Renewable Heat Incentive

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Renewable Heat Incentive

The UK government organizes the renewable heat incentive scheme to support and encourage homes to go for renewable energy for heating purposes. 

This incentive aims to encourage private households, businesses, and communities to invest in renewable energy technologies. 

How Long Will Renewable Heat Incentive Last?

Initially, the incentive should end by 31 March 2021. 

However, since several homes and businesses have still not benefited from the incentive, the UK government has announced the extension of the scheme by 12 months, meaning that it’ll run until 31 March 2022. 

Using renewable energy for generating electricity for heating purpose offers several advantages.

However, many homes find the initial cost of installing the system exorbitant, and hence, are not encouraged to shift to the system and would rather stick to the old system of heating, which is harmful to the climate. 

To prevent this, the government had to come in with an incentive – renewable heat incentive.

This incentive will help the UK achieve its proposed target of driving 12% of its heating from renewable energy sources. 

The latest regulations were effected on the 22 May 2018.

It’s important mentioning that Renewable Heat Incentive is of two types: domestic and non-domestic. 

While domestic RHI is meant for installations in private residences, non-domestic RHI is a type of incentive designed for commercial, public, and industrial facilities. 

Here in this article, we look into both Domestic and Non-Domestic Renewable Heat Incentive.

Domestic Renewable Heat Incentive (DRHI)

The types of renewable heating systems eligible for DRHI scheme include:

  • Boiler
  • Ground Source 
  • Air Source
  • Heat Pump
  • Heat Pump
  • Biomass 
  • Thermal
  • Solar 

How the Renewable Heat Incentive Works

The domestic RHI is a form of financial assistance from the UK government to help households using renewable energy sources for heating purpose. 

Households with eligible heating systems can save a lot of money with this scheme in the long run.

However, even if the heating system is on the list of eligible heating systems for Renewable Heat Incentive, it’s important to follow the right procedures and application processes. 

When applying for this incentive, certain requirements must be met, relating to the installation itself and the home it’s installed.

Spending quality time to go through the requirements and taking every step to meet them speeds up the rate of your application being granted. 

When the processes are followed, the application is quickly granted.

How Are Domestic RHI Payments Calculated?

Calculating the domestic RHI payment is based on three major factors:

  • Property’s annual heating and hot water demand
  • Current RHI tariffs
  • Heating system’s Seasonal Coefficient of Performance (SCOP)

This shouldn’t go without mentioning that the rate of RHI payments for a particular home can vary year by year. 

The system first followed a ‘degression’ pattern when it was established. This pattern was aimed at managing the budget for the Domestic Renewable Heat Incentive.

However, the Department for Business, Energy and Industrial Strategy (BEIS) announced in a statement that it’d discard the ‘degression’ pattern starting from 1 January 2020.

How to Calculate Domestic RHI Payments

The first step in calculating the domestic RHI payments is calculating the household’s annual heating and hot water demand. 

This data is available on the household’s Energy Performance Certificate (EPC), taking 30,000 kWh/yr for our example.

This step is followed by calculating the amount of electrical energy that the heating system is assumed to consume. 

It’s achieved by dividing the household’s annual heating and hot water demand with the household’s heating system’s Seasonal Coefficient of Performance. 

The Seasonal Coefficient of Performance usually varies between 2.5 and 4, according to the MCS installer. As such, we can have our example as 30,000/3 = 10,000 kWh/yr.

The next step is to calculate the “renewable” content, done by deducting the last figure form the household’s annual heating and hot water demand. 

According to our example, we have 30,000 – 10,000 = 20,000 kWh/yr. 

The last figure is then multiplied by the current RHI tariff to get the Renewable Heat Incentive annual payment (20.89 p/kWh (for a ground source heat pump). 

Therefore, if our example is for ground source heat pump, we have 20,000 x 0,2089 = £4,178 per year.

However, if this calculation is too tedious to follow, there’re online calculators you can use to arrive at your RHI annual payment. 

All you need to do with these calculators is to input certain figures.

To relieve households on a low income the hassle of struggling to pay for their energy bills, Ofgem rolled out new customer protection regulations. 

The regulations, released on 15 December 2020, temporarily protect vulnerable households lacking the financial capacity to pay their energy bills. 

The regulations came in the form of sustainable repayment plans and credit management policies.

Installing an RHI Heating System

Several heating systems are available that are eligible for renewable heat incentive. 

Also worth mentioning is that each of these systems comes with its pros and cons. 

As such, you should know the pros and cons you’re likely to have from your preferable heating system. 

This necessitates you speaking with a professional on the right system for your home. 

When choosing the right heating system, consider the benefits you’ll enjoy from the system and how much the system will save you through the renewable energy incentive.

Another factor that comes in when planning on installing a heating system is metering. 

Two types of metering are available for a heating system: metering for payment and metering for performance. 

Your professional will advise you on which type of metering to choose, based on your preferred heating system.

While the requirements demand that biomass stoves, heat pumps, and boilers have metering for payment installed, metering for performance is an eligibility obligation for a new heat pump.

However, metering is not a requirement obligation for the solar thermal system. 

As such, if you’re comfortable with the pros and cons of solar energy, you don’t need bothering about installing metering. 

Having chosen your preferred renewable energy system, one other important task is to hire the right installer for the system. 

When hiring your installer, it’s recommended to ensure he has a Microgeneration Certification Scheme (MCS) certificate.

