CPD articles

CPD: Renewable heat incentive

11 October 2012

•  What the RHI scheme is
•  What the scheme covers
•  How to apply for payments

Click here to be taken to the online test paper for the October 2012 issue

After the fiasco of Feed-in Tariffs for solar PV, the government is under pressure to ensure its flagship Renewable Heat Incentive scheme works effectively. Neil Lawson looks at the scheme in more detail.

In March 2011, the Department of Energy and Climate Change (DECC) announced a world first: a major financial scheme to revolutionise the way heat is generated and used in buildings. It was hailed as a way to increase green capital investment by £4.5bn up to 2020, stimulating a major new market in renewable heat.

By “renewable heat” read technologies such as biomass boilers, ground source heat pumps and solar thermal panels — all ways of generating heat for buildings using a renewable energy resource, such as the sun, ground or water. Installers of these energies can apply for cash payments from the government, which has committed £860m of funding over the period  2011-2015. RHI tariffs are designed to provide an income stream for 20 years to any organisation that installs eligible heating systems, ensuring that renewable heat is commercially attractive when compared to fossil fuel alternatives.

Inauspicious start
Unfortunately, the RHI didn’t get off to a particularly good start when phase 1 was launched to commercial customers about a year ago, accrediting just 20 installations in its first five months of operation. The low number wasn’t necessarily a reflection of the popularity of the scheme — 376 applications were made — but rather the high number of incorrectly submitted applications. Changes were brought in by Ofgem which runs the RHI scheme for DECC, particularly aimed to making the application process a bit clearer. While this has certainly helped, there is still a lot of misunderstanding in the market and the DECC target of 126,000 installations by 2020 is looking increasingly ambitious.

In June 2012 there came another shock.  Climate change secretary Greg Barker announced that the government was limiting RHI payments to £70m during this financial year. It would also suspend the subsidy for the rest of the financial year if it forecast the budget would be exceeded. This would be triggered if 97% of the budget was used up. Renewable heat installers would be given just a week’s notice of the suspension.

This potentially could become a big problem in coming months when the RHI starts paying out to domestic customers who have installed renewable heat technologies. At the moment, applications can’t be made for single domestic properties — that is, homes defined as a “self-contained unit” for council tax purposes — although multiple domestic premises and mixed-use premises are eligible for RHI. However, a consultation was issued last month extending the RHI to single households. The consultation states that all measures that can be funded by the Green Deal should be carried out first. There is a likely backlog of RHI qualifying installations in individual homes going back to July 2009. As soon as that scheme for domestic installations is launched, the RHI budget will come under pressure.

An accompanying consultation extends the applicable technologies to include air source heat pumps, direct air heating from biomass, bioliquids, biogas above 200kWth, energy from waste other than municipal solid waste (MSW), geothermal and combined heat and power (CHP).

Air source heat pump technology is included in the latest proposals for commercial property RHI

Get applications in quick
Applications for RHI have to be in accordance with the RHI Scheme Regulations 2011 and they have to be made online at Ofgem’s website. Installations have to be completed and commissioned before applications are made, although Ofgem will accept installations of 1MW or larger up to a month before commissioning to allow time to process the more complex applications.

Applicants need to show evidence to support the installation, including company details, installation capacity, date of installation and installation serial number. You will also need to commit to meet ongoing obligations such as regular submission of heat data and meter readings, maintenance of heating equipment and meters, and declaration of change in ownership. Site inspections may be made before and after equipment is accredited. Successful applicants will then be sent a statement of eligibility confirming the applicable tariff rate.

Preliminary accreditation
To give applicants a bit more certainty in the whole process, the RHI scheme allows preliminary accreditation to be applied for at planning stage. This doesn’t guarantee the rate of tariff at the time of preliminary application, but it will give you assurance of full accreditation once the plant is commissioned and is working according to original plans.

Preliminary accreditation is aimed at larger, more complex bespoke installations and is currently limited to biogas, geothermal and solid biomass and solid biomass contained in municipal waste installations (in proposed installations over 200kWth).
Before preliminary accreditation is granted planning permission must have been given for the installation if required. The application must include the proposed layout of the installation including positioning and number of meters. Preliminary accreditation can be withdrawn if the original information was incorrect or legislation changes mean that the original application would not have been granted accreditation.

You can also make an application for more than one installation if they use the same source of energy and technology (such as ground source heat pump) or form a common heating system. For instance, two biomass boilers generating heat for a common heating system would be treated as single plant. If plant is already accredited under RHI then the new installation would be treated as “additional capacity”.

Who can apply?
We are currently working with a range of organisations in the private and public sector. It is a particularly attractive scheme for anyone with sites off the gas grid and buildings dependent upon oil, LPG or electricity for heating. To be eligible for the scheme, you must meet the following criteria:

•    You must own the installation. Unfortunately, while construction managers may advise their clients, agents and third parties can not act on behalf of an owner. If the owners are companies or public authorities, key individuals need to be nominated to act on the organisation’s behalf. Multiple owners will have to decide who receives the RHI payments.

