The UK Renewable Heat Incentive and Renewable Heat Premium Payment Schemes

1. The UK Renewable Heat Incentive and Renewable Heat Premium Payment Schemes Reading Borough Council Gabriel Berry

2. Agenda 1. Context 2. The Renewable Heat Premium Payments Scheme & the Renewable Heat Incentive How the schemes work Tariff and grant rates Eligibility & standards 3. Impact predictions 4. Criticism & issues 5. RHI case study 6. Summary

3. Summary Renewable Heat Incentive + Premium Payments WHAT? 2 schemes providing financial support to domestic and non-domestic renewable heat generators WHERE? England, Scotland and Wales (RHI: off gas network) WHEN? RHI launched tomorrow; RHPP since 1st August 2011 WHO? Owners of eligible heaters recently/soon installed: ground & water source heat pumps, biomass, solar thermal, RHI: deep geothermal, biogas, municipal waste, biomethane injection HOW? 955m€ central Government funding, paid per unit of metered eligible heat for 20 years (RHI), plus capital grants (RHPP) WHY? UK RES target is 15% of energy - currently 1.5% (11% of heat - currently 1%). + Avoid carbon emissions up to 44 MtCO2

4. Context – 15% Target • UK Renewables Strategy & Roadmap Renewable heat: 2010 2020 1%, or 7 TWhth 11% or57-72 TWhth • “Heat pumpscould also play a more important role than previously estimated” • of whichGSHPs to provide 14 TWhth “...requires an annual growth rate of up to 41%”

5. UK vs EU - Ground energy • Heat pumps • 709 GWhth, 2010 • 135 MWth, 2008 (11th in EU) • 10,350* no., 2008 (9th in EU) • Deep geothermal • 9 GWhth, 2010 • 1 MWth, 2010 • 1 no., 2010 • *2010: 12-22,000 no.

6. Context - GSHPs in UK RE Strategy

7. Context – Government’s strategy • How? “Use incentives, address barriers”

8. Context - Existing incentives Domestic • Reduced VAT rate (5%) on small-scale RE • Revenue from govt incentives exempt from tax • New zero-carbon homes get relief on duty Business • Annual investment allowance • Enhanced Capital Allowance • for Energy Technology List • products incl. GSHPs (plant only) Industry • £5m Deep Geothermal Challenge Fund 2009-11 = grants for major projects (>2 MWe or >5 MWth)

9. Context – Energy prices

10. RHI & RHPP – Timeline • Mar 2009 – UK RE Strategy & Targets • Feb 2010 – Public consultation • May 2010 – Change of govt • Oct 2010 – Spending review • confirmed RHI & set budget • Mar 2011 – Details published • Aug 2011 – RHPP launch • Oct 2011 – RHI scheme launch • Aug 2011 – RHPP ends • Oct 2012 – RHI domestic launch

11. Intro 1 - Renewable Heat Premium Payments • Government domestic renewable heat grant • Selected EU RES (e.g. not stoves/cooling) • Phase 1, August 2011 – March 2012 • Grants for eligible heat generators… • Phase 2, from October 2012 • …+ RHI payments for metered heat

12. RHPP – How it works • The householder: • Applies to EST* for grant ‘voucher’ • Installs biomass boiler/solar collector/heat pump • Registers heater via the installer • Redeems voucher & receives grant • (probably) Joins RHI in Oct 2012 * Energy Saving Trust = government’s consumer energy advisory agency Owner must agree to heat metering & attitude surveys if randomly selected

13. RHPP – Grant amounts 330 € 950 € 1,060 € 1,390 €

14. RHPP – Eligibility & standards • Domestic (social housing – special conditions) • Must be owner’s main home • Off gas network (except solar) • Must be main heating (except solar) • Cavity wall insulation + 250mm loft insulation • Product & installer registered with MCS • Hence capacity below 45 kWth • Installed by end Mar 2012 or voucher expiry date “We will continue to monitor and review the performance of heat pumps in situ.”

15. RHPP – eligibility Solar PV Wood boiler heat Wood boiler+chillerCOOLING Small wind Solar thermal hot water Wood stove heating Biogas Biogas heat Hydro power Air to water source heat pumps Air to air source heat pumps District heating Deep geothermal Ground / water source heat pumps Feed in tariff or ROCs Not eligible!

