ECA Today reports:
The commercial Renewable Heat Incentive (RHI) was launched with much fanfare at the end of 2011, but take-up remains lower than expected. With the much- delayed domestic scheme soon to be rolled out, could the RHI yet prove to be a lucrative opportunity for contractors? ANDREW BRISTER reports
Nearly half of all the energy consumed in the UK is used to produce heat. The government knows, if it is to meet its target to generate 15 per cent of its 2020 energy consumption from renewable sources, it needs to do something about heat – and quickly.
Only about two per cent of current heat demand is met by renewable sources. The coalition estimates that 12 per cent of heat needs to come from renewable energy by 2020 if overall targets are to be achieved – a near six-fold increase from today’s levels. The Renewable Heat Incentive (RHI) is the principal mechanism for driving this tough transition.
The first such scheme in the world, the RHI was launched at the end of 2011 and aims to bridge the gap between the cost of fossil-fuel heat sources and renewable-heat alternatives, through financial support for owners of installations. A tariff, payable in pence per kilowatt-hour (p/kWh) of heat generated, is available for eligible technologies, including biomass boilers, ground-source heat pumps and solar thermal.
Figures from the Department of Energy and Climate Change (DECC) show that take-up has been lower than expected. Some building owners have been put off by their experiences with the government’s Feed-in Tariff (FITs) scheme for renewable electricity (tariffs were slashed after the scheme became too popular), while the tailing-off of the market for solar photovoltaics (PV) resulted in many installation contractors giving up on the renewables sector. The RHI has also garnered a reputation for a lengthy and bureaucratic approvals process, and onerous metering requirements.
As of 31 December 2013, the non-domestic scheme has registered 4,100 applications, representing 827MW of installed capacity, with 2,900 accredited installations. Only 634,810MWh of heat have been generated by accredited installations that have received payment, against a target contribution of 72TWh from heat by 2020.
Some technologies hardly figure in the data: biomass-boiler installations account for 99 per cent of RHI applications by heat generated (93 per cent by number of installations) and the coalition is seeking to stimulate take-up of technologies such as ground- source heat pumps by increasing the tariffs – by as much as three times the present rates – while largely holding biomass tariffs at current levels.
Moves to increase the scope of the RHI to include technologies such as air-source heat pumps, biomass direct-air heating, biogas combustion, biomass and bioliquid combined heat and power, and deep geothermal have been welcomed by industry practitioners. The changes are expected to start in spring 2014, alongside the much-delayed introduction of the domestic RHI scheme.
The roll-out of the domestic scheme is certainly good news for contractors. The tariff levels have been set at 7.3p/kWh for air-source heat pumps, 12.2p/kWh for biomass boilers, 18.8p/kWh for ground-source heat pumps and 19.2p/kWh for solar thermal.
The government is predicting a big take-up. ‘We anticipate 3.9TWh of renewable heat will be supported through the domestic scheme by 2020/21, equating to around 745,000 installations cumulatively over that period,’ says a DECC spokesperson. ‘We expect to see steady growth in installations over the next few years.’
Anyone who has installed a renewable-heat technology since 15 July 2009 will be able to join the scheme. DECC will offer an extra payment of £230 per year when consumers take out metering and monitoring support packages for heat pumps, and £200 for biomass boilers. Applicants will need to complete a Green Deal assessment before submitting their application and must ensure they meet minimum loft (250mm) and cavity-wall insulation requirements. All installations and installers must be certified to Microgeneration Certification Scheme (MCS) standards.
In the run-up to the domestic roll-out, DECC’s Renewable Heat Premium Payment (RHPP) scheme has provided one-off payments to subsidise the capital costs of equipment. Householders who receive money under RHPP will have this amount deducted from any future RHI payments to avoid a double subsidy.
‘The domestic RHI is a great initiative that will be good for homeowners, helping them to make the case for renewable technologies,’ says Thomas Mortimer, general manager at ECA member Wessex Renewable Energy. ‘We are pleased that air-source heat pumps are now being included – and at a tariff that will push people to make the choice over oil- fired or LPG boilers.’
Wessex is already getting enquiries. However, homeowners are holding fire until the scheme kicks off. ‘We expect a busy period around that time,’ predicts Mortimer, ‘and consumer confidence will grow as they hear about it from their neighbours.’
Burton-based ECA firm Parker Energy is also expecting good take-up from the domestic scheme. ‘The tariffs for air-source and ground-source heat pumps look attractive,’ says the company’s renewables director, Rafe Bateson. ‘If you are using oil or LPG, then biomass or air-source heat pumps are a brilliant solution. Against gas, it’s not so great. The issue will be finance – homeowners will want to earn money out of it.’
At current prices, paybacks can be expected in about five to six years – which should entice homeowners. The ECA is encouraging members to gear up for the expected interest and make sure they are trained for air-source heat pump installation. ‘Electrical contractors just need to think of the technology as an electrical piece of kit, with two pipes coming out of it that happen to contain water,’ says Bill Wright, head of energy solutions at the ECA. ‘Because water is involved, the plumbers have tended to hang on to it, but the electrical sector needs to think afresh and see this as an opportunity.’ Wright does not think the electrical sector will find MCS certification onerous.
Clare Campbell, product marketing manager for Dimplex renewables, also urges electrical contractors to get involved: ‘The rates set by DECC look good and have created a real incentive for consumers to invest in renewable heat. I am certain it will stimulate the market and electrical contractors are well placed to take advantage of this uplift if they are willing to undergo the necessary training.
‘One particular product set to soar is air-source heat pumps. The latest high-quality, highly efficient models from reputable manufacturers offer improved efficiency, easier installation and quicker paybacks – not to mention the added benefit of RHI payments. It creates a compelling product for electrical contractors to offer alongside more traditional electric-heating options – particularly for retrofit projects in larger, older, off-gas private homes.’
For any contractor looking to capitalise, the most important thing is to make sure they have the correct certification and are up to date with the latest standards. ‘MCS approval is a minimum requirement of any renewables installation in order to access RHI, and the MIS3005 installer standard has been designed to ensure the quality and consistency of heat-pump installations in the UK,’ says Campbell.
If the government’s predictions are to be believed, the domestic RHI roll-out offers contractors tempting new markets as the industry starts to emerge from recession. What are you waiting for?