The Heat Pump Walkthrough

General Information About Government Aids

As one of his last acts as prime minister, Tony Blair signed the EU agreement for 20% of UK’s power to come from renewable sources by 2020. At the time the pact was signed, many people were skeptical about reaching the target and they regarded it as very ambitious, since at that time the renewable energy output was around 3 to 5%. Nowadays, the target doesn't seem so far of, and that is because the government have started working on different programmes and incentives that would enable people to be more informed and receive financial help in order to install the best renewable system. The UK government has started 3 programmes for people to reach out to, and they are as follow:

  • Green Deal - It’s part of the 2011 Energy Act.
  • Renewable Heat Incentive - Is the world’s first long-term financial support programme for renewable heat.
  • Feed-in Tariff - It’s the electricity part of what some people call Clean Energy Cashback, a scheme that pays people for creating their own "green electricity".
  • Renewables Obligation - It is a programme that allows to gain money from producing electricity using renewable resources.

General Information

Renewable Heat Incentive

People who wish to benefit for the Renewable Heat Incentive (RHI) have to install, generate and use renewable energy to heat their buildings. The UK government wishes to increase the generation of heat from renewable energy sources, instead of fossil fuels, thus the RHI helps the country reduce its CO2 emissions and speed up meet the targets for reducing the effects of global warming. This incentive consists of 2 parts: 

  • Domestic RHI - Launched on the 9th of April 2014 and open to homeowners, private landlords, social landlords and self-builders.
  • Non-Domestic RHI - Launched in November 2011 to offer payments to industry, businesses and public sector organisations.

This scheme has been designed to close the gap between the cost of fossil fuel heat installations and renewable heat alternatives by financially supporting the owners. The government estimate the policy changes that were set out could motivate around 5,000 non-domestic installations and an additional 6.4 TWh of renewable heat by the end of 2015, and with at least double in numbers and terawatts for domestic users.

Renewable Heat Incentive

Domestic RHI

The RHI scheme is available to generators of heat and producers of biomethane meeting the eligibility criteria of England, Scotland, and Wales. It is for households that are both on and off the gas grid. Usually, new house owners are not eligible, unless they are building their own house.

As mentioned above, this scheme has been initiated on the 9th of April 2014. A building qualifying for the domestic RHI can be defined as being a single renewable heat installation which powers a single house or flat. As an example, a social landlord installing individual heat pumps in multiple households would be considered as a domestic installation but if you install one heat pump which serves two or more houses, it is considered to be as non-domestic.

Domestic RHI mostly targets homes off the gas grid, but it’s not a rule. Houses without gas have the potential to save the most on fuel bills and decrease CO2 emissions. The incentive will cover single domestic dwellings and will be open to homeowners, social landlords, self-builders, and private landlords. The domestic RHI will pay the following tariffs per unit of heat generated for seven years:

Technology

Tariff

Air-source heat pumps

7.3p/kWh

Ground and water-source heat pumps

18.8p/kWh

Biomass-only boilers and biomass pellet stoves with integrated boilers

12.2p/kWh

Solar thermal panels (flat plate and evacuated tube for hot water only)

19.2 p/kWh

Source: www.gov.uk

The RHI guarantees an expected cost of the renewable heat generation for over 20 years. These payments will be every quarter. The government decided to make these payments after extensive consultation on how the financial incentive would work best for householders and landlords. Several documents regarding policy framework for introducing support for domestic renewable heating, consultations, and the associated impact assessment are all available on the British government’s website at www.gov.uk. There you will also find published a number of documents to guide you through the process on how to apply and receive payments from the RHI.

The domestic RHI was launched on April 9, 2014, while the non-domestic RHI was already launched in November 2011. Both  programs will last until the end of 2015/2016.

You can apply online through a simple procedure and providing some documentation. Read the Essential Guide for Applicants to check, whether you are entitled for the domestic or the non-domestic RHI.

The required documentation includes:

  1. Your Microgeneration Certification Scheme (MCS) certificate for your heating technology, ensuring a high quality standard.

