new question: q23 agreee680/energy/energy_links/rhi/... · 2011. 2. 2. · benefiting from the rhi....

Yes

Comments:Ideally the level of support should decrease at a rate proportional to the decrease in the cost of implementing renewable technologies, so that for the duration of the scheme the level of support remains effectively-unchanged. With the uncertainties around new technologies, it is right to not introduce degression from the outset of the scheme.

AgreeQuestion: Q23

Yes

Yes, providing that this approach does not waste tax-payers’ money on assisting with the adoption of overly-expensive, inefficient, or commercially non-viable technologies where an efficient and more cost-effective alternative already exists. Focus should instead be on assisting the addressing of the underlying issues that make the technologies non-viable or inefficient, before assisting their adoption. New technologies should be supported and encouraged as they are proved, not just as they emerge. Cost-effectiveness and the setting of tariff-values should also be considered, as the RHI in its present form discourages cost-effective solutions, favouring maximum uptake of the more expensive RHI solutions at any cost.

AgreeQuestion: Q24

Surely the RHI tariff structure should have started from a single tariff linked to cost-effectiveness of the solution employed, rather than the actual technology cost itself?

Question: Q25

No

Lead times for investments on large industrial sites, such as Energy from Waste CHP, can take at least 4 years from funding to final commissioning. The uncertainty in the level of support from the RHI over this timescale raises a question mark as to whether such investments can be made. We urge Government to assess the best way to encourage large-scale investment that gives clarity for investors at the time of investment not commissioning.

DisagreeQuestion: Q26

No. Ceramic users can not afford new equipment and would need to modify existing installations which in the proposal would not be allowed.


Yes

Comments:See Q8

The proposed measures for dealing with fuel-mixes and modification of existing installations could prevent most of the ceramics industry from benefiting from the RHI. The measures do not properly allow for the uptake of renewable heat (where technically-possible) in the ceramics industry, due to the significant and prohibitive financial barriers that would be incurred by following a 'compatible' course of action (i.e. installation of a separate 'biomass' boiler in parallel to a fossil-fuel one; inability to modify an existing installation). Monitoring the renewable content of fuel blends entering an individual boiler need not entail an excessive administrative burden – and could involve little more than retaining supplier invoices and company stock records.

There are several problems in the scheme as set out. Tariff structures provide little incentive for initial cost reduction, and give strong incentives for developers and homeowners to install renewable-heat technologies before upgrading energy-efficiency; there are inadequate requirements for improving energy-efficiency standards before receiving RHI; There is still no detail regarding how the RHI will be paid for; and no provision is made for industries such as ceramics, that require high-grade heat which renewable sources generally cannot supply.

Question: Q29

548 Stove Industry Alliance Trade Association

22 June 2010 000 of 1348

1. PREFACEThe RHI consultation document raises a number of important questions and, in particular, the methodology and application of biomass incentives. The SIA (Stove Industry Alliance), HETAS and the SFA (Solid Fuel Association) are all significant representative bodies in the appliance, wood, biomass and solid fuel sectors and have concluded that a single representative response is the most appropriate for our sector of the energy industry. Appendix 1 provides a summary of the SIA, HETAS and the SFA and their activities.

2. INTRODUCTIONRHI recognises the challenges of incentivising wood burning stoves and the use of carbon neutral wood log fuel in general. Through joint consultation with industry, the SIA, HETAS and SFA propose an approach that, we believe, supports and enhances the potential of the proposedincentive process.Fundamental to our approach is the principle that the use of good quality wood fuel burned in high quality appliances displaces the use of high carbon fuels in the domestic heating and hot water sector. We believe that the assessment of wood log use in the domestic heating and hot watersector can be achieved by requiring consumers to keep and/or provide evidence of wood log purchases which, through the deeming process, can be audited on a sample basis similarly to the majority of grants or incentive based schemes.This approach incentivises the use of a specific carbon neutral fuel and removes any uncertainties about patterns of appliance usage.Whilst we believe the use of good quality and sustainable wood fuel is of paramount importance, the installation of an approved and DEFRA exempted appliance by a registered competent installer forms an equally important part of our submission.

