What is Phase One of the Renewable Heat Incentive (RHI)?
The RHI is the world’s first financial incentive scheme designed to increase the uptake of renewable heat technologies and reduce the UK’s carbon emissions. In brief, the scheme provides a subsidy for each kilowatt hour of eligible renewable heat generated from accredited installations, payable on a quarterly, index-linked basis for 20 years. The subsidy is intended to eliminate financial barriers which might, otherwise, encourage the continued use of traditional fossil fuel technologies.
The commercial RHI is available for apartment developments in England, Wales and Scotland.
Why has the Government introduced the RHI?
The European Union’s 2009 Renewable Energy Directive obliges the UK to meet 15% of its energy consumption from renewable by 2020. In order to accelerate the uptake of renewable technologies, the Government has committed to various policies which provide financial incentives. It is expected that an increasing deployment of renewables will reduce carbon emissions, increase energy security and create ‘green collar’ employment.
Are residential developments eligible for support under the commercial RHI?
Yes, subject to certain conditions. Phase One of the RHI, launched in November 2011, covers ‘district heating systems where multiple dwellings are served by a central renewable heating unit’. Ofgem, the RHI administrators, has confirmed that Shoebox installations which are linked to a communal ground array (see here for typical system schematic) will satisfy this definition.
What is the current subsidy level for ground source heat pumps (GSHP)?
Currently, the subsidy for commercial ground source heat pump installations (up to 100kW) is 4.7p per kilowatt hour for installations; this subsidy will be index-linked and is paid to the owner of the installation on a tax-free basis for 20 years.
In September 2012, DECC launched a Call for Evidence to establish whether the present tariff levels (4.7p per kW/Hr up to 100kW, 3.4p per Kw/Hr over 100kW) were appropriate given the very modest number of applications for support. It is considered likely that increased tariffs will emerge; Kensa will provide further information as it become available.
Are residential developments featuring individual ground arrays eligible for support under the RHI?
Right now, DECC is consulting on how to support straightforward domestic installations featuring a unique ground array per property. Please click here for the latest information.
How much will be paid?
Each installation will be metered to ensure the tariffs are paid on the renewable heat generated at each development.
Clearly, the amount of renewable heat generated will depend upon many factors including weather conditions, occupancy levels, lifestyle habits and the function of the heat pump (space heating only or space heating and domestic hot water). That said, SAP reports will indicate the expected energy consumption (in kilowatt hours) for each apartment and so provide a total figure for the entire development.
Alternatively, prior to the availability of SAP reports, Kensa’s Shoebox RHI calculator can provide an estimate upon receipt of basic development details ie. the number/size of all the apartments.
Who can apply for the commercial RHI?
The application must be submitted by the owner of the installation. For apartment developments, this is likely to be the management company. Management companies will need to decide how best to allocate benefit to the individual apartment owners, perhaps via a reduced management charge.
Although each individual dwelling will be metered, Ofgem will not accept individual applications from each apartment owner.
For social housing developments, a communal ground array could sensibly serve houses as well as apartments.
For private sector developments featuring freehold properties, it will be necessary to set up an entity which can administer the RHI payments.
How are applications handled?
Having read the guidance documents to confirm eligibility, an Authorised Signatory, representing the installation owner, will need to gather up all the required information (click here for the Ofgem ‘Summary of Supporting Information for RHI applicants’ document) and submit it electronically. In most instances, applications can only be submitted once the installation has been commissioned.
How will Kensa support the commercial RHI application process?
Kensa can provide a complete consultancy service to support the application process. That said, the process is straightforward and fully supported by detailed documentation provided by Ofgem.
How are the payments made?
For projects where the metered renewable heat is less than one megawatt, Ofgem will expect the management company to supply the meter reading on a quarterly basis, starting three months after the initial commissioning. Ofgem has committed to make a quarterly payment direct into a nominated bank account within six weeks of the receipt of the necessary meter readings.
What continuing obligations must be met?
Besides providing the meter readings, it will be necessary to sign an Annual Declaration confirming that the installation continues to meet the eligibility criteria, the meter readings are accurate and there have been no other changes in material circumstances.