•    Installations must be completed and first commissioned on or after 15 July 2009. Evidence of installation and plant installation may be required including photographs of the installation.

•    Public grants must not have already been received for an installation. However, installations commissioned on or after 15 July 2009 may be eligible if public grants are repaid.

•    Plant must be new when installed. Converted equipment will not be eligible for the RHI. Location of new installations must be as stated in the application. A heat exchanger added to an existing electricity-only plant will be considered new if used for eligible heat purposes.

•    Heat delivery. The technology must use liquid or steam to deliver heat, although the final use can be to heat air, such as radiators.

•    Microgeneration requirements. Certification for both the technology and the installation is required for installations of 45kWth or less, including ground source heat pumps, water source heat pumps, solid biomass and solid thermal. Certification must be under the Microgeneration Certification Scheme or other equivalent certification schemes such as Solar Keymark 29 for solar installations or any scheme accredited under European Standard EN45011. Certification will not be required if the combined installation capacity of more than one technology is over 45kWth.

•    District heating. District heating, such as a central boiler for an apartment or pipes to create a network are allowed for RHI as long as the heat is produced by an eligible installation. An installation producing heat for a district heating system will not receive a higher tariff if it is the same size as a boiler generating heat for a single building.

•    Dual fuelled plant. No fossil fuel is supported and if a dual plant generates heat from a fossil fuel it will have to be metered separately to heat produced by eligible systems.

•    Installation capacity. This is defined as “total installed peak heat output capacity” for the installation. For CHP systems this relates to heat output of the plant in the form of usable hot liquid or steam. Heat used to generate electricity is not eligible.

•    Heat use. Heat used must be for eligible purposes. Under the Regulations this is defined as heating a space, heating water or carrying out a process (such as industrial cooking, drying or chemical manufacture). What is not acceptable includes uses such as the heating of open external spaces or heating open air swimming pools.

•    Buildings must also be “long lasting” and “fully enclosed”. Tents, polytunnels etc are not considered long lasting. Moveable structures that have a long period of use, such as static caravans and greenhouses, are eligible.

Tariffs
How much RHI tariff you may receive is determined by the amount needed to bridge the gap between the cost of conventional and renewable heat systems. RHI tariffs for different technologies have been calculated on the basis of a return on additional capital invested on technology and fuel of 12%. The exception is solar thermal, which is more costly per unit of energy and would risk emptying the funding pot if it received support on the same basis.

Proposed domestic tariffs
The proposed tariffs for domestic are: 17.3p/kWh for solar thermal; 12.5-17.3p/kWh GSHP; 6.9-11.5p/kWh for ASHP; 5.2-8.7p/kWh for biomass. Payment depends on the type and size of technology and the amount of heat generated (see table below).

Eligible technologies

Under the current regulations, the following technologies are eligible for RHI:

Solar thermal
Installations of less than 200kWth are eligible. MCS requirements apply for kit less than or equal to 45kWth. Collectors must be flat plate or evacuated tube. RHI is eligible for the heat produced, not the electricity.

Geothermal
The technology must generate heat using naturally occurring energy located at least 500m beneath the surface. If less than 500m below ground these systems would be classed as ground source heat pumps.

Ground and water-source heat pumps
Systems using heat from the ground or surface water are eligible. Installations of 45kWth or below need MCS certification. Pumps must have a coefficient of performance of at least 2.9.

Solid biomass
Installations must be designed for solid biomass as primary fuel, but wet fuels such as food waste can be considered. Regulations require heat to be transferred through liquid or steam, which must be metered.

Biogas combustion
Only installations of less than 200kWth are eligible. Heat must be produced using anaerobic digestion, gasification or pyrolysis. The participant must not use biogas from landfill.

Combined heat and power (CHP)
To be eligible for RHI the CHP must use either geothermal, biogas or solid biomass, and meet the criteria for these technologies.

District heating
This is eligible for RHI as long as heat is produced by an RHI-eligible installation. Typically biomass and large heat pumps are used in district heating networks.

Biomethane injection
This is a relatively new technology and regulatory frameworks are still developing. Ofgem advises applicants to contact them early in the process so they can advise how best to meet legislative requirements.

Associated infrastructure
This is not included in the definition of eligible installations such as heat meters, pipes delivering heat to users, heating controls, pumps, valves, radiators, heat exchangers and heat storage kit.

 

Click here to be taken to the online test paper for the October 2012 issue

Neil Lawson is head of renewable heat at Ardenham Energy, a nationwide designer and installer of renewable energy systems for commercial and public sector buildings.
www.ardenhamenergy.co.uk

 

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