Tapping into the Renewable Heat Incentive
A complex issue
27th March 2012
A recent RHI project Encraft supported paid for itself in less than a year. While 6-8 years are more typical, there are many lucrative opportunities in the commercial heat sector for the right projects. In this viewpoint Kate Ashworth explains how RHI works and some of the issues project developers will need to confront.
The RHI legislation, brought in last year for commercial systems, was designed to encourage the uptake of renewable heating technologies such as biomass boilers, heat pumps and grander scale technologies such as anerobic digestion. This is the first of its kind in the world, and is made possible by the commercial availability of highly accurate heat meters upon which all the tariffs (except biomethane injection) are paid. The meters aren’t cheap however at an average cost of around £1000 each. All projects are required to have at least one, and many will be required to have several. This will be the case if your project is assessed to be ‘complex’ i.e. the heat is being used in more than one building, or if you have elgible and ineligible heating technologies within the same system.
An example of a complex installation is if the boiler plant is housed in an external plant room, even if it is adjacent to the building in which the heat is being used. In this situation you may be asked to install a meter on the boiler output and another on the pipework as it enters the building. If you have a mini-district heating scheme, the situation becomes a lot worse, requiring a seperate meter for every building. Ofgem have stated that where it is unreasonable to fit a meter, if the pipework is buried or is surrounded with asbestos then it may be possible to replace the meter with a heat loss calculation which will then be subtracted from the final tally of eligible kWh that can be claimed. They have also stated that cost of fitting the meters or the time taken to read all of them will not be considered sufficient obstruction to be able to cite this case.
If a installation is considered complex then you will need a independent metering report to verify that all the meters are fitted in the correct locations and that they meet the accuracy requirements as specified in the legistlation. This is one of the services we can offer as well as help before and during the application process.
The question of whether an installation is considered complex and how it should be treated is often not as simple as might appear and will require a lot of time and effort in negotiation with Ofgem. This may be one of the reasons that Ofgem have only managed to approve 11 installations at the time of writing with another 300 in the pipeline. They are very careful to state that the onus is on the applicant to have a throughout knowledge of the regulations and thus responsibility for submitting applications which comply with all the requirements. This knowledge of the regulations is invaluable in navigating these difficult issues, and getting to an optimised solution which satisfies all parties. The reward, once accredited, will often be worth all the pain in getting there.
An example project we have recently assisted with involved a 500 kW biomass boiler used for process heat. The boiler is being used 24/7 at peak capacity and is expected to receive around £95,000 per year in RHI. The project will pay back in less than one year. A more typical project would involve a heating technology such as a biomass boiler or heat pump used for space heating i.e. when it is cold enough to require them. If the alternative fuel was heating fuel, oil or electricity then we would expect these schemes to pay back within 6-8 years. The successful applicant would then continue to enjoy the benefits of the scheme, in addition to the fuel savings for the next 20 years when the hard work getting the original application through will be a distant memory!