For many years Good Energy has been lobbying the government to introduce a renewable heat incentive (RHI). Around half the UK’s carbon emissions come from heating, but only 0.6% of our heating needs are generated by renewable sources and an RHI will help redress the balance. We got a bit fed up of waiting, so we launched our own version of an RHI in 2008, called HotROCs – this pays domestic solar thermal generators for their heat energy and is funded by revenues from Gas+, our gas product. We know it works – and we’re now supporting 467 renewable heat generators through the scheme.
In February the Labour government published a consultation on an RHI. The main points of this consultation were:
• Heat should be supported at all scales; from householders to businesses to industrial-scale generators.
• Tariff levels should be calculated to bridge the economic gap between conventional heating systems and renewables (for example, to make the cost of an air-source heat-pump comparable with that of a conventional condensing boiler);
• There should be an additional incentive to ensure a return on investment; 12% for most technologies, 6% for solar thermal (as this technology already has significantly greater penetration within the UK market – and requires a lower initial investment for the average household).
In the run-up to the Comprehensive Spending Review in October, there was widespread concern that the RHI might be a victim of Government cuts. Fortunately it wasn’t, but the government said the RHI would be reduced in scope from the original consultation by 20% (or £105m a year), and would be paid for by the Treasury rather than through a levy on energy bills as suggested in the consultation.
There is still a lot we don’t know about the RHI, so we put our questions to Good Energy’s resident expert on RHI, Will Vooght:
When will the details of the RHI be announced?
We don’t know exactly but the government has promised it will be outlined by the end of this year.
When is the scheme likely to start?
It’s set to be operational from June 2011.
What technologies are likely to be included?
We can’t see any reason why anything would be cut from the original consultation, so there’ll be an incentive available for Solar Thermal, Biomass, Heat Pumps – air & ground – and even to encourage the injection of biomethane into the gas grid.
Do we have an indication as to what the reward levels will be and how long they will be paid for?
DECC set-out indicative tariffs in their consultation early this year, but as we’ve learned through the Feed-in Tariff consultation process, they have the potential to shift the goal posts considerably.
How will the heat be measured?
We expect that, for smaller generators such as Solar Thermal or heat pumps, it makes the most financial sense to deem the amount of energy produced – exactly how Good Energy’s HotROCs works. For larger generators, even a small change to the expected efficiency of a generator – above or below that of their expected, deemed, output could result in significant over or underpayment. In such case, despite the comparatively high cost of an accurate heat-metering arrangement (compared with electricity generators) – it’s not difficult to see the logic in installing one. So, small – deem, big – meter. What the definition of small/big is, I guess we’ll have to wait and see.
Will the tariff be guaranteed for 25 years like the feed in tariff?
It’s difficult to say. Within the proposals document, unlike the Feed-in Tariff’s rather uniform approach, there’s a whole range of eligibilities ranging from 15 to 23 years for different renewable heat technologies. If anything, based on the 20% ‘efficiency’ cuts that have been enforced, I’d expect the eligibilities for different technologies to be shortened……or the actual payments reduced – it’s difficult to see exactly where else these so-called efficiencies can be achieved.