Renewable Heat Incentive – Commercial – paid over 20 years

The RHI tariff table below shows the technologies eligible for RHI and the subsidy received for each technology. The RHI now 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 rates vary with the technology and scale used as follows:

RHI Commercial paid 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	p/kWh from 1 Apr 2018	p/kWh from 1 Apr 2019	p/kWh from 1 Apr 2020
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	10.75	10.98	11.12
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	9.36	9.56	9.68
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	2.69	2.75	2.79
Biomass	6.8	5.87	4.40	4.18	3.76	3.62	3.26	3.10	2.91	2.85	2.71	2.96	3.05	3.11	3.15

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

RHI rate for ground source heat pumps is 2.89p for use over 15% of the full rated annual capacity.

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.

 

Renewable Heat Incentive – Domestic – paid over 7 years

RHI for domestic buildings applies from 9 April 2014. Renewable heat installations commissioned since 15 July 2009 can receive a cashback subsidy of 20.87 pence per kilowatt hour used – for the first seven years of the equipment used.

The RHI tariff table below shows the technologies that are eligible for Domestic RHI and the rate 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 rates vary with the technology used as follows:

RHI Domestic over 7 years	p/kWh from Jan15	p/kWh from Apr	p/kWh from Jul	p/kWh from Oct	p/kWh from Jan16	p/kWh from Apr16	p/kWh from Jul16	p/kWh from Jan17	p/kWh from Apr17	p/kWh from Jul17	p/kWh from Oct17	p/kWh from Apr18	p/kWh from Apr19
Solar thermal	19.2	19.51	19.51	19.51	19.51	19.74	19.74	19.74	20.06	20.06	20.06	20.66	21.09
GSHP	18.80	19.10	19.10	19.10	19.10	19.33	19.33	19.55	19.86	19.86	19.86	20.46	20.89
ASHP	7.3	7.42	7.42	7.42	7.42	7.51	7.51	7.51	7.63	7.63	10.18	10.49	10.71
Biomass	10.98	8.93	7.14	6.43	5.14	5.21	4.69	6.44	4.28	3.85	6.54	6.74	6.88

Tariffs increase with inflation each April (subject to biomass degression).

Each domestic building must show an Energy Performance Certificate to evidence its energy use.

See Degression of biomass tariffs

Tax free income

Tariffs 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 RHI.

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 very ambitious target of 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 will pay tariffs, on a quarterly basis, over 20 years. Owners will 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 will 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 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

Tariffs 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 Renewable Heat Incentive.

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

 

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