Domestic Renewable Heat Incentive – Confirmed for systems completed by 31 March 2022

ICAX welcomes the continuity of the Domestic RHI until 31 March 2022.

Investment in low carbon technologies, like heat pumps, is a private investment for a public benefit. Until the Treasury accepts that public money is needed to encourage the public benefit of lower carbon emissions very few heat pumps will be installed, the skills shortage will remain and the supply chain will be underdeveloped.

Low carbon heat support – Boiler Upgrade Scheme

The Domestic RHI has beem replaced with the new Boiler Upgrade Scheme from April 2022. This new heat pump grant provides an up-front sum of £5,000 for domestic installations of heat pumps in place of the £7,000 paid quarterly over seven years. A grant is a better mechanism than the complex RHI because it helps meet the cash cost of a new installation, and because the administrative costs are much reduced. However, funding has been restricted to just £450 million over three years.

The Climate Change Committee has recommended that, "The 29 million existing homes across the UK must be made low-carbon, low-energy and resilient to a changing climate. This is a UK infrastructure priority and should be supported by HM Treasury. Homes should use low-carbon sources of heating such as heat pumps and heat networks".

RHI Domestic tariffs

Renewable Heat Incentive Domestic	RHI tariffs pence/kWh from April 2017	RHI tariffs pence/kWh from April 2018	RHI tariffs pence/kWh from April 2019	RHI tariffs pence/kWh from April 2020	Tariff lifetime in years
Ground source heat pumps	19.86	20.46	20.89	21.16	7
Air to water heat pumps	10.18	10.49	10.71	10.86	7
Solar thermal	20.06	20.66	21.09	21.36	7
Biomass	4.28	6.74	6.88	6.97	7

Tariffs increase with CPI each April.

RHI Commercial tariffs

Previously the government had announced an allocation of funding for the non-domestic RHI up until 31 March 2021. From the Treasury Red Book issued on budget day, 11 March 2020, the Government said it "will also introduce a new allocation of flexible tariff guarantees to the Non-Domestic RHI in Great Britain in March 2021, helping to provide investment certainty for the larger and more cost-effective renewable heat projects". The previous two tariff guarantee allocations covered ground and water source heat pumps over 100kW capacity, biomass over 1MW, biogas over 600kW and CHP using solid biomass, biomethane and geothermal. The new "tariff guarantees" will allow the RHI for large installations commissioned after 31 March 2021, but before 31 March 2022. However, the application for Tariff Guarantees through Ofgem can take months before being granted, and there is a risk of further "degression" of tariffs on large heat pump installations beyond the 28% degressions already announced.

It appears that the Government has no plans to encourage low carbon commercial heating using heat pumps after the end of the RHI, unless they are linked to district heating systems.

Renewable Heat Incentive Commercial	RHI tariffs pence/kWh from April 2017	RHI tariffs pence/kWh from April 2018	RHI tariffs pence/kWh from April 2019	RHI tariffs pence/kWh from April 2020	Tariff lifetime in years
Ground source heat pumps	9.09	9.36	9.56	9.68	20
Air to water heat pumps	2.61	2.69	2.75	2.78	20
Solar thermal	10.44	10.75	10.98	11.12	20
Biomass	2.96	3.05	3.11	3.15	20

The rates shown for April 2019 are adjusted for inflation

The rates shown are reduced for run hours above 1,314 hours a year

RHI rate for GSHPs above 100kW is reduced to 8.72p from April 2020, to 6.98p from July 2020 and to 5.58p from October 2020.

See RHI Tariff History

Is there Life after RHI?

It appears that the Government plans to move away from subsidy towards issuing instructions or prohibitions. From 2005 it has no longer been legal to install a gas boiler which was not a condensing boiler. Similar types of compulsion may be seen in future, possibly linked to planning permission. The Chancellor announced a ban on connecting gas to new build homes from 2025 in March 2019 and the government has since published the Future Homes Standard. It is possible that such mandatory instructions will come into force before the RHI for new domestic installations ends on 31 March 2022.

Now is the time to invest in Ground Source Energy installations

The RHI will continue to be paid for installations completed and commissioned before 31 March 2021. After 31 March 2021 new commercial installations may not receive any form of subsidy, unless covered by "tariff guarantees".

RHI contributes to realistic payback periods for renewable heat

For those installing ground source energy while the RHI is still available the RHI income will normally be larger than the annual running cost: this provides a significant contribution to the higher initial capital cost of ground source installations.

The tariff for GSHPs is now over three times the rate for biomass.

Take advantage of the opportunity to invest in ground source heating while the RHI budget lasts!

However, remember that it is critically important for a ground source installation to be well designed, well installed and well controlled for you to achieve the full financial reward.

How should the Government respond to the widespread calls for action to curb climate change?

All UK political parties express concern about climate change, but seem vague about what should be done to curb it.

Real progress has been made in decarbonising electricity generation: this has been achieved largely by curbing electric generation from the combustion of coal and encouraging generation from wind turbines.

Almost no progress has been made in decarbonising heating: almost 84% of homes are still heated by combustion of gas supplied through the national gas grid.

As CO₂ is emitted from combustion of all carbon compounds, the answer to curbing climate change lies in using heating systems which do not use combustion. The alternative is heat transfer which means using heat pumps to transfer heat from the ground – or from the air – to heat buildings. This is the only practical route to achieving the Clean Growth Strategy.

It is also the only practical route to achieving the Clean Air Strategy in cities like London.

NO_xious emissions

There have been suggestions that an alternative to burning gas for low carbon heating would be to pipe hydrogen through the gas grid and burn hydrogen instead.

Although there are many practical issues to be solved before burning hydrogen from the gas grid would be possible, the key difficulty is that burning hydrogen in air would yield up to six times the amount of NO_x as burning natural gas in air.

 

 

See Ten reasons for the UK to use ground source energy to reduce carbon emissions.

 

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