The Renewable Heat Incentive

By becoming a Microgeneration Certification Scheme (MCS) Certified Installer with the support of Easy MCS you are certified to offer consumers The Renewable Heat Incentive as long as MCS Certified equipment is used.

The Renewable Heat Incentive is very similar to the Feed In Tariffs which have done more than anything else to accelerate the installation of renewable energy capacity in Europe. 

That's why the founders of the Renewable Heat Incentive were so active in the campaign to introduce them in the UK. The Renewable Heat Incentive was launched on April 9th 2014 for Domestic applications and November 2011 for commercial applications. As an MCS Certified installer you’ll be able to be a part of this exciting new development. By getting in touch with Easy MCS today you’re giving your business the potential to expand under the MCS Scheme.

Key aspects of the domestic sector

The following list is a summary of the important details taken from the document.

  • The domestic RHI is a financial support scheme for renewable heat targeted at, but not limited to, off-grid gas households
  • The domestic RHI covers England, Wales and Scotland only
  • The RHI is administered by Ofgem
  • The RHI is available to single domestic dwellings and is open to owner-occupiers, private landlords, Registered Providers of Social Housing and self-builders. New build properties other than self-build will not be eligible
  • The RHI is open to anyone above who installed an eligible technology since 15 July 2009, provided they met the scheme’s criteria
  • The RHI is paid to the owner of the heating system at a set rate per unit of renewable heat produced (kilowatt-hour, kWh), for seven years, payments are made quarterly
  • Eligible technologies are air source heat pumps (ASHP), ground source heat pumps (GSHP), biomass systems and solar thermal. The support rates depend on the technology installed. 

Sources of information for renewable heat output

Air Source Heat Pump - EPC & Equipment SPF

Ground Source Heat Pump - EPC & Equipment SPF

Biomass - EPC

Solar Thermal - MCS Installation Estimate

  • The renewable heat generated for payment purposes will be estimated, in most cases, by referring to the source shown above
  • Systems must be certified under the Microgeneration Certification Scheme (MCS) scheme and meet relevant standards for each technology
  • For biomass systems (other than for legacy installations), the standard includes limits on harmful emissions
  • RHI applicants whose system provides space heating and who retain a back-up heating system (such as an oil fired boiler), or people applying for a second home, need to install metering equipment on which the RHI payments can be based
  • To help improve information about the performance of renewable heating systems, there is an extra incentive for applicants who install metering and monitoring service packages set at £230 per year for heat pumps and £200 per year for biomass boilers
  • All applicants are required to complete a Green Deal Assessment (GDA) before applying and to ensure they meet minimum energy efficiency requirements relevant to loft and cavity-wall insulation where required by the GDA
  • Any public grants previously received, including the RHPP, will be deducted to avoid a double subsidy
  • Tariffs will change annually in line with the Retail Price Index (RPI)
  • To control the costs of the policy, DECC intend to introduce a system of degression. This is where reductions are made over time in the tariffs paid to new applicants, as specified thresholds (known as triggers) in the amount spent to date are crossed. Tariff recipients who have already been accredited will continue to receive tariffs at the pre-degression level.

The domestic RHI has been designed as a ‘boiler replacement scheme’. As such, the payments are intended to bridge the costs between the installation and running costs of fossil-fuel heating systems and the renewable alternatives. Unlike the Feed-in Tariffs, it is not constructed to deliver a particular return on investment or payback period.

Calculating the amount received in tariff payments

The RHI is paid on each kWh of renewable heat generated for a period of seven years. The amount of heat is estimated, based on the property’s expected annual heat use as assessed for and documented in the Energy Performance Certificate and, in the case of heat pumps, their seasonal performance factor (SPF).

Additional considerations for heat pumps

Because not all of the heat generated by electrically powered heat pumps is renewable, RHI payments are made only on the renewable portion of their heat output. This is the energy that comes from the ground, water or air but does not include the electricity used to run the appliance.

The term for a heat pump’s CoP averaged over a whole year is Seasonal Performance Factor (SPF); it is normally between around 2.5 and 4. The eligible heat for the purposes of RHI payment will be worked out using the following formula:

Eligible heat demand = total heat demand x (1 – 1/SPF)

As an example, if the heat pump has an SPF of 3, two-thirds of the heat output will be renewable and therefore eligible for RHI payments.

For heat pumps installed after the RHI scheme launch, the performance of the system will be estimated by the MCS installer. The rating will be recorded by the installer and given to the owner of the system as part of the installation process. Heat pumps installed before the launch of the scheme are given a default SPF of 2.5. Applicants can arrange a full assessment by an MCS installer to demonstrate a higher rating if they wish.

Only heat pumps with an SPF of 2.5 and above are considered renewable under the EU Renewable Energy Directive, and only those that are considered renewable are eligible for the RHI.

The application process

By maximising the proportion of electronic applications, processing times are intended to be kept as short as possible and administration costs controlled. However, DECC will ensure that there are alternative ways of applying so that the scheme is accessible to all. 

To manage the potentially large volume of legacy applications and avoid a backlog, DECC and Ofgem are developing an approach to phasing legacy applications over a period of time after the launch of the scheme.

Applicants must state, as part of the application, if they have received the RHPP and/or any other public funding for the heating system. The amount will be deducted from the quarterly payments over the life time of the tariff.

Related obligations

All scheme participants are required to regularly confirm their continuing eligibility to receive payments under the RHI. This requires the completion of an annual declaration, including confirmation that:

  • The system is still in use and meets the requirements of the RHI
  • The system is in working order and being maintained in line with manufacturer’s instructions, and the current recipient is still entitled to the payments in relation to this system

Participants will also need to let Ofgem know of any changes in circumstances that affect their eligibility to receive payments. For example, if the owner of the system changes because the property is sold.

Participants in the RHI can be selected for one or more of the following checks:

  • Ofgem will select a sample of applications for a more detailed review, either at the time of initial processing or after acceptance. If selected, a participant should make every effort to supply the additional information Ofgem request. This could include allowing Ofgem to visit the property to inspect the renewable heating system
  • The MCS and its certifying bodies also conduct checks to make sure installation companies are carrying out works to the appropriate standards. Site visits help to ensure that only high quality installers are able to fit systems under the scheme. If chosen, the RHI recipient will be asked to agree to MCS or the certifying body visiting their property to check the quality of the installation.

Metering and monitoring service option

The RHI includes an offer to householders installing heat pumps and biomass boilers of an optional additional payment of £230 or £200 per year respectively for purchasing a Metering and Monitoring Service Package from their installer. These packages are similar to a service contract. An installer will fit to the new heating system a set of advanced meters that meet Ofgem’s requirements so that the householder and installer will be able to view measured data from their system using the internet.

The payment has been designed to reimburse the householder for the cost of the package over the seven years of RHI payments. It will stop if the service contract ends before the end of the seven years.

Selling a property receiving tariffs

If the owner of a system receiving tariffs under the RHI sells the property, Ofgem must be informed so that payments can be transferred to the new owner.

Key aspects of the commercial 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

For further details on achieving MCS Certification and offering The Renewable Heat Incentive please contact a member of our MCS Team on 0124 478 4260.