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Last updated: 25 July 2019

How to Calculate Renewable Heat Incentive (RHI)?

Learn More About RHI

The Renewable Heat Incentive is a form of payment provided by the English government and it serves to ensure that only the heat produced for useful aims is paid for. It is part of the programme aimed at reducing carbon emissions by 80% in 2020 and temper the effects of climate change. This is only one of the numerous initiatives and you can learn more about the others by reading Find a Green Energy Tariff  Volume 1 and Volume 2.

There are two categories of RHI, depending on the type of property ownership. One category, called Non-domestic RHI  comprises instalments in commercial and other non-domestic properties while the second category, called Domestic RHI is open to homeowners, private landlords, social landlords and self-builders.

Four factors model for Renewable Heat Incentive

In order to calculate the value of the incentive, there are four factors to be considered apart from the category of RHI, either domestic or non-domestic:1) the type of renewable heating system, 2) the property’s heating requirement, 3) the system’s running hours and 4) the average level of inflation.

Eco 43Type of Renewable Heating System

This factor displays the different systems that could be adopted by companies or households: ground/water source heat pumps, air-source heat pumps, biomass or solar thermal with different tariffs applying to each of the energy sources.

Thermometer4Property´s Heating Requirement

This one refers to the amount of heat needed to keep the space warm enough. This value depends in turn on some of the property’s characteristics (the area to be heated, whether walls, floors and roof are isolated and the type of gazing that the building has). Obviously, the bigger the area and the lower the insolation, the larger the amount of heat needed. Usually, the government requires certification of good insulation as part of the application documents as renewable sources work better if the house is well insulated and this leads to real savings.

 Stopwatch 6 (3)System´s Running Hours

The third factor, the system’s running hours, depends on the size of the heating system. On the one hand,  the relative proportions of the heating with respect to the place to be heated up determine how many hours should the system work before it reaches the desired temperature. On the other hand, the size of the heating system also affects the performance and the duration of the system itself. Both oversize and undersize create some problems as too small heatings need to overwork (and are thus worn out earlier) while too big ones make the place hot faster and due to this, they are switched on and off very often. The other two variables to consider are the temperature you want to keep in the house and the external weather conditions, as the higher the degrees the more the heating running hours will be.

Seo 15Average Level of Inflation

The last factor is the annual rate of inflation expected for future years.

Payments for Standard and Multiple System (for applications submitted from 24 September 2013)

According to the number of quantities to be measured in order to calculate the Eligible Heat Output (EHO), installations are assigned either to standard or multiple systems. We call a system standard if there is only one quantity to be measured to calculate the EHO while in the case of multiple systems there are two or more quantities to be measured and summed to get the final value. There are also two different ways to calculate the heat produced: either directly measuring it (metering) or forecasting the likely amount (deeming).

Standard System

There are two options to calculate the Eligible Heat Output (EHO):

Cal1

As we underlined before, in the first point the amount is metered while in the second it is deemed.

Multiple System

For installations using a multiple meters there are 3 required pieces of information in order to calculate the amount of money due:

a. eligible heat generated

b. eligible heat used

c. total heat generated/used in the system

Then, there are two alternative ways to calculate the value of the payment:

Cal2

It is important to highlight that tariffs are not fixed but they change every year according to Retail Price Index (RPI) and any change is implemented starting from the first payment period after the 1 April every year. The instalments are paid every three months and the tariff values consider the cost of renewable energy in 20 years.

Moreover, the budget scheme is called digression and it provides a lower tariff rate as the number of green energy adopters increases. There is clearly a tradeoff in terms of the number of installations and the gains of the adopters. Therefore, since after a tariff decreases applicants receive a lower amount, it is convenient to be early movers and switch to the renewable energy source as soon as possible If you are thinking about going green, you better get informed and have the new appliances installed before the others spot the opportunity!

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