2. Does RHPP apply to existing houses or can it apply to new build as well?

Only householders occupying a house can apply for a voucher. So, for example where a householder applies for a voucher in respect of a main heating system in their newly completed house, or in the case of individual self-build at point of completion, this is eligible. However, neither householders applying in relation to an offplan development, nor installers or building developers in any case are in a position to apply – they would not be eligible.

3. Can owners who have installed systems since 15th July 2009 apply for vouchers, or does that date only apply to the RHI proper? What is the earliest start date for a RHPP eligible installation?

Installations made from 21st July 2011, but before the application for the voucher will be eligible. However, if you as a householder do commission or carry out an installation before receiving a voucher, it is at your own risk; and we can give no guarantee that you will receive a voucher. The Government or Energy Saving Trust will not be liable for any costs in relation to decisions you have taken on this basis. You may find as a result that you have committed to paying the full cost of the installation yourself. We would in general recommend not entering into any binding contractual commitment or otherwise pay out any money (including any deposit) for a renewable heating system before receiving a voucher.

EST FAQ clarifies some RHPP issues

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The Energy Saving Trust have published a RHPP FAQ document that may clear up some of the doubts surrounding certain aspects of the Renewable Heat Premium Payment scheme and how the eligibility rules would be applied.

1. Only air to water heat pumps are eligible. Air to air heat pumps are not.
2. A household that is connected to the gas main can apply but only if gas is not currently used as the fuel for their heating.
3. The dwelling must be the primary residence of the applicant – holiday home owners (and MPs) need not apply.
4. The residence must be a permanent building – boats, caravans, mobile homes and swimming pools are not included.
5. A minimum 250mm loft insulation should already be in place, and cavity wall insulation ‘where practicable’.
6. Only installations that have been carried out since the scheme announcement on 21st July 2011 will be eligible. But EST say that they cannot guarantee a voucher for anyone who installs before applying.

Renewable Heat Premium Payments details announced

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DECC have published a factsheet covering the terms of the Renewable Heat Premium Payment (RHPP) that serves as an interim measure to incentivise take up of renewable heat systems until the full Renewable Heat Incentive (RHI) comes in to force for domestic properties.

Of special note is confirmation of the earlier rumour that RHPP (and possibly therefore also applies to the full RHI) payments are only going to be made available to properties that are not connected to the gas grid. Solar thermal is an exception to this.

The scheme is limited to £12 million and is being administered by the Energy Saving Trust on a first-come first-served basis.

Payments will be:
– solar thermal £300
– biomass boiler £950
– air source heat pump £850
– ground source heat pump £1250

At these rates the £12 million budget will only fund around 15,000 properties:
4000 x £300
4000 x £950
4000 x £850
3000 x £1250

totals £12.15 million.

[update]
DECC press release now says that £15 million is available “to support up to 25,000 installations” but with a review once £10 million has been reached.

It also looks like early adopters get disadvantaged again as the RHPP will only apply to systems that are to be installed from today onwards. The full RHI was always supposed to be available to systems installed on or after 15th July 2009. I’m waiting for the EST to confirm this – calls to their Helpline 0800 512 012 are not being answered at present as they are probably inundated.

DECC announce RHI details

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DECC announced the details of the Renewable Heat Incentive around 10:15 this morning. The main features are:

RHI will be introduced in two phases.

Phase 1.

RHI initially targeted at the non-domestic sector.

Non-domestic
Support for a range of technologies and fuel uses including:
– solid and gaseous biomass,
– solar thermal,
– ground and water source heat-pumps,
– on-site biogas,
– deep geothermal,
– energy from waste
– injection of biomethane into the grid;

Note – no ASHP initially – but this may be added from 2012

Only new equipment will be eligible, conversion of existing plant will not. Considered for the future.

• Support for all non-domestic sectors including:
industrial and the commercial sector;
the public sector;
not-for-profit organisations;
communities;

• RHI payments to be claimed by, and paid to, the owner of the heat installation or the producer of biomethane;

• Payments will be made quarterly over a 20 year period;

• For plants up to and including 45kWth both installers and equipment to be certified under MCS (or equivalent)

• Tariff levels have been calculated to bridge the financial gap between the cost of conventional and renewable heat systems, with additional compensation for certain technologies for an element of the non-financial cost;

• Heat output to be metered and the support calculated from the amount of eligible heat, multiplied by the tariff level;

• Biomass installations of 1 MWth capacity and above will be required to report quarterly on the sustainability of their biomass feedstock for combustion and where they are used to produce biogas;

• Eligible non-domestic installations completed on or after 15th July 2009, but before the start of the RHI, will be eligible for support as if they had been installed on the date of its introduction;

• The Gas and Electricity Market Authority (Ofgem) will administer the RHI including:
dealing with applications; accrediting installations; making incentive payments to recipients;
and monitoring compliance with the rules and conditions of the scheme;

• The RHI will be funded from general Government spending, not through the previously proposed RHI levy.

All systems up to 45kWth must be MCS to be eligible. All eligible systems installed since 15th July 2009 can claim RHI.

No allowance for grants and RHI payments. Anyone who has received a grant for systems since 15th July 2009 must repay it in order to qualify for RHI. Anyone who accepts a grant after the RHI regulations come into force will be excluded from RHI.

Domestic
Will also introduce Renewable Heat Premium Payments (RHPP) for the domestic sector supported by a ring-fenced £15 million fund (to be spread across 25,000 households = average £600 per household)

“These direct payments will subsidise the cost of installing qualifying renewable heating systems. In return for the payments, participants will be asked to provide some feedback on how the equipment works in practice and suppliers will be asked to provide a follow up service on any issues that are raised. This will boost confidence in the technology and the information we receive will help enable Government, manufacturers, installers and consumers to better understand how to maximise performance of the various technologies. The Renewable Heat Premium Payments will support a spread of technologies across all regions of Great Britain and will cover households using gas and other fossil fuels. We may consider focusing support for primary heating systems, such as heat pumps and biomass boilers, on households off the gas grid, where fossil fuels like heating oil are both more expensive and have a higher carbon content. We aim to launch the Renewable Heat Premium Payments in July 2011 and will announce further details in May 2011.”

Phase 2.

Full support for the domestic sector – to be introduced in 2012 to link in with the launch of Green Deal.

Domestic users from Phase 1 (under the RHPP) will get access to the long term tariffs once these are launched.

“we will also consider introducing support for a number of other technologies and fuels which are not supported from the outset.”

The RHI will be open to new installs up to 2020. Scheduled review in 2014 and every 4 years.

No tariffs for domestic owners have been announced – these will be published later.

DECC press release
Full RHI details
Non-domestic tariffs