  2. Your Green Deal Advice Report (GDAR) that is valid for 10 years and includes expert considerations regarding your house energy efficiency, the amount of energy used, suggested improvements, expected savings, and the expected investment payback from the improvements. From next spring on, this assessment will not be compulsory anymore for social landlords, but they could opt for Energy Performance Certificate less than two years old.

  3. Your Energy Performance Certificate (EPC): measures the household energy efficiency and suggests ways to increase it. It is required to ensure that the property classifies as domestic, that loft and wall insulation are in place, and that it is used for the payments calculation.

  4. Your bank account details to credit the installments. It is very important that the name on the application is the same on the bank account.

  5. If you are applying for a domestic heat pump, you are given a Seasonal Performance Value (SPV) of 2.5 by default, but it is possible to have the real value esteemed before submitting the application.

The application consists of two pages with access to the second one being subject to approval of the first. While in the first page general information about personal details and the heating systems are collected, the second page focuses more on personal details, and  additional documentation that may be required. After this phase, the decision is made and communicated to the user.

There are notable gains from installing renewable energy heating under the RHI. The installments are paid on a 7 year basis, and the amount of money depends on how much green energy has been produced and used.

Different tariffs apply for different renewable energy resources, as displayed in the table below.

 

Biomass boilers and stoves

Air source heat pumps

Ground source heat pumps

Solar thermal

Tariff per Kwh renewable heat

12.2 p

7.3 p

18.8 p

19.2 p

The scheme works in a degression trend in such a way that the RHI always breaks-even. This means that lower tariff rates are applied to the belated entrants. However, the tariff granted at the time of the application does not change and it is not affected by new adopters: it only changes once a year on the 1st of April, to align with the Retail Price Index.

Non-Domestic RHI

This programme addresses non-domestic agents spanning from commercial and industrial to the public sector and non-profit organisations and producers of bio methane. Non-domestic installations are those that produce a renewable heat unit at large scale to supply small community heating projects. Non-domestic users include hospitals, small businesses, schools and systems such as those where one boiler serves as a heating source for two or more buildings.

Bio methane producers are not required any accreditation but can directly register for the RHI funding since the rules provided for bio methane injection are deemed sufficient to ensure eligibility.

This part of the scheme is meant to help the public sector, businesses, and non-profit organisations that meet the cost of installing renewable technologies. Payments are made over 20 years and are based on the heat output of the system you’re using. The application process for this programme has begun on the 15th of July 2009 in England, Scotland and Wales. For Northern Ireland, there is another scheme that is implemented to help people with installing renewable heating.

After 4 years, in 2013, further developments have been made to this scheme, such as:

  • An increase for renewable combined heat and power (CHP) systems, large biomass boilers (over 1MW), ground source heat pumps, solar-thermal, deep geothermal and biogas combustion.
  • Support introduced for air-water heat pumps, commercial and industrial energy coming from waste.
  • A mature approach to budget management, by using well documented market intelligence to allow credible growth rates across all ranges of renewable heating technologies.
  • These changes in policy are estimated to motivate around 5,000 new non-domestic installations with an additional 6.4 terawatts (TWh) of renewable heat by the end of 2015/16. There was also the decision of implementing a transparent budget management mechanism in the non-domestic scheme called degression. This will ensure that budgets will be viable from April 2013 to March 2015. The government ensured that they publish monthly data on the scheme’s uptake and reduce tariffs, where it’s necessary and on a quarterly basis.

The table below represents the RHI tariffs and the technologies eligible for non-domestic RHI and the money received for each technology. This scheme is meant to provide a major incentive for owners and businesses to invest in renewable heat systems. The tariffs are based on pence/kWh of renewable heat delivered. The rates have been increased for ground source heat pumps (GSHP) after it has been proposed to DECC in May 2013 and were confirmed by the 4th of December 2013. The grants offered by the incentive vary from the system and scale used as follows:

Non-Domestic Renewable Heat Incentive

Scale

Revised RHI tariffs

pence/kWh

Tariff lifetime

in years

Ground source heat pumps

all scales

8.7

20

Air to water heat pumps

all scales

2.5

20

Solar thermal

up to 200 kW

10.0

20

Solid biomass²

up to 200 kW

7.6²

20

Solid biomass

200-1,000 kW

5.1²

20

Solid biomass

over 1,000 kW

2.0

20

Source: www.gov.uk

Rates revealed by Ofgem for year starting 1st of April 2014 - rates are due to change every year due to inflation.

