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OVERVIEW
- Renewable heat counts towards CRC EES targets
- Investments in renewable heat are expected to have paybacks in
the region of 5-12%
- Preliminary accreditation of designs with Ofgem secure budget
allocations, reducing investor risk
- The scheme is capped, early adopters will benefit from tariffs
before digression from 2012
- Payments are made over 20 years by Ofgem against metered
readings
- Installations made prior to the scheme i.e. 2009 are also
eligible. However, those "meeting" planning requirements and only
capable of occasional use may need redesign
- System owners, not third parties, must register the
installations with Ofgem to gain the tariffs
- Installations meeting quality criteria are eligible
- Replacement installations are eligible
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INBUILT'S OPINION
The Renewable Heat Incentive (RHI), launched April 2011, is a
payment for renewable heat generated by a range of technologies
including heat-pumps, solar thermal, biomass boilers, renewable
combined heat & power, biogas and bio-fuels and bio-methane
injection into gas grid. Incentive payments are made over 20 years,
funded from Government central funds to encourage the take up of
renewable heating. The RHI is linked to the Retail Price Index
(RPI).
£860m has been allocated to the scheme administered by Ofgem.
The metered heat energy will reduce an organisation's reported CO2
emissions e.g. where required by the CRC Energy Efficiency Scheme.
Tariffs vary by the technology installed and reduce from Tier 1 to
Tier 2 when energy load factors exceed 15%. Ofgem is likely to add
heat to its future regulatory activities following the introduction
of the RHI and use of heat metering.
RHI is being launched in 2 phases: Phase 1 starts in April 2011
for Industrial, Commercial and large scale heat users; Phase 2 for
Domestic applications from 2012 introduced with the Green Deal.
Payments will be made by Ofgem following registration of the
installation and provision of metered data. Investor confidence
should be improved through "preliminary accreditation" of designs
with Ofgem and guarantee the availability of funding - a potential
risk with government capped schemes. Early adopters that install
and commission renewable heat in 2012, before derogation, have a
greater chance of enjoying the financial benefit offered by
RHI.
Unlike renewable electricity systems that produce a fraction of
the energy demand, renewable heat systems will provide a much
larger fraction and interface with existing heat systems. There is
therefore an incentive to sort out problems with existing heat
systems that, until the introduction of RHI, were not worth dealing
with. There are a number of ways of procuring RHI technologies
which include self-procured as well as investor led.
STEPS TO SECURING A PROFITABLE RETURN
If you are considering your options under the RHI you should be
preparing to have any renewable technology commissioned as early as
possible. This means having a clear strategy that aligns with your
business objectives so that you gain maximum benefit from the
scheme, the technology and the other benefits that you can exploit.
It is vitally important that you have an independent expert on your
side who can deliver and manage all aspects from outline
feasibility, to strategy, to installation focussed on benefit to
you. The best practice process you should follow must allow you to
pull out at the appropriate stage and ensure that you gain the
necessary intelligence to make sound business and financial
decisions as a result.
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