Is RHI incentive enough?

Over a year into the first phase of RHI, Jeff House, Marketing & Applications Manager for Baxi Commercial Division asks, what is the story?

The Department for Energy and Climate Change (DECC) introduced the RHI scheme on 28 November 2011 to promote the uptake of renewable heat technologies by industrial, commercial, public sector and not for profit organisations.

A range of technology types are supported with potential applications from single building scale through to much larger community size schemes. Of immediate relevance to the building services sector are support for solar thermal, biomass and ground source heat pumps; all established technologies which can be effectively integrated into heating and hot water systems at building level.

In the new build sector regulatory compliance provides a significant driver for the adoption of renewable heat, however, in wider terms the replacement and refurbishment market will prove more critical with respect to meeting UK Governments legally mandated emissions reduction targets.  

Through the Climate Change Act there is a legal requirement for the overall UK CO2 emissions to be reduced by 80% against a 1990 benchmark. As acknowledged by DECC, heating and hot water production account for almost half of all energy consumption in the UK therefore effective reduction of demand and integration of low carbon technology will be crucial to meeting mandated targets.

The scale of the task in hand is bought into stark relief by the Government Construction Advisors assertion that some 80% of the building stock predicted to be in use come 2050 is standing today.  Therefore from a policy viewpoint the link between the Climate Change Act and the RHI is clear, a far greater share of renewable heat is needed in our existing buildings.

Key considerations

Clearly capital investment is a key consideration for building operators, with this in mind RHI pays up to 8.9p/kWh, index-linked, for up to 20 years, making calculations of the whole life cost of installations far more attractive.

To meet expected demand for the first phase of RHI a budget of some £70 million was allocated per financial year. OFGEM, who administer the RHI on behalf of DECC, publish quarterly updates, the latest of which states that, as of the end of September 2012 only £1.2 million had been dispensed to accredited installations for the year 2012/13: less than 2% of the budget. This is somewhat concerning as the scheme is structured such that any annualised under spend is not re-invested in successive years.

At face value this would suggest the scheme has failed and the market appetite is simply not there for renewable heat. With further investigation a different picture emerges.

Firstly it is interesting to see the number and split of successful applications reported by OFGEM. From a reported 348 accredited installations biomass is clearly dominant and, surprisingly, solar thermal only accounts for some 3% of installations. This leads to the first issue with the scheme. 

In order to meet with RHI entry requirements all ‘useful’ renewable heat must be metered and dedicated heat meters must be of ‘class 2’ accuracy, compliant with the relevant requirements set out in Annex I to the 2004 Measuring Instruments Directive (MID) (2004/22/EC). Most solar thermal systems use a mixture of glycol and water as a heat transfer medium, to provide frost protection, obtaining a heat meter  compliant  with ‘class 2’  accuracy  specifications  able  to  measure  a glycol mixture, proved somewhat challenging at the scheme outset. There are now a number of suppliers offering equipment to meet this requirement therefore opening the RHI up to more solar thermal applications.

Multiple heat sources

Heat metering in general has also been identified as somewhat of an issue for RHI applicants with systems comprising multiple heat sources; the number and arrangement of meters required for such proving to be unnecessarily complex.

Difficulties with heat metering aside, market feedback also brings into question the overall application procedure; it is claimed this is a barrier to uptake both in terms of administrative burden and length of time taken to process.

In June 2012 OFGEM consulted industry over a range of topics pertaining to RHI. In light of findings OFGEM has now published new guidance documents intended to support applicants in submitting a full and ‘properly made’ application, saving time, improving the rate at which applications can be processed and encouraging greater take-up. These documents provide information concerning the issues with heat metering, and sets out what they are doing to speed up the accreditation process, as well as explaining what applicants can do to ensure installations meet scheme requirements.

OFGEM report that the number of RHI accredited installations increased from 121 to 348, between June and September 2012, an increase of 188%.  Whilst this is encouraging, there is clearly more work to be done by Government in order to deliver anywhere near the expected take up.