There will be no RHI pay for air to water heat pumps which offer cooling as well.

RHI rates for small and medium biomass fall to 2.0p for use that goes over 15% of the full rated annual capacity.

RHI rates for GSHPs go down to 2.6p for use over 15% of the full rated annual capacity.

The program was launched in 2013 and it is still possible to apply.

The application process requires you to prove that you meet the requirements with your documentation. There are a few steps to follow:

  • You need to create a new account at the Non-Domestic RHI register on behalf of your organisation. You can refer to the Guide to Using the RHI Register provided by the government to guide you through the process. The application is organised in stages that can be saved so that you can complete your application at different times.
  • Upload your certificates and documents in .PDF format after completing the application. There are both general files that everyone should provide and there may be others specific to the case. Following, we list the required documents for any application:
  • Commissioning certificate/ report for the installation.
  • Schematic sketch of the diagram.
  • Photo of the meter/s used.
  • Letter of authorisation that empowers you to act on behalf of your company. Some templates are provided on the government website.
  • Documents/ bills that prove the non-domestic status by showing how it benefits from the heat provision.
  • Independent Report on metering arrangements.
  • Coefficient of Performance (COP) measurement for heat pumps.
  • Information about the capacity and the serial number of the appliance.

Specific requirements are:

  •  Biomass - A certificate showing that the boiler is used as a primary heating source.
  •  Biomass - A certificate showing that the boiler meets the standard air quality requirements.
  •  Installations with an external pipework - a heat loss certification is required unless the pipes are properly insulated.
  •  Post identification documents and bank details for payment.

As for the domestic RHI, there are gains and financial support from installing renewable energy powered devices. The payments span over a period of 20 years and they are calculated according to quarterly tariffs set by Ofgem, taking into consideration the number of applications and certifications. Based on your time of application, tariffs applied are different, you can check the tariffs scheme.

Renewable Obligations

Renewable Obligations is a scheme that rewards those who produce more than 50 kW of electricity from renewables through the sale and purchase of certificates. This programme has been initiated by the Government in order to increase the number of renewable energy in the country towards the target for 2020. There are clear financial benefits

  • Receive a payment for all the electricity you produce, even if you use it only for yourself
  • A reduction on your electricity bill, because you will be using energy you produce yourself
  • Additional financial benefits for the producers of most ROCs

Any company generating more than 50kW of renewable power is eligible to receive ROC’s that is the basis for the calculation of Renewable Obligations. Renewables covered under the scheme include: Anaerobic Digestion, Biomass, Hydroelectric (excluding some large scale installations), Tidal, Wind, Solar PV, Landfill Gas, Sewage Gas and Wave Power. Some technologies, although eligible, tend not to receive support due to the prohibitive cost involved.

The Renewable Obligations certificates are issued to generators for each unit of renewable energy they produce. The operators can then trade their certificates at the market rate, with energy suppliers then using the certificates to meet their ‘obligation’. Each year the obligation increases, with the current level meaning that 20.6% of generation must be met by ROC’s, or by the ‘buy out’.

Where suppliers do not have enough ROCs to meet their obligation, they must pay a buyout price currently set at £42.02 per MWh (this increases annually in line with the RPI), or buy more ROCs from the market.

The buy out money collected by Ofgem (who regulate the scheme) from the suppliers is then redistributed in proportion to the amount of ROCs they produce, creating a ‘win-win’ for those suppliers that produce the most ROCs.

The Renewable Obligations programme was started in 2002 and it is possible to apply until 31 March 2017.

The Office of the Gas and Electricity Markets (Ofgem) monthly collects the amount of electricity supplied by eligible renewable electricity producers. On the basis of these amounts, then the Ofgem releases Renewable Obligations Certificates (ROCs) that energy generators sell to suppliers in order to receive a premium over the price received for the energy sold.

The gains accrued by renewable energy generators depend on the ROCs level. There is no fixed level of such tradable goods since it is the result of a negotiation between the energy generator and the supplier but it converges to the buyout price (currently about £46). The obligation level is usually published on 1 April and it is applied from October on. From 2027 the value will be fixed for the following 10 years in order to reduce uncertainty and volatility.

