The Domestic Renewable Heat Incentive – what is it?
The Renewable Heat Incentive (RHI) is a government scheme that pays people that produce their own heating and hot water using renewable energy sources such as heat pumps or solar thermal panels.
The scheme has been launched in an effort to help the UK government meet its legal commitment to ensure 15% of the UK’s energy comes from renewable energy sources by 2020.
This scheme has been up and running in the non-domestic sector since November 2011, however the domestic RHI scheme kicked off in April 2014 for households in the UK. The Renewable Heat Incentive works in a similar way to how the Feed-in Tariff works for domestic renewable electricity production; households in this case being paid based on the amount of renewable heat they produce.
There are currently 4 technologies that are eligible for the domestic renewable heat incentive
The payments will be made quarterly for seven years and should cover a significant proportion, if not all of the initial installation costs.
Domestic Renewable Heat Incentive tariffs
Each of the five different renewable technologies eligible for the renewable heat incentive have different RHI rates associated with them, mainly because the cost of installing the different technologies varies considerably and the RHI payments are designed to help cover some or all of the initial install cost.
On the whole, the RHI rates have increased very slightly in line with inflation except for biomass boilers and wood pellet stoves with back boilers which have dropped considerably – the rates below are correct as of 15th March 2017. You can find current rates here.
The payments are made on a quarterly basis (in arrears) by OFGEM and last for a total of 7 years. In addition the tariff amounts are RPI index linked, so as inflation increases over time, the tariff rates above will increase with it. The RPI increases will be applied to the rates on 1st April each year.
RHI Payments will last a total of 7 years
Much like with the feed-in tariff, once you sign up to the RHI you will be locked in at the tariff rate that you initially get – so if you installed a Ground Source Heat Pump today you would get a payment of 19.10p per kWh of renewable heat you produced for the next 7 years (although it will increase with the the RPI each year).
Since there is a finite pot of money available for the RHI payments, it is likely the current tariffs will get smaller over time (again much like the solar feed-in tariff) therefore if you are considering installing a renewable heating technology it is worth moving quickly to ensure you get the highest payment rate!
The government do a quarterly review of the RHI scheme and adjust the tariff amounts in line with the total RHI budget so as to control the costs. Therefore if you install a renewable heating system you will get (and lock in) a better rate potentially than someone who installs a renewable heating measure 2 years down the line.
RHI payments are estimated based on heat demand rather than Metered
Tariff payments will be deemed rather than metered, which means they will estimate the heat demand of the property and base the RHI payment on that. This implies that it is paramount to install a heating system that is correctly sized; because if you install a more expensive, oversized biomass boiler (that creates more than you require), you will be paid the same through the RHI and potentially won’t recoup the additional unnecessary investment.
Likewise, there are ways to maximise your RHI payments!
Click on the titles below to see exactly how the RHI is calculated for biomass, heat pumps and solar heating.
For biomass boilers and wood pellet stoves, the RHI payment can be fairly easily calculated based on the heat demand of the property. This heat demand figure can be found right at the bottom of the Energy Performance Certificate (EPC) expressed in kWhs – so it is simply a case of multiplying £0.0416 x this number, which will give you the total annual payment.
Example calculation for biomass:
For a home with a heat demand of 18,000kWh installing a biomass boiler would provide you with an RHI payment each year of:
18,000 x £0.0416 = £748.80
For solar thermal, the MCS approved installer calculates the RHI payment. They will deem a figure that is the estimated contribution of the solar thermal to the home’s hot water demand, but the calculation is based on occupancy – the more people that reside in the property, the higher the payment – worth bearing in mind when you are speaking to your installer / green deal assessor.
For heat pumps (both ASHP and GSHP) the heat demand figure from the EPC is combined with the heat pumps estimated efficiency to calculate the RHI. Remember not all the heat produced by heat pumps is renewable, therefore only the part that is will receive RHI support.
The technical term for the estimated efficiency is known as the Seasonal Performance Factor (SPF) – and this tends to be somewhere between 2.5 and 4 (this is also sometimes referred to as the Coefficient of Performance or CoP). So an SPF of 3 for example, means that for every one unit (kWh) of electricity used, 3 units (kWh) of useful heat will be produced.
