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)?
The current RHI Phase One tariff payment for a sub-100KW installation is 4.8p per kilowatt hour, index-linked for 20 years and based upon metered output.
Best of all, DECC has recently announced its intent to pay a far higher annual two tier tariff up to 10.2p per kilowatt hour for the first 15% of run hours, followed by a tariff up to 2.3p per kilowatt hour for any remaining heat output throughout the year.
This new proposed payment structure will continue for 20 years, and be made to the landlord. Installations completed since 21st January 2013 will be eligible for any increase in the Commercial RHI tariff.
Are residential developments featuring individual ground arrays eligible for support under the RHI?
The Domestic RHI (Phase 2) is scheduled to launch in Spring 2014; tariff levels have been confirmed ahead of its launch with 18.8p/kWh available to single domestic dwellings that install ground source heat pumps, payable for 7 years.
MCS accredited domestic installations since 15th July 2009 will be eligible for the RHI Phase 2; Kensa Engineering is an approved MCS accredited installer, and Kensa products are MCS accredited.
How much will be paid?
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.