16. Intro 2 - Renewable Heat Incentive • Government payments for metered heat • Non-domestic until Oct 2012 • EU RES but not ASHP, stoves, cooling • Paid over 20 years • Rate of return vs fossil fuel 12% (6%) • World first? Starts October 2011

17. Renewable Heat Incentive – How it works • Installeligible heater & heat meters • Registerwith Ofgem for RHI • Read & report heat production • Receive quarterly payments (owner) • Continues for 20 years

18. RHI – How it works • Tariff rates calculated to: • compensate for cost of RE plant over fossil • cover both installation & running costs • • provide return on additional capital invested • be incentive to overcome non-financial barriers After the start of the scheme, tariff levels will be adjusted automatically each year in line with the Retail Price Index (RPI). This adjustment will be applied both for new and existing projects.

19. RHI – Tariff rates 4.8 €c /kWh 3.3 €c /kWh 8.4 €c /kWh Small biomass 2.1 €c /kWh < 200 kW Medium biomass 200 kW - 1 MW 5.2 €c /kWh 2.1 €c /kWh Large biomass > 1 MW 1.4 €c /kWh Small ground source < 100 kW Large ground source > 100 kW Solar thermal < 200 kW 9.4 €c /kWh Biomethane 7.2 €c /kWh

20. RHI – eligibility Solar PV Wood boiler heat Wood boiler+chillercooling Small wind Solar thermal Wood stove heating Biogas Ground / air source cooling Biogas heat Hydro power Air source heat pumps: domestic Ground / water source heat pumps & deep geothermal Air source heat pumps: non-domestic District heating (RE) Feed in tariff or ROCs Not eligible!

21. RHI – Standards • All heat pumps • Required: CoP 2.9 or above (heat pump only) • May change when EC issues guidance • Heat pumps ≤ 45 kWth • Must conform to UK Microgeneration Certification Scheme • MCS covers installer, product, design & installation standards • Heat pumps > 45 kWth • Ofgem will verify eligibility • No standards other than CoP (above) “We will continue to monitor and review the performance of heat pumps in situ.”

22. RHI – High temperature geothermal • Same tariff as ground source heat pumps • “We intend to consider whether specific tariffs for deep geothermal heat can be introduced from 2012” • “There are no MCS or equivalent standards so, for the RHI, Ofgem will verify eligibility based on the documentation required” • … i.e. no technical standards for deep geothermal • NB Cogeneration under the RHI • Heat element only is eligible for payments • No additional support for CHP - RHI deemed sufficient

23. RHI & RHPP – Impact predictions • 110,000 public/commercial installations • 13,000 industrial installations • ?? domestic installations • contribute to 100,000 new RES jobs • directly stimulate 5.0 billion € • capital investment • generate 57 TWhth by 2020

24. RHI & RHPP – Criticisms & issues • Lack of installer/product/design standards >45kW • July 2009 cut-off – unfair, or practical? • Exclusion of log/pellet stoves & bio-liquid fuels • Exclusion of cooling and ‘waste heat’ • No additional support for extra costs of district heat • Air source heat pumps – always sustainable? • Biomass fuels/emissions – always sustainable? • Some wanted payments assignable to 3rd parties • Some wanted fossil fuel suppliers to pay RHI

25. RHI – Opportunity for ground energy Reading Borough Council GEO.POWER team (UK) Tel. +44 118 937 2159 Email climate.change@reading.gov.uk

26. RHI - GSHP case study • The Avenue Centre • Owner: Reading Borough Council • Function: New-build school + offices • 2× 80 kWth grd loop HPs to underfloor heat • Generates 420 MWhth pa, uses 140 MWhe • Installed by Geothermal International

27. RHI - GSHP case study • GSHP: capital cost 142 k€ • + electricity costs 14 k€ pa • Gas boiler: capital saving 14 k€ • + fuel saving 12 k€ pa PAYBACK no RHI= never…180 k€ loss* • RHI 20 k€ pa for 20 yrs • PAYBACK RHI= 8 yrs…120 k€ income* *assuming static fossil energy prices!