10 Mar 2011

Renewable Heat Incentive: kicked into touch

So today, at long last, the government (in this case DECC or the Department of Energy and Climate Change) published the details of the Renewable Heat Incentive. Ever since the last administration announced this dog of an idea in February 2010, it's been subject to a constant barrage of criticism from just about all sides. Even the manufacturers and installers of heat pumps, biomass boilers and solar panels have been throwing mud at the ministry. Not because they are against the subsidy in principle, but because the way it's been managed means that many of them haven't had any work for a year whilst their potential customers wait to see what this incentive would actually consist of.

So? Was it worth waiting for?

Well, the bad news is that the domestic customer — i.e. your typical selfbuilder — is barely any the wiser than they were yesterday. Listen up. This is what the boys from the ministry have hit upon. They have divided the market into two, domestic and non-domestic (or commercial). And whilst the non-domestic customers can plug into the incentive more or less right away, the domestic side has been put on hold for another 18 months. "Until the Green Deal comes into effect" is what they are saying. Now if the Green Deal has anything like the same smooth trajectory that the Renewable Heat Incentive has enjoyed, you can take a pretty fair guess that it won't be appearing in 2012. Methinks it's really just a delaying tactic.

Now what they are saying is that come 2012 (or whenever) there will be a payment based on how much energy you use, but they haven't actually said you how much it will be yet. And yet they expect people to make informed decisions on this basis!

All is not lost. There is a transitional arrangement for domestics which has been put in place from this July and it's to be called the RHI premium payment. This is a capital grant, very similar to the ones we have already had (first Clear Skies, then the Low Carbon Buildings Programme, neither of which was a resounding success, as they kept running out of money). And they have published a table of how much these new installation grants will be worth.

• Solar Thermal - £300/unit

• Air Source Heat Pumps - £850/unit

• Biomass boilers - £950/unit

• Ground Source Heat Pumps - £1250/unit

They have set aside £15million to fund these payments and expect to have 25,000 installations going through it before it gets reviewed. By my calcs, that's an average grant of £600. If it's anything like the Low Carbon Buildings Programme, it'll be doled out on a first come first serve basis and when the money runs out, tough.

Now these amounts are not to be sniffed at, but neither are they generous. They are at best appetite wetters. The real action is expected to be coming in from the tariffs which will pay so much per kWh consumed. But they haven't published tariffs for the domestic sector. Domestics will have to wait (18 months?) before they find out what the rates will be. It's a bit like taking out a mortgage and being told that you'll find out the interest rate sometime in the future. Not really terribly compelling, is it?

If the non-domestic tariffs are anything to go by (and these have been published today), it looks as if tariffs will be greatly reduced from the levels suggested in the original consultation document. For instance:
• Ground source heat pumps: consultation doc tariff 7p/kWh for 23yrs, today's tariff 4.3p/kWh for 20 yrs
• Solar thermal: consultation doc tariff 18p/kWh for 20 yrs, today's tariff 8.5p/kWh for 20 yrs

You get the drift. It's cuts all round before the RHI has even started. One can only surmise that, by 2012, the rates will drift even lower.

Now sir source heat pumps (ASHP) — what fate awaits them? Well, it's intriguing. As you can see, ASHP qualifies for a premium payment of £850. But the non-domestic tariffs don't support ASHP. How can this be? Buried elsewhere in the main document is a rather cryptic statement that states:

Air source heat pumps will not be supported from the outset because more work is needed to better understand the costs associated with the technology and, for air to air heat pumps, work is ongoing to develop a robust methodology for measuring heat delivered in the form of hot air. Subject to successful conclusion of this work and other factors (such as the role of cooling as opposed to heating in such systems) we intend to extend eligibility to this technology from 2012.

And if the work isn't successfully concluded? Presumably, ASHP will be dropped from the scheme. It hardly breathes confidence into the market, does it?

So it's all a bit of a dog's dinner. What started out as something like the Feed-in-Tariff for heating technologies is getting watered down to a mixture of a small installation grant and a bit of extra help with the bills. Arguably, this is what it should have been all along, as the supported technologies have questionable green credentials at best. But the problem is that the delay in implementing this incentive has contrived to all but cripple the small businesses it was setting out to support. And the consumer, especially the off-gas grid selfbuilder (who was potentially the main beneficiary of the RHI) is still left groping around in the dark as to how to heat their home. I anticipate being swamped with queries about home heating strategies at the Homebuilding & Renovating show later this month and I can tell you now that I won't have a clue what to say.

The Renewable Heat Incentive has now become a case study in how NOT to go about it. What was designed as a policy to kick-start an industry has ended up kicking it into touch.


  1. Mark

    you simply say Insulation and airtightness, which was always the common sense approach

  2. ...work is ongoing to develop a robust methodology for measuring heat delivered in the form of hot air.

    You'd think that bunch would be experts on things in the form of hot air, wouldn't you?

  3. Mark, thanks for your good summary which I read having trawled through the policy statement. I have waited for the delayed proposals with interest to see what would change from the initial consultation, and it is disappointing to see just how much it has changed.

    Most significant is undoubtedly the delay - whilst the DECC can now claim to have initiated the scheme, in reality all that has been done is to say the domestic market must wait for 18 months. With the current financial climate, and the fact that this is funded directly by the Treasury perhaps this is not surprising.

    So what will this mean for my own, off mains, renovation? I will still aim to improve the insulation levels and airtightness as before, but the planned ASHP and solar thermal combination has suddenly become much more expensive than I had hoped it would be. If I am lucky maybe I can still secure a one off 'premium payment' in the short term. The question now becomes is a high efficiency oil boiler at a fraction of the initial cost a better bet than ASHP?

    It would have been good to see the opportunity taken to target the domestic market in priority over non domestic users rather than vice versa; doing so could have seen a much more mainstream take up of alternate heating sources in the home market whilst potentially addressing some elements of 'fuel poverty' in the medium term.

    The compulsory metering should be a positive but may also become double edged - is there is a risk that running a GSHP and leaving the windows open could generate more heat related income than maximising efficiency and energy conservation?

    Lets hope the opportunity the RHI promised has been deferred and not missed.

  4. James,

    A couple of points. It's not clear that metering will be compulsory in the domestic market. The consultation suggested it would be deeming, yesterday's document says nothing on the matter, except that many of the previously deemed supplies have switched to metering in the non-domestic sector.

    I very much doubt the tariffs will be so generous as to allow you to leave the windows open and burn heat with abandon. In fact, it's quite clear from the published non-domestic tariffs that they are only going to pay a proportion of the running costs, not all of them.

    Oil boiler or ASHP? It's difficult. Oil boilers are not much cheaper than ASHP and cost roughly the same amount to run (without taking the RHI into consideration). I suspect that ASHP now edges it. The problem is what happens when you get weather like we had in December and ASHP packs up!

    This is where a passivhaus-style solution begins to look like the answer, backed up with a large hot water tank and an immersion heater switched to Economy 7.

  5. Comment posted by James that somehow didn't make it onto the blog but still arrived in my in box.

    Mark, thank you.

    For metering perhaps I am guilty of reading between the lines, but when there is comment such as they are looking at how to acceptably measure the output of air to air systems before including them in 2012 it does appear they have gone a long way down the metered route already and I suspect they will take the same approach in domestic situations. On balance it would seem fair to reward actual generation rather than base payments on designed specification (and this is closer to the FiT scheme), but it does mean it does not necessarily incentivise further energy efficiency improvements to homes.

    Oil vs ASHP. I fully agree with your comparison for a new build system but the equation is sadly not as good for me in a renovation situation with an older oil system already on site (so retaining a useable tank etc) and the cost of ASHP is going to be roughly twice that of a replacement oil boiler. That said I still hope to go ahead with a Mitsubishi Ecodan for a number of reasons.

    Some of my disappointment with the news yesterday was that ASHP has been omitted, at this stage, as this is a technology I have looked closely at over the past two to three years, and is one that I think shows significant potential in the domestic market where GSHP cannot be, or is not cost effective to be, used. As to the December weather, well let us not forget to what happenend to some gas condensing boilers when they froze... no technology is entirely proof against exceptional weather conditions - even my woodburner failed, or rather the lock to the wood shed froze solid and I could not get to the fuel!

    Your Passivehaus comment is interesting. It seems to me there are very few people who really understand the full complexities of designing to maximise the passivehaus potential, and I am certainly not one of them. I have however picked and chosen certain elements for my renovation which I hope will make a contribution, eg changing size, position and specification of openings, use of various insulation techniques to improve thermal performance and airtightness and adding a wide front conservatory to act as a solar collector. Are all these as efficient as possible? No. Some will be expensive in terms of their return, some will be excellent value but the litmus test will be a simple one - am I warm in winter without horrific bills!

  6. ASHPs and cold weather - bad news unless ASHP is large enough to heat building at a COP of 1.5 or so (-15 degC). If you use electric resistance "backup", you crash the nationsal grid.

    Wonderful ... power cuts for the rest of us, all because a group of silly people thought ASHPs were "renewable energy" and would work as well as a boiler in cold weather.

    No less than the nationalised elec industry said this was a naive idea 30 years ago. (But don't worry, Prof. Mackay and DECC know better.)

    If ASHPs need a backup oil heating system, should ASHPs become widespread and really threaten grid stability, it gets bizarre.

    Logically, for low CO2, stick to an LPG condensing boiler, high insulation and large active solar system. Cheaper than heat pumps and lower CO2 emissions now, regardless of assumptions about the grid being "decarbonised".

    Solar best installed when roof needs work anyway.

  7. "kicked into touch" - an industry, and homeowners, kicked in the balls, more like.

  8. I would second your skepticism about the new planned start of the domestic RHI and the Green Deal.

    We have a number of forum members who went ahead with biomass installations in good faith, who are now left in limbo. The announcement has raised as many questions as it has answers.

    We have referred to your article here, 'Renewable Heat Incentive Launched or Delayed?as it is one of the best straight forward explanations we have read to date.