Renewable Heat Incentive – Commercial – 20 years

The RHI applies to Non-Domestic buildings from 28 November 2011. Renewable heat installations commissioned since 15 July 2009, and accredited with Ofgem after 21 January 2013, can receive a cashback subsidy, based on the metered heat used in a building, of 9.09 pence per kilowatt hour used – for the first twenty years of the equipment used.

The RHI tariff table below shows the technologies eligible for RHI and the subsidy received for each technology. The RHI provides a major incentive for owners to invest in ground source heat pumps and solar thermal renewable heat technologies. The tariffs are based on pence/kWh of renewable heat delivered. The grants vary with the technology and scale used as follows:

RHI
Commercial
over 20 years
p/kWh
from 1 Jan 2015
p/kWh
from 1 Apr 2015
p/kWh
from 1 Jul 2015
p/kWh
from 1 Oct 2015
p/kWh
from 1 Jan 2016
p/kWh
from 1 Apr 2016
p/kWh
from 1 July 2016
p/kWh
from 1 Oct 2016
p/kWh
from 1 Jan 2017
p/kWh
from 1 Apr 2017
p/kWh
from 1 July 2017
p/kWh
from 1 Oct 2017
GSHPs 8.7 8.84 8.84 8.84 8.84 8.95 8.95 8.95 8.95 9.09 9.09 9.09
ASHPs 2.5 2.54 2.54 2.54 2.54 2.57 2.57 2.57 2.57 2.61 2.61 2.61
Solar thermal 10.0 10.16 10.16 10.16 10.16 10.28 10.28 10.28 10.28 10.44 10.44 10.44
Biomass¹ 6.8¹ 5.87¹ 4.40¹ 4.18¹ 3.76¹ 3.62¹ 3.26¹ 3.10¹ 2.91¹ 2.85¹ 2.71¹ 2.96¹

RHI rates published by Ofgem – rates change with inflation each year.

RHI rate for ground source heat pumps is 2.71p for use over 15% of the full rated annual capacity.

¹ RHI rate for biomass is 2.08p for use over 35% of the full rated annual capacity.

¹ RHI for small biomass fell from 8.8p to 8.4p on 1 July 14, and by steps down to 2.96p by Oct 2017.

BEIS is abolishing the medium and large biomass tariffs, and offers a single biomass tariff as shown above from 20 Sept 2017.

See Degression of biomass tariffs

 

Announcement on Commercial RHI – 4 December 2013

After many months of waiting the Government published its updated policy for Commercial RHI on 4 December 2013 under the title: Non-Domestic Renewable Heat Incentive: Improving Support, Increasing Uptake. This was in response to consultations issued over a year earlier after the the uptake of Commercial RHI had been much lower than anticipated, with almost all payments being made only to owners of biomass boilers.

Following announcements in December 2013, there will also be specialist commercial RHI tariffs for additional technologies available from Spring 2014:

RHI
Commercial
over 20 years
Scale p/kWh
from 1 Jan 2015
p/kWh
from 1 Apr 2015
p/kWh
from 1 Jul 2015
p/kWh
from 1 Oct 2015
p/kWh
from 1 Jan 2016
p/kWh
from 1 Apr 2016
p/kWh
from 1 Jul 2016
p/kWh
from 1 Oct 2016
p/kWh
from 1 Jan 2017
p/kWh
from 1 Apr 2017
p/kWh
from 1 Jul 2017
Solid Biomass CHP 4.1 4.17 4.17 4.17 4.17 4.22 4.22 4.22 4.22 4.29 4.29
Biogas - small < 200kW 7.5 7.62 7.62 7.62 7.62 6.94 5.90 4.43 3.32 3.20 2.88
Biogas - medium 200-600 5.9 5.99 5.99 5.99 5.99 5.45 4.63 3.47 2.60 2.26 2.26
Biogas - large > 600kW 2.2 2.24 2.24 2.24 2.24 2.04 1.73 1.30 0.98 0.95 0.86
Deep Geothermal 5.0 5.08 5.08 5.08 5.08 5.14 5.14 5.14 5.14 5.22 5.22
Municipal solid waste 2.0 2.03 2.03 2.03 2.03 2.05 2.05 2.05 2.05 2.08 2.08
Commercial and industrial waste 2.0 2.03 2.03 2.03 2.03 2.05 2.05 2.05 2.05 2.08 2.08
Biomethane tier 1 6.8 7.62 7.24 6.52 5.87 5.35 4.55 4.43 3.89 3.56 3.20
Biomethane tier 2 6.8 4.47 4.25 3.83 3.45 3.14 2.67 2.54 2.29 2.10 1.89
Biomethane tier 3 6.8 3.45 3.28 2.95 2.66 2.42 2.06 1.96 1.76 1.61 1.45

 

RHI Background

Renewable Heat is a subset of the wider category of renewable energy, which includes the generation of electricity from wind turbines and photovoltaic cells.

