10 March 2011
Incentive to increase number of industrial, commercial and public sector installations by seven times to 2020
A full system of RHI payments will be available to households from October 2012;
In the interim, more than a quarter of the first year’s budget to be guaranteed for up to 25,000 household installations through a “RHI Premium Payment” to encourage take-up;
150,000 existing manufacturing, supply chain and installer jobs to be supported
The world’s first financial incentive of its kind to revolutionise the way heat is generated and used in buildings has been launched by Energy Secretary Chris Huhne.
The Renewable Heat Incentive (RHI) will support emerging technologies and businesses in the UK, strengthening security of supply by reducing dependence on fossil fuel heating and emissions.
Currently around half of the UK’s carbon emissions come from the energy used to produce heat – more than from generating electricity. The RHI will reduce emissions by 44 million tonnes of carbon to 2020, equivalent to the annual carbon emitted by 20 typical new gas power stations .
over 95% of heat in the UK is currently produced by burning fossil fuel but with North Sea supplies now in decline leading to an increase in imports, low carbon alternatives are needed.
The new financial incentive will encourage installation of equipment like renewable heat pumps, biomass boilers and solar thermal panels to reduce emissions and support the existing 150,000 jobs in the heating industry.
Chris Huhne said:
“Renewable heat is a largely untapped resource and an important new green industry of the future.
“This incentive is the first of its kind in the world. It’ll help the UK shift away from fossil fuel, reducing carbon emissions and encouraging innovation, jobs and growth in new advanced technologies.”
RHI tariff scheme: industry, commercial and public sector
This is a new market for the UK. The RHI tariff scheme, which we will shortly be asking Parliament to approve, will stand alongside the Renewables Obligation and Feed in Tariff scheme to send a strong signal of support to the renewables sector.
By 2020 we estimate that the renewable heat sector will have grown to include around:
13,000 installations in industry;
110,000 installations in the commercial and public sector, supplying 25% of the heat demand in these sectors;
This is seven times the number of anticipated installations in 2014.
Anything from a pub to a public library, a school to a power plant will be eligible under the RHI to install technologies like biomass boilers, heat pumps and solar thermal. Community projects will also be eligible, provided a single installation is providing heat to more than one house.
The tariffs will be paid for 20 years to eligible technologies that have installed since 15th July 2009 with payments being made for each kWh of renewable heat which is produced.
Once in the scheme the level of support an installation will receive is fixed and adjusted annually with inflation. However, as with feed in tariffs, we expect the levels of support available for new entrants to the RHI scheme will decrease over time as the costs of the equipment and installation reduce through economies of scale.
RHI premium payment: households
RHI tariff payments will start for homes alongside the Green Deal from 2012 to allow a more whole-house approach to heat production and energy saving.
In the meantime, up to 25,000 installations from July will be supported by a “RHI Premium Payment” to help people cover the purchase price of green heating systems. Those taking up the Premium will then be eligible for a RHI tariff from October next year when the Green Deal begins, as will anyone else who has had eligible equipment installed from July 2009.
The “RHI Premium Payment” will be worth around £15m and will ensure there is a fair spread of technologies across all regions of Great Britain. The installed technologies will be monitored to enable government, manufacturers, installers and consumers to better understand how to make sure householders get the most out of them.
There will be clear eligibility criteria in order to qualify for a Premium payment, including:
a well insulated home based on its energy performance certificate;
agreeing to give feedback on how the equipment performs
A key focus of this initial phase will be on people living off the gas grid, where fossil fuels like heating oil are both more expensive and have a higher carbon content.
We plan to publish details of the “RHI Premium Payment” and how this will apply in May this year. We will consult on the RHI tariffs that will apply from October 2012 later in the year.
