the uk renewable heat incentive and renewable heat premium payment schemes

1 Ferrara (IT), 29 September 2011

EUROPEAN REGIONALDEVELOPMENT FUND

> GEO.POWER 1st D-LAB

The UK Renewable Heat Incentive and

Renewable Heat Premium Payment Schemes

Reading Borough CouncilGabriel Berry

> GEO.POWER 1st D-LAB2

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

> GEO.POWER 1st D-LAB3

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

> GEO.POWER 1st D-LAB4

Context – 15% Target

UK Renewables Strategy & RoadmapRenewable heat:

2010 20201%, or 7 TWhth 11% or 57-72 TWhth

“Heat pumps could also play a more important role than previously estimated”

of which GSHPs to provide 14 TWhth

“...requires an annual growth rate of up to 41%”

> GEO.POWER 1st D-LAB5

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.

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Context - GSHPs in UK RE Strategy

> GEO.POWER 1st D-LAB7

Context – Government’s strategy

• How? “Use incentives, address barriers”

Renewables Roadmap priority areas

Technology costs RHI heat payments

RHPP grants

Planning and licensing processes

-

Availability of quality installers/ engineers

RHPP standards

(RHI in future?)

Demands on the electricity grid

-

Performance and technical issues

RHI CoP standards

RHPP borehole standards

> GEO.POWER 1st D-LAB8

Context - Existing incentives

• Reduced VAT rate (5%) on small-scale RE

• Revenue from govt incentives exempt from tax

• New zero-carbon homes get relief on duty

• Annual investment allowance• Enhanced Capital Allowance for Energy Technology List products incl. GSHPs (plant only)

Domestic

Business

• £5m Deep Geothermal Challenge Fund 2009-11= grants for major projects (>2 MWe or >5 MWth)

Industry

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Context – Energy prices

UK commercial fossil prices €c/kWh

Natural gas 2.3

Heating oil 5.4

Electricity 10.1

> GEO.POWER 1st D-LAB10

• 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

RHI & RHPP – Timeline

> GEO.POWER 1st D-LAB11

Intro 1 - Renewable Heat Premium Payments

• Phase 1, August 2011 – March 2012 Grants for eligible heat generators…• Phase 2, from October 2012

…+ RHI payments for metered heat

• Selected EU RES (e.g. not stoves/cooling)

• Government domestic renewable heat grant

> GEO.POWER 1st D-LAB12

RHPP – How it works

Owner must agree to heat metering & attitude surveys if randomly selected

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

> GEO.POWER 1st D-LAB13

RHPP – Grant amounts

330 €950 €

1,060 €

1,390 €

> GEO.POWER 1st D-LAB14

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.”

> GEO.POWER 1st D-LAB15

RHPP – eligibility

ELECTRICITY HEAT COOLING AND UNMETERABLE HEAT

Solar PV

Small wind

Biogas

Hydro power

Wood boiler heat

Solar thermal hot water

Feed in tariff

or ROCs

Air to water source heat pumps

Wood boiler+chiller COOLING

Wood stove heatingBiogas heatDistrict heating

Air to air source heat pumps

Deep geothermal

Not eligible!

Ground / water source heat pumps

> GEO.POWER 1st D-LAB16

Intro 2 - Renewable Heat Incentive

• Government payments for metered heat

• World first? Starts October 2011

• Paid over 20 years• Rate of return vs fossil fuel 12% (6%)

• Non-domestic until Oct 2012 • EU RES but not ASHP, stoves, cooling

> GEO.POWER 1st D-LAB17

Renewable Heat Incentive – How it works

1. Install eligible heater & heat meters

2. Register with Ofgem for RHI

3. Read & report heat production

4. Receive quarterly payments (owner)

5. Continues for 20 years

> GEO.POWER 1st D-LAB18

RHI – How it works

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.

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

> GEO.POWER 1st D-LAB19

RHI – Tariff rates

4.8 €c /kWh

3.3 €c /kWh

8.4 €c /kWh

2.1 €c /kWh

5.2 €c /kWh

2.1 €c /kWh

1.4 €c /kWh

9.4 €c /kWh

7.2 €c /kWh

< 200 kW

200 kW - 1 MW

> 1 MW

< 100 kW

> 100 kW

< 200 kW

Small biomass

Medium biomass

Large biomass

Solar thermal

Biomethane

Small ground source

Large ground source

> GEO.POWER 1st D-LAB20

RHI – eligibility

ELECTRICITY

Solar PV

HEAT COOLING AND UNMETERABLE HEAT

Small wind

Biogas

Hydro power

Wood boiler heat

Solar thermal

Biogas heat

Feed in tariff

or ROCs

Wood boiler+chiller cooling

Wood stove heating

District heating (RE)Air source heat pumps: non-domestic

Ground / air source cooling

Not

eligible!

Air source heat pumps: domestic

Ground / water source heat pumps & deep geothermal

> GEO.POWER 1st D-LAB21

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.”

> GEO.POWER 1st D-LAB22

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

> GEO.POWER 1st D-LAB23

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

> GEO.POWER 1st D-LAB24

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

> GEO.POWER 1st D-LAB25

RHI – Opportunity for ground energy

Reading Borough Council GEO.POWER team (UK)Tel. +44 118 937 2159

Email climate.change@reading.gov.uk

> GEO.POWER 1st D-LAB26

RHI - GSHP case study

The Avenue Centre

Owner: Reading Borough CouncilFunction: New-build school + offices

• 2× 80 kWth grd loop HPs to underfloor heat • Generates 420 MWhth pa, uses 140 MWhe • Installed by Geothermal International

> GEO.POWER 1st D-LAB27

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

• RHI 20 k€ pa for 20 yrs PAYBACK RHI= 8 yrs…120 k€ income*

PAYBACK no RHI= never…180 k€ loss*

*assuming static fossil energy prices!