Therefore the RHI for heat pumps is calculated using the 2 formulas below:
1. Eligible Heat Demand = Total Annual Energy Demand x (1 – 1 / SPF)
2. Annual RHI = Eligible Heat Demand x RHI Tariff
Example calculation for Air Source Heat Pumps:
For a home with a heat demand of 25,000kWh installing an air source heat pump with a SPF of 3.5 the annual RHI payment would be:
Eligible Heat Demand = 25,000 x (1 – 1 / 3.5) = 17,857 kWh
Then multiply by RHI tariff (7.51p / kWh) = £1,341 per year
Only heat pumps with an SPF of 2.5 or more are considered renewable under the EU Renewable Energy Directive and only those that are considered renewable will be eligible for the RHI.
How long will my renewable heating investment take to pay back?
This is a difficult one to answer to be honest because it is so dependent on your home’s individual heat demand.
In terms of investment, you can expect to pay about £8,000 for an air source heat pump, £20,000 for a ground source heat pump, £8,000 for a biomass boiler and £4,500 for solar thermal.
If you can get an accurate view of the heat demand (from the EPC) then you should be able to calculate the annual payment from the domestic RHI, which multiplied by 7, will give you to the total payments to expect over this period.
With the investment figure and the total lifetime RHI return (comparing renewable heating to the next best alternative), you should be able to get a rough feel of the payback.
Changes to the RHI – April 2016
In April 2016, the government announced significant changes to the RHI. Not only have rates dropped, but deployment caps have been introduced. Essentially, these mean that once a certain number of payments have been claimed, and the budget for that specific technology has been reached within the quarter, rates for remaining claimants will drop. Therefore, you can expect to receive comparatively less money than last year.
Find current information on the scheme here.
Eligibility requirements for the Domestic Renewable Heat Incentive
Renewable heating systems don’t come cheap – the domestic RHI makes these systems more affordable by offering a financial incentive based on the amount of heat they produce. However, there are quite strict eligibility criteria, so it is worth ensuring that you adhere to the rules to make sure you are entitled to the payments.
Which technologies are eligible for the domestic RHI?
As previously mentioned, the renewable heat incentive is available on installations of any of the following technologies:
- Air source heat pumps (limited currently to those that heat water)
- Biomass boilers
- Wood pellet stoves with back boilers
- Ground source heat pumps
- Solar thermal (only flat plate and evacuated tube solar panels are eligible)
Who is eligible for the domestic RHI?
The scheme covers single domestic dwellings (as soon as the heating system is providing heat to more than one property, you would need to look at the non-domestic RHI). It is open to owner-occupiers, private landlords, registered providers of social housing, third party owners of heating system and self-builders.
Note to private and social landlords: you will need to agree with the tenants that an annual servicing visit will be required to ensure the system complies with the detail set of requirements and continues to be eligible for domestic RHI payments.
New builds are not eligible for the RHI – this means the renewable heating system was installed in the home before it was inhabited for the first time.
You heating system needs to be on the Government approved list
In order to ensure eligibility for the RHI, you must make sure the renewable heating system you get installed is listed on the Governments product eligibility list (PEL) – you can access this by clicking here.
MCS accreditation is a must!
To be eligible for the scheme, the installers must adhere to the European Standard EN 45011. The Microgeneration Certification Scheme (MCS) adheres to this standard, therefore as a rule of thumb you need to ensure that the team installing your renewable heating system are MCS accredited and the kit being installed is also MCS accredited.
Equivalent schemes to MCS do exist, but don’t simply take your installers word for it that they adhere to EN 45011 – check all the relevant paperwork before getting any work done.
Getting a Green Deal Assessment is no longer required!
In early 2016, the Government changed the elegibility requirements for the RHI and one of those changes involved scrapping the need for the Green Deal Report. The EPC is still a requirement though – this needs to be dated within the last 48 months – and will be used to calculate your RHI payments.