Feed-in-Tariff

The Feed-in Tariff (FiT) operates in a similar way as the RHI, but it works for the electricity sector only. These tariffs have been initiated by the Government in order to increase the number of renewable energy in the country towards its target for 2020. These tariffs have 3 clear financial benefits:

  • Receive  payment for all the electricity you produce, even if you use it only for yourself.

  • Additional financial bonuses for electricity you export to the grid.

  • A reduction on your electricity bill, because you will be using energy you produce yourself.

The FiTs are designed for anyone who wishes to switch to a renewable energy source, so this obviously includes landlords, households, businesses and even schools and care homes. This scheme will pay the user dividends for most forms of renewable electricity systems in sizes up to 5 megawatts (enough for a large factory).

The Feed-in Tariff (FiT) scheme has been introduced on the 1st of April 2010 and has replaced the UK government grants as the main financial incentive in order to encourage people to install renewable electricity-generating technologies. You are going to get paid for the electricity you are generating, either if you use it just for yourself, or for any surplus electricity you export to the grid. Hence, you will receive money for producing your own electricity and save money on your electricity bill as well.

There are 3 steps you should go through in order to receive gains from FITs:

  • Register for the FITs and apply for the accreditation either through MCS-FIT or ROO-FIT route.
  • Installation planning: there are some requirements to be complied with but there are also eased paths for domestic installations that allow to speed up the process
  • Get the accreditation necessary to receive the tariffs. These are usually sufficient to be entitled for the payments, but sometimes additional requirements are needed.

The program was launched on April 1st and it will close in March 2021. The budget is revised every year and the closing date changed accordingly.

Systems installed starting from the 15th of July 2009 can also join the FiTs scheme, but they will only start receiving money after 1st of April 2010. If you already made the conscious choice of installing a renewable electricity system, under the present rules, it is qualified only if had been registered for the Renewables Obligation by the 31st of March 2010. The UK government specified that installations completed before July 15th will not receive full Feed-in Tariffs rates. This means that people will receive the tariffs at a basic rate of 9p per kWh.

Before applying, it is wise to have a home energy check so you can make sure you are maximising your energy potential.

The next steps involve:

  • Deciding on which technology to install and find a certified installer.

  • Get a certificate from your installer attesting that your device complies with the standard.

There are two ways through which you can get an accreditation for your installation:

Accreditation

Technology

Declared Net Capacity

MCS-FIT

PV and wind

  • up to 50 kW microgenerators

  • up to 2 kW micro CHP installations

ROO-FIT

PV and wind

  • between 50 kW and 5 MW

  • anaerobic digestion and hydro up to 5 MW

The Eligibility Date is the starting point for  payments. It is the date when the FiT supplier receives your application and starts processing it.

As mentioned before, there are benefits from applying to this programme. Tariff rates have been decided on the basis of the Feed-in Tariff 2012. You can have a glance at the latest rates.

Timeline

Renewables Obligation (RO)

Renewables Obligation (RO)

UK's suppliers are asked to source some of the energy they produce by renewables and are rewarded for this amount.

/p> 2002 (until 31 March 2017)
Feed-in-Tariff (FITs)

Feed-in-Tariff (FITs)

Users that produce and use low carbon electricity are paid both the consumed energy and the one sold to the grid.

/p> 1 April 2010 (Until March 2021)
Renewable Heat Premium Payment (RHPP)

Renewable Heat Premium Payment (RHPP)

Payment to support households, communities and social housing landlords that want to buy renewable heating technologies

/p> August 2011 (Until 31 March 2014)
Renewable Heat incentive - Non domestic (Phase I)

Renewable Heat incentive - Non domestic (Phase I)

Payment to commercial, industrial and public entities that produce renewable energy for 20 years

/p> November 2011 (until 2020)
Renewable Heat Incentive - Domestic (Phase II)

Renewable Heat Incentive - Domestic (Phase II)

Payment to homeowners, private landlords, social landlords and self-builders over a seven years period.

/p> 9 April 2014 (until 2020)