Notes to editors:
1. Further detail of the scheme can be found at www.decc.gov.uk/rhi
2.Table of Tariffs (RHI for industry, business and large organisations)
Download this Table of Tariffs [filetype:pdf filesize: 74.47Kb]
Levels of support
Tariff name Eligible technology Eligible sizes Tariff rate
Small biomass Solid biomass;
Municipal Solid Waste (incl. CHP)
Less than 200 kWth Tier 1:
Tier 1 applies annually up to the Tier Break, Tier 2 above the Tier Break. The Tier Break is: installed capacity x 1,314 peak load hours, i.e.:
kWth x 1,314
Medium biomass 200 kWth and above; less than 1000 kWth Tier 1: 4.7
Tier 2: 1.9
1000 kWth and above 2.6 Metering
Small ground source
Ground-source heat pumps;
Water-source heat pumps;
Less than 100 kWth 4.3 20 Metering
Large ground source
100 kWth and above 3
Solar thermal Less than 200 kWth 8.5 20 Metering
Biomethane Biomethane injection and biogas combustion, except from landfill gas Biomethane all scales, biogas combustion less than 200 kWth 6.5 20 Metering
3. Table highlighting likely levels of support for RHI Premium Payments:
Solar Thermal - £300/unit
Air Source Heat Pumps - £850/unit
Biomass boilers - £950/unit
Ground Source Heat Pumps - £1250/unit
The scheme will be introduced in two phases.
In the first phase, long-term tariff support will be targeted in the non-domestic sectors, at the big heat users - the industrial, business and public sector – which contribute 38% of the UK’s carbon emissions. Under this phase there will also be support of around £15 million for households through the Renewable Heat Premium Payment.
The second phase of the RHI scheme will see households moved to the same form of long-term tariff support offered to the non-domestic sector in the first phase. This transition will be timed to align with the Green Deal which is intended to be introduced in October 2012.
Key aspects of the RHI from 2011
Support for a range of technologies and fuel uses including solid and gaseous biomass, solar thermal, ground and water source heat-pumps, on-site biogas, deep geothermal, energy from waste and injection of biomethane into the grid
Support for industrial and the commercial sector; the public sector; not-for-profit organisations and communities in England, Scotland and Wales through the RHI tariffs
Support for households through the Renewable Heat Premium Payment in the first year of the scheme until the Green Deal is introduced in October when households will become eligible for RHI tariffs
The RHI will be funded from general Government spending, not through the previously proposed RHI levy
Key aspects of the non-domestic sector
RHI payments to be claimed by, and paid to, the owner of the heat installation or producers of biomethane for injection
Payments will be made quarterly over a 20 year period
For small and medium-sized installations (up to and including 45kWth), both installers and equipment to be certified under the Microgeneration Certification Scheme (MCS) or equivalent standard, helping to ensure quality assurance and consumer protection
Tariff levels have been calculated to bridge the financial gap between the cost of conventional and renewable heat systems, with additional compensation for certain technologies for an element of the non-financial cost
Heat output to be metered and the support calculated from the amount of heat used for eligible purposes, multiplied by the tariff level
Biomass installations of 1 MWth capacity and above will be required to report quarterly on the sustainability of their biomass feedstock for combustion and where they are used to produce biogas
Eligible non-domestic installations completed after 15 July 2009, but before the start of the RHI, will be eligible for support as if they had been installed on the date of its introduction
The Gas and Electricity Market Authority (Ofgem) will administer the RHI including: dealing with applications; accrediting installations; making incentive payments to recipients; and monitoring compliance with the rules and conditions of the scheme
Key aspects of the domestic/household sector
Further details will be published shortly on the eligibility criteria for the Renewable Heat
Premium, but will include the following principles:
a fair spread of technologies across all regions of Great Britain
monitoring to enable government, manufacturers, installers and consumers to better understand how to make sure ‘real life’ users get the most out of them, and to inform decisions on the tariff levels and other scheme parameters for phase 2
a well insulated home based on its energy performance certificate
a householder must agree to monitor and record performance
A focus on people living off the gas grid, where fossil fuels like heating oil are both more expensive and have a higher carbon content