Information and advice for anyone who uses heating equipment at home
or work and is off the mains gas network
The Domestic Renewable Heat Incentive (RHI)
What is the Renewable Heat Incentive?
The Renewable Heat Incentive (RHI) is a government scheme designed to reduce the nation’s carbon emissions by incentivising people to install renewable heating in their buildings. There are two versions, one for the non-domestic sector and one for residential homes.
The domestic scheme offers regular ‘support’ payments for seven years for those using certain types of renewable technologies to heat their homes. The amount that’s paid depends on what technology is used and a ‘deeming’ calculation that estimates the property’s annual heat usage, evidenced by an Energy Performance Certificate provided as part of a Green Deal Assessment.
How do the RHI payments work?
Homes that qualify will receive a quarterly support payment, in arrears, for a period of seven years. The energy regulator Ofgem is responsible for dealing with applications and payments.
The RHI supports the following technologies:
- Air-to-water heat pumps
- Biomass boilers and biomass pellet stoves with back boilers
- Ground and water source heat pumps
- Solar thermal panels.
To qualify, homeowners must have a Green Deal assessment done on their property and ensure that it meets the necessary minimum standard for insulation. Additionally, the renewable heating equipment must be installed by someone who is registered with the Microgeneration Certification Scheme (MCS). OFTEC is a certification body for MCS and MCS registered installers of renewable technologies can be found via the OFTEC website. Owners of all eligible renewable heating systems installed on or after 15 July 2009 may apply for the RHI.
Is the RHI right for me?
Each property is different so it is very difficult to give a simple answer. It is important to understand that the RHI payment tariffs have been set carefully by government to allow homeowners to recoup some of the high installation costs associated with installing renewables. They are not designed to enable homeowners to profit from installing renewables and the switch won’t necessarily save you money – in some cases you may actually end up paying more for your heating. For most off-gas homeowners, the installation costs are the biggest barrier to participation. Renewable energy systems typically cost between £7,000 and £19,000 (1) to install and many rural homes are difficult to convert without substantial, expensive modifications. This is because the UK’s rural housing stock includes some of the oldest and least energy efficient buildings in the whole of Europe.
The savings associated with running renewables are often overstated. For example, there is currently little to choose between the annual cost of heating a radiator system with an air source heat pump or an oil condensing boiler. However, the average annual cost of electricity prices have risen 28% in Great Britain over the last three years, while the average price of kerosene has actually fallen (2). If these trends continue it may not be wise to replace an oil boiler with a heat pump. Detailed calculations done by OFTEC, comparing the cost of installing an oil condensing boiler to an air source heat pump in a typical three bedroomed home, found that even with RHI payments, the heat pump was significantly more expensive over the seven year RHI period. You can find the detailed calculation on the Oilsave website.
Who should consider the RHI?
OFTEC believes the following are most likely to benefit from the RHI:
- Homeowners with significant savings who plan to remain in their home for at least ten years
- Homeowners making major renovations who can include the installation cost as part of their mortgage
- Homeowners with modern, easy to convert properties that already have excellent insulation/double glazing, etc.
The RHI is unlikely to benefit:
- Owners of older properties with single skinned walls and single glazing
- Homeowners who can only finance the installation cost by taking out a loan.
The bottom line…
Renewable heating is suitable for some homes and the RHI will be an attractive option in those cases. Because of the high upfront costs and concerns that homeowners could be miss-sold technologies that will fail to heat their home in the coldest weather, we recommend doing careful research before making any decisions. Oil heating works well when combined with a heat pump or solar thermal panel, so a system using both conventional and renewable heating may also be worth serious consideration as, in many cases, it provides a ‘best of both worlds’ solution. However, for the majority of off-gas homes, the simplest, cheapest and most effective option is to upgrade to one of the latest oil condensing boilers. This simple step will reduce your heating bills and carbon emissions by around 20%, while making it easy to add other improvements in the future.
Overall it would be wise to discuss your heating options with your installer.
1 - The Energy Saving Trust
2 - Figures supplied by independent energy analysts, The Sutherland Tables