In May 2018 government announced updates to the Domestic Renewable Heat Incentive Scheme (RHI). The key aims of the changes are:
* to help overcome the capital cost hurdle of switching away from traditional gas central heating;
* to gather more detailed information on energy use by heat pumps;
* and to manage government budgets for incentives more closely.
Behind this development is the government’s overarching goal of decarbonising our heating in all buildings. For domestic properties, this will ultimately mean that we have to wean ourselves off the long-standing dependence on gas central heating.
And as we all know, encouraging the public, installers and property owners/developers to embrace that sort of change is no easy task.
With this in mind, the updated RHI is focused on reducing barriers to change, which for most households is the up-front cost of installation. The landlord-tenant relationship also has to be addressed, given the number of people in private rented accommodation.
We could be confident in marking 2018 as the year when the shift away from gas really began
Assignment of Rights
The new ‘assignment of rights’ (AoR) is aimed at helping us all over those hurdles. From 27th June 2018 new rules on AoR come into force.
A third party (not the property owner) can now pay for installation of the renewable heating system, and the householder can assign that nominated investor the payments from the RHI scheme.
This creates more opportunity for access to up-front costs, and assignment of rights would give landlords greater incentive to move their properties to renewable heating sources.
One of the other main changes in the new domestic RHI is in ‘metering for performance’. All new applications for domestic RHI are required to have electricity metering arrangements in place alongside their heating system.
There are three options available: electricity meters; on-board electricity meters; or a metering and monitoring service package (MMSP).
Government favours and incentivises the MMSP which works like a service contract and is a useful way to check on system performance.
Consumers registering for an MMSP receive some financial support for installing the package and keeping to the agreement.
MMSPs are also offered by leading heat pump manufacturers such as Mitsubishi Electric through their partner-installers, so they are easy for householders to access.
New MMSP registrations on or after 22nd May 2018 are eligible for a lump-sum payment and a maximum of 7 years of quarterly MMSP payments. For a heat pump installation this would be a lump sum payment of £805 and MMSP payments of £115 per year (paid quarterly).
Three types of RHI-eligible technology already saw uplifts to the tariff rates paid from September 2017. Biomass plant tariffs rose by almost 70% to 6.54 pence per kilowatt hour (p/kWh). Air source heat pump tariffs were increased by 33% to 10.18p/kWh. Ground source heat pump tariffs saw a small rise to 19.86 p/kWh. There were no changes to tariff rates for solar thermal systems.
Another change introduced in May is the government’s use of degression – reducing the tariff levels across time to ensure the scheme remains financially viable. In the past, degression would take place on set dates, regardless of how many applications had successfully been made for the tariffs.
Now, that won’t happen because degression will be directly linked to take-up of a particular technology. So degression won’t happen if the number of accreditations for a particular eligible technology have slowed down.
Serious about renewables
Overall, the changes to the domestic RHI show that government is seriously looking at helping the market move to renewable heating technologies, and that it has taken on board lessons from the previous iterations from the scheme.
While the new RHI may not create a landslide of applications for heat pumps, we could be confident in marking 2018 as the year when the shift away from gas really began.