If your EPC recommends loft and cavity wall insulation it must be installed before you apply and you’ll then need to get a new EPC that no longer recommends these measures. The reason for this is that heat pumps and solar thermal tend to produce hot water at lower temperatures than traditional gas central heating systems. This means that radiators and underfloor heating will be operating at cooler temperatures compared to regular central heating systems, therefore it is very important the house is really well insulated prior to having them installed. The insulation process should bring the heating requirements of your home right down.
I have received other grants to pay for the technology. Do I still get the domestic RHI?
DECC confirmed in 2013 that any public funding paying for the domestic renewable heating installation would be deducted from RHI payments made. In addition, where an installation was not at least in part paid for by the owner, even where the installation was funded from a private source, that installation will not be eligible for the domestic RHI. An installation which has been part-funded by the owner will be eligible.
I have already installed my renewable heating system – Can I still claim the RHI?
You must apply to join the Domestic RHI within 12 months of the commissioning date of the renewable heating system. This can be found on the MCS certificate. The team that run the admin side of the RHI at DECC offer very little wriggle room here (99 times out of 100 – zero wiggle room!) so make sure you apply within the stipulated timeframes.
Technology Specific Eligibility Requirements
- All heat pumps must have a Seasonal Performance Factor (SPF) greater than 2.5 to be eligible for the RHI. Heat pumps installed by legacy applicants will automatically be considered to have an SPF of 2.5, and will require a full assessment by an MCS installer to prove a higher SPF (which would lead to higher RHI payments – so may well be worth doing!)
- If a heat pump is installed alongside another space heating system then a meter will need to be installed to gauge exactly how much heating is coming from the heat pump. RHI payments will be based on these meter readings rather than the estimated heat demand for the property.
Biomass boilers/wood pellet stove with back boiler
- If a biomass boiler is installed alongside another space heating system then a meter will need to be installed to gauge exactly how much heating is coming from the biomass system. RHI payments will be based on these meter readings rather than the estimated heat demand for the property.
- New installations of biomass boilers will need to meet strict air quality standards in relation to particulate matter and oxides of Nitrogen – as mentioned previously – legacy applications will not need to adhere to this.
- If the air quality standards change in the future, you do not need to concern yourself with your installed boiler not meeting the standards.
- To be eligible for the RHI, the fuel needs to be sourced from a supplier registered on the approved supplier list.
How do I apply for the domestic RHI?
The application process for the domestic Renewable heat Incentive is fairly simple, however numerous pieces of evidence (installation certificates, EPC, and photos for example) are required for the submission.
Since the RHI is funded out of a public kitty (through tax payers), it is important that the money being spent to subsidise the scheme is under the right level of scrutiny, hence the volume of evidence required.
Applying for the domestic RHI
Applications for the domestic RHI are made through the OFGEM website through the My RHI portal
However if you find the thought of carrying out this process a little too onerous, there are third party companies offering to complete this on your behalf, although obviously there is a charge for this service. The process genuinely is pretty easy though, so in our opinion certainly worth giving it a try yourself before getting this kind of company in!
The RHI is now closed to legacy applicants
If you are a new applicant (so the installation took place after the scheme launched), then you will be able to claim the RHI straight away.
Unfortunately the scheme has now closed to legacy applicants (i.e. those who installed their renewable heating system prior to the scheme going live in April 2014).
Can the set RHI levels be changed once I have applied?
The headline RHI tariff figures do change, like we have already seen for the biomass renewable heat payments, and as time goes on and the RHI budget gets used up, we expect further drops in the tariff to take place. The Government will look at the tariff levels every 3 months and adjust them accordingly – however if you are receiving the RHI – you have locked in to whichever rate was agreed at the beginning – this is the rate that you will receive for 7 years (although it will increase with RPI each year).
Is there anything else I need to know?
The government will run a “Metering and Monitoring Service Package”, which consumers can volunteer for. Data collected under this scheme will be shared by the Department of Energy & Climate Change (DECC) with the installer and consumer. Domestic RHI recipients who volunteer will receive £230 per year to have their heat pump installation monitored and £200 per year to have their biomass installation monitored.
Hybrid systems installed with a gas boiler or oil boiler will need to be metered, except solar thermal systems.
The system will need to be serviced annually in accordance with manufacturer’s instructions to ensure efficient running of the system.