The minister at DECC introduced the RHI by saying: The heat used in our homes, public buildings, businesses and factories is responsible for around half of all the energy consumed in the UK, and accounts for roughly half of all UK carbon emissions. Taking action now to switch from fossil fuels to cleaner and more sustainable green sources of heat will reduce the impact that our heat requirements have on the environment and help ensure the UK has an energy supply that is safe, secure and reliable.

It is for this reason that we are introducing the Renewable Heat Incentive, making renewable heat not just an environmentally sound decision, but also a financially attractive one. This support can help drive take-up of renewables now, stimulate the renewables industry, encourage further innovation and ultimately, bring down the cost of renewable heating.

Almost half of the final energy consumed in the UK is in the form of heat. Its generation accounts for 47% of UK CO2 emissions. Renewable Heat currently satisfies only 1% of heat demand.

DECC is encouraging Renewable Heat as part of the UK's commitment to aim for the rather ambitious target of generating 15% renewables by 2020 and is introducing the Renewable Heat Incentive.

For the Renewable Heat technologies included, the energy ultimately comes from the sun. The sun provides planet earth with more energy each hour than human civilization uses over a whole year. The challenge is how to make use of this vast supply of incoming radiation to provide solar space heating and hot water.

RHI Administration by Ofgem

The RHI is administered by Ofgem. Owners of renewable heat technologies included apply to Ofgem who pay tariffs, on a quarterly basis, over 20 years. Owners need to provide information on the metered heat generated and satisfy Ofgem that the equipment is used to provide space heating or hot water and that the equipment is maintained according to the manufacturer's instructions. For installations rated up to 45 kW capacity the equipment and the installers need to be MCS certified, or equivalent.

Comment on the Renewable Heat Incentive

An investment in renewable energy usually means payment of a higher capital cost to achieve lower annual running costs (and also a lower carbon emission for the benefit for the community at large). The RHI will reduce the annual running cost of Interseasonal Heat Transfer to a very low level and allow owners to reduce the payback period from their investment to a few years.

Owners of IHT installations will benefit from the RHI for using ground source heat pumps and the RHI for using Solar Thermal when IHT is used to provide domestic hot water.

The RHI is calculated to offer a good return on initial investment

The introduction of the RHI offers a financial reward for lower carbon emissions over twenty years for the renewable heating technology installed. The tariffs proposed for the Renewable Heat Incentive have been calculated to offer a rate of return of 12% on the initial investment across the tariff bands.

The introduction of the RHI coincides with a time of increasing wealth and demand for fossil fuels from an increasing world population: many pundits expect the price of oil and gas to increase much more sharply than general inflation over the next three years.

While there are a number of renewable energy options to be considered, ICAX believes the most practical and affordable answer to generating Renewable Heat is to use Interseasonal Heat Transfer.

The RHI provides a positive step change in the business case for delivering on-site renewable heat, not only to reduce energy bills and carbon emissions, but also to deliver a energy related cash flow into your building.

Tony Grayling, head of Climate Change and Sustainable Development at the Environment Agency said: Ground source heating is a rapidly growing technology that has the potential to produce at least 30% of the country’s renewable heat needs, but it needs financial support in order to grow. We would like to see this technology given adequate financial support through the new renewable heat incentive to meet its full potential in the UK.

RHI Tax free income

RHI grants are exempt from income tax. This means that domestic users and other income tax payers will not be taxed on any income received from the Feed-In Tariffs or the Renewable Heat Incentive.

For those using IHT, the annual clean energy cashback for heating will normally be larger than the annual running cost.

See Ground Source Heating       See Ground Source Cooling       See Ground Source Energy

 

See also: Banking on IHT                 The Merton Rule                Economic Renewable Energy