Renewable Heat Incentive (RHI)

Financial incentives for heat pumps

The Renewable Heat Incentive (RHI) is a financial incentive scheme that pays you a tariff depending on how much heat is used. It started in 2011, and can apply to heat pumps and Biomass. There are both domestic and commercial schemes, these have different time periods, typically 7 years for domestic and 20 years for commercial. Some schemes are ‘deemed’, where the expected heat use is calculated and a fixed payment is made. Otherwise, the heat is metered (measured) and the payment is based on the meter reading.

Information can be found here https://www.ofgem.gov.uk/environmental-programmes/domestic-rhi

To qualify for RHI payments, your heat pump must be installed according to the Heat Pump Standard, and must be installed by an MCS accredited installer (Micro-Generation Certification Scheme) You can find a local accredited installer here, http://www.microgenerationcertification.org/consumers/installer-search

Your MCS installer will tell you what payments you should expect, and the requirement you will need to comply to.

To give a very rough approximation of what you might expect, I have made the chart below. You can do your own calculations in a similar manner.

In this example, we consider a typical house using 15,000 kWh (units) of heat. This would currently cost around £750 per year if heated by mains gas or oil.

The RHI payments are based on the quantity of heat being extracted from the environment. This is the ‘renewable’ part, and a bit less than the 15,000kWh consumed in our example house.

The current annual payments for Air source and Ground source could work out at around £1,000 and £2,100 respectively. This would be available for 7 years on the domestic tariff.

The price of heating oil has been low for many years now, and I now assume gas and oil to be around the same. There seems no point in trying to be too accurate here estimating expected fuel costs since we don’t know what gas and oil prices will be 1 year, let alone 10 years hence.

Click here for an Ofgem fact sheet is full of useful information

Click here for the full RHI updates of December 2016

The current tariff structure tends to support larger older buildings that use a lot of energy. However, a maximum payment cap has been introduced of 20,000 kWh (units) for ASHP and 30,000 kWh for GSHP. Unfortunately the incentive tends not encourage economy of use, since payments are based on how much heat is used. The deemed method does at least mean that your payments are fixed regardless of how much or little that you actually use. This might encourage people to turn down rooms that are infrequently used etc.