How to Apply For Renewable Heat Incentive

To be eligible to apply for Domestic Renewable Heat Incentive, you should reside in England, Wales, or Scotland. 

As such, before you can apply for this incentive, you must own a home in any of these countries or build a new home that meets the requirements in one of the countries.

When applying for the incentive, one thing required is a Microgeneration Certification Scheme (MCS) installation certificate number. 

This is where hiring an MCS certified installer comes in. Your installer will give you this number to process your application.

After this is the Green Deal Assessment for your building; which involves two different documents: Occupancy Assessment and Energy Performance Certificate (EPC).

While Occupant Assessment gives clues on how to improve the property’s energy efficiency, Energy Performance Certificate rates the energy efficiency of the property, from A (Very efficient) and G (Inefficient).

Applying for domestic Renewable Heat Incentive also requires submitting your bank details and the amount you paid for installing the system. 

You’re also required to specify if you’ve been paid from the public fund before, with the amount and the date you’re paid.

Necessary Documents for Applying for Domestic Renewable Heat Incentive

  • Microgeneration Certification Scheme (MCS) certificate number
  • Personal information and bank details
  • Occupancy Assessment document
  • Energy Performance Certificate (EPC) number
  • Ongoing Renewable Heat Incentive Obligations

From the very day that your application for the renewable heat incentive is granted, you’re obligated to some rules. 

The rules require you to adhere strictly to the ongoing obligations that relate to your specific renewable heating system and your household. 

This incentive also requires you to fill out some form where you make certain declarations. 

In these declarations, you promise to comply with the scheme rules, letting you have the right amount of money paid to you for the heat you generate.

Annual requirements that you’ll need to submit include, but not limited to, the following:

  • That the heating system is still intact in your property
  • That the same heating system is what you still have installed and that it’s still in a good working condition
  • That the meter installed for the system is still intact and working perfectly
  • That you adhere to the criteria required of you regarding the heating system and the occupants of the building

To ensure that all these are true, Ofgem goes around from household to household, checking the system and occupants for any bridge of agreement. 

There is no specific time for inspecting a household. Any household can be chosen at any time for the audit check. 

However, while the inspection is often based on random sampling, there’re reasons that prompt Ofgem to select a household for the audit check. 

Non-Domestic Renewable Heat Incentive

What is The Non-Domestic RHI?

Again, the non-domestic renewable heating incentive is a form of financial support from the UK government to business to generate energy for heating from renewable sources. 

What Benefits Does It Have On Businesses?

Many businesses find it difficult paying their energy bills. 

This incentive is an encouragement for businesses to generate energy from renewable sources for heating. 

This makes generating electricity through renewable energy technologies cheaper and attractive. 

Once the system is installed, and the application has been granted, the payment continues for 20 years. It’s only required that you continue meeting the criteria. 

With this, you can enjoy the benefits of generating energy for your business through a cheaper renewable heating system, especially with the increase in fuel prices.

Technologies eligible for Non-Domestic Renewable Heat Incentive include:

  • Biomethane 
  • Biomass 
  • Ground source heat pumps
  • Water Source Heat Pumps 
  • Air Source Heat Pumps
  • Solar Thermal 
  • District Heating 

What Are The Eligibility Criteria?

Before your application can be considered for approval, you must meet certain criteria. Here’re the major requirements to qualify for non-domestic renewable heating incentive:

  • The applicant owns the property on which the heating system is installed. Along with this is that the owner submits his/her name and bank details for verification. In a situation where the property belongs to more than one person, the applicant must act with other owners’ consent.
  • The business’s heating system is on the list of eligible renewable heat technologies and falls under eligible sizes.
  • The heating system was installed after 15 July 2009. In a case where the system has been installed before this period, there must be a proof that it’s just been converted to the eligible system on or after 15 July 2009. 
  • There was no grant collected, or to be collected, for installing the system. In a case where grants were collected for the installation before the commencement of the scheme, the grants must have been repaid.
  • The plant was not transferred from another property when installed, meaning it’s new.
  • The installation was carried out by an MCS certified renewable heating installer. 

Returns to Expect

The return to expect from installing a heating system that generates energy from a renewable source depends on certain factors, including the type of technology you choose, the cost of installing the system, and the current RHI payment tariff.

However, it’s important to know that what you benefit from this technology is not limited to the incentive received but includes the low cost of generating energy for your heating system.

Non-Domestic Renewable Heat Incentive: How Is It Paid?

An approved installation receives payments on a quarterly basis for a period of 20 years.

Before any payment can affect, the quarterly readings must’ve been sent to Ofgem, which determines what is paid every quarter. 

It’s easy for businesses to calculate how much to expect based on the aforementioned factors. The amount paid is estimated by multiplying the current tariff by the eligible usage.

What Meters to Install?

Like under Domestic Renewable Heat Incentive, two meters are required here: usage meter and generation meter.

What Rules To Maintain To Be Eligible For The Payment?

Once the installation is made and approved for the incentive, the payments will be made for 20 years. However, getting approved doesn’t mean that all is well. 

The property owner and occupants are to meet certain requirements to have these payments rolling in quarterly. 

Gladly, these are not hard to meet; keep proper maintenance of the system and allow Ofgem to carry out inspections whenever they come for it and provide them with necessary information when needed.

What If the Ownership of the Heating System or the Business Changes?

Change in ownership of the system doesn’t affect the payments. 

However, the new owner must have necessary documents proving that the business’s ownership or the system has been transferred to him/her.