3. OUR PROPOSALThis joint submission is based on our premise that introduction of Renewable Heat Incentives for biomass should consider the reputation, viability and contribution of wood logs, chips and pellets as currently used by domestic consumers and, in our view, the significant role they will play in the future.Domestic installations not only embrace larger properties but also include hundreds of thousands of domestic customers who buy wood log burning appliances to displace high carbon fuel use and establish a degree of fuel security and independence. The most common biomass fuel currently inuse is wood logs which invariably offer domestic consumers a lower price per kWh. We believe the challenges of providing incentives for biomass include;• Counting the carbon savings for variable usage patterns for the different types of domestic wood burning appliances available.• Establishing appliance populations and usage.• Ascertaining consumer usage habits particularly for multi-fuel appliances that burn both wood logs and solid fuel.• Determining how consumers buy fuel, what their quality requirements are and how they then burn the fuel cleanly.• Measuring the effect that increased use of biomass fuels will have on the environment particularly with regard to emissions.• Ensuring that appliances are installed not only to fully comply with the requirements of Building Regulations but that they also meet the SAP requirements to minimise carbon dioxide emissions, are of the required minimum efficiency levels and provide enhanced levels of consumer safety for both carbon monoxide poisoning risks and fire protection.Some of these challenges are believed to have contributed to the proposal on page 31 of the consultation to exclude wood burning stoves and open fires.

Whilst the importance of these challenges and the statement are recognised and understood, such blanket exclusion will have the effect of denying hundreds of thousands of wood burning consumers from the receipt of any incentive and, in our view, will even more importantly fail tomaximise on an important opportunity for significant carbon saving.We also believe that many of the installation types that might receive assistance under the RHI are, of themselves, designed to be supplementary to existing heating and hot water systems so logicallywood burning stoves adequately meet such criteria.A UK Solid Biomass Assurance Scheme is being developed by HETAS utilising a grant from DECC. It will cover wood logs, chips, pellets, briquetted fuels and other solid biomass.

4. WOOD BURNING APPLIANCESModern wood burning stoves and boiler stoves are highly efficient and clean burning heat producing appliances. Elementary analysis from conversation with suppliers and retailers shows that consumers purchase such appliances to reduce their dependency on gas, oil or LPG, reducetheir fuel bills and improve their energy security. Such appliances are also increasingly installed as part of and in support of other renewable energy systems such as solar thermal systems to produce a marriage of technologies that suit variable seasonal heating requirements.Further analysis suggests that consumers buying wood burning appliances do not generally remove existing gas, oil or LPG appliances and are therefore having them installed as supplementary appliances. There are instances where existing appliances are of sufficient age that totalreplacement with wood burning appliances is an option but, more often, a wood burning appliance is installed as an additional or supplementary heating or heating/hot water resource. It follows that the installation of a wood burning stove as an additional or supplementary appliance will, atsome level, displace the consumption of fossil or high carbon fuels.We conclude that establishing a way to provide incentives for wood burning without discriminating between the uses of different biomass appliance types would offer significant advantages. We contend that, irrespective of specific utilisation patterns, burning wood will replace theburning of high carbon fuels at some level.

4.1 EfficiencyThe introduction of EN13240:2001 requires a minimum net efficiency of 70% and carbon monoxide emissions of less than 0.3% at 13% air oxygen content. Many of the appliances listed in the HETAS Guide (list no. 16, 2010) achieve efficiencies above the minimum requirements of the European standard so, in efficiency terms alone, there is currently no restriction on consumers having ‘state of the art’ stove technology.

4.2 EmissionsSmoke Control Areas were established in the UK over 30 years ago and are regulated under the Clean Air Act 1993. Under the auspices of DEFRA, robust control mechanisms for maintaining air quality standards are in place requiring stoves to adhere to strict criteria to gain exemption for

Question: b) GeneralResponse

22 June 2010 Page 1001 of 1348

burning wood in smoke control areas.There are currently 114 ‘exempted’ appliances* listed on the DEFRA website which, we submit, reflects both on the technological and efficiency improvements achieved by manufacturers and the recognition throughout the stove industry of the important role emission limits must play in thefuture.DEFRA exemption also requires manufacturers to satisfy a separate test body that a stove will not produce smoke under various operating conditions simulated in the test laboratory. Both the SIA and HETAS believe that any stove which has gained exemption to burn wood logs in smoke control areas should be valid for the RHI scheme as these stoves clearly demonstrate proven thermal efficiency and the lowest emissions of any stoves in the market