DECC Announces Details of Domestic RHI

DECC published on the 12th July the response to its consultation on a Domestic RHI scheme, launched in September 2012. The response provides details of how the scheme will operate when it is opened for applications “in Spring 2014”, subject to State Aid and Parliamentary approval.  This message provides a brief summary of the highlights:

Key points in the domestic RHI response

• The domestic RHI is targeted at, but not limited to, off gas grid households.  Tariffs will be paid for seven years to the owner of the heating system and increased yearly by RPI.  The tariffs reflect support for renewable heat over 20 years but payments are being ‘front-loaded’ into the first seven years to reflect the capital-intensive nature of the investment.  The scheme will support air source heat pumps (ASHP), biomass systems, ground source heat pumps (GSHP) and solar thermal technologies. The support rates at launch in 2014 vary depending on the technology installed :

• The solar thermal tariff is capped by reference to the level of support offered to offshore wind. The tariff will be at least 19.2p, and possibly up to 21.7p, depending on the decision on the appropriate level of the ‘value for money’ cap following the outcome of the non-domestic tariff review consultation. The announcement on the final tariff will be made in the Autumn.

• DECC’s modelling projects that the domestic RHI might support around 750,000 renewable heating systems by 2020, predominantly installed off the gas grid.  The scheme is expected to be open until March 2021.

• RHI payments for heat pumps will only be made on the renewable portion of their heat output, determined by their Seasonal Performance Factor (SPF).  For heat pumps installed after the scheme launches, the performance of the system will need to be estimated by an MCS installer.  DECC is working with MCS to develop how to do this.  Only heat pumps with an SPF of 2.5 and above are considered renewable under the EU Renewable Energy Directive, and only those will be eligible for the RHI.

• The scheme will cover single domestic dwellings and will be open to owner-occupiers, private landlords, Registered Providers of Social Housing, third party owners of heating systems and self-builders. It will not be open to new build properties other than self-build, which is the only significant part of the outcome that we are disappointed at.   The scheme will be open to anyone in these groups who installed an eligible technology since 15^th July 2009, provided they meet the eligibility criteria (known as ‘legacy installations’).

• Recipients of RHPP and other forms of public funding will need to declare this and any support received will be deducted from RHI payments, spread evenly over the tariff period.  In some cases recipients of past subsidy may be deemed ineligible, however details are not yet available.

• All installations must be certified under MCS (or equivalent) and meet relevant required standards for each technology, including limits on emissions for biomass systems.  DECC is working with Ofgem and MCS to develop an online list of products that are eligible for the domestic RHI, that applicants and installers can access.  Legacy installations will need to meet the MCS standards that applied at the time of installation, rather than the current standards.  Hybrid installations will only be allowed where solar thermal complements another eligible technology.

• All applicants (including legacy) will be required to complete a Green Deal Assessment before applying.  They must ensure that they have met minimum energy efficiency requirements of loft and cavity insulation where required by the Assessment but are not obliged to undertake other ‘green tick’ measures.   The EPC will need to reflect any remedial work undertaken.

• The renewable heat generated will be estimated in most cases for payment purposes.  For biomass and heat pumps, it will be based on an estimated figure of heat demand from the final EPC.  For heat pumps, this will be combined with an estimate of the heat pump’s efficiency to determine the renewable proportion of the heat.  For solar thermal systems, the payments will be based on the estimate of system performance completed as part of an MCS installation.

• Those applying for a space heating system who want to have a back-up heating system, such as an oil boiler, or people applying for a second home, will need to install heat metering equipment on which the RHI payments can be based.

• New installations of biomass systems will need to meet air quality standards in relation to particulate matter (30g/GJ) and oxides of nitrogen (150g/GJ). Legacy installations, installed between 15^th July 2009 and the launch of the scheme, will not need to meet this requirement.  Once accredited on the RHI scheme, systems will be grandfathered.

• To be eligible for RHI support, fuel for a biomass system needs to be sourced from a supplier registered on an approved supplier list.  Such a list will be set up ahead of the launch of the scheme and will be the same one that is being established for the non-domestic RHI scheme.

• Installations will need to be ‘meter-ready’ and DECC is working with MCS to make it an MCS Installation Standard requirement that all new systems installed in the domestic RHI are ‘meter-ready’ where possible.  To help improve performance of renewable heating systems, there will be an extra incentive for applicants who install metering and monitoring service packages, of £230 per year for heat pumps and £200 per year for biomass boilers.  An installer will fit an advanced set of meters to the new heating system so that the householder and installer will be able to view measured data from their system over the internet.

• The Green Deal could provide a way to part-finance a renewable heating system; consumers will be able to use Green Deal finance and claim the RHI.  The amount of Green Deal finance offered towards the cost of a renewable heating system will depend on the expected fuel bill savings from the measures installed in the particular property.

• DECC intends that the scheme will open for applications in Spring 2014.  It will be administered by Ofgem.  Guidance will be available before the launch of the scheme on how to apply and the information that will need to be provided.  The opening date for legacy applications will be phased over time.

• All scheme participants will be required to regularly confirm their on-going eligibility to receive payments under the scheme. This means completing an annual declaration which will include confirmation that the system is still in use, meets the requirements of the scheme and is being maintained in line with manufacturer’s instructions.

• Consumer protection will be provided jointly by the MCS product and installer standards and the Renewable Energy Consumer Code, which MCS certified installers must be members of.

• To control the costs of the policy, DECC intends to introduce a system of degression, similar in principle to the one implemented for the non-domestic scheme.  This will reduce tariffs over time as threshold spend figures (“triggers”) are reached.  DECC may also introduce an overall cap to the scheme.  DECC will be announcing further details on cost control policy in the Autumn.

• DECC plans to review the domestic RHI in 2015 and 2017, with the aim of bringing in any changes in 2016 and 2018 respectively.  It is possible they may also do a tariff review sooner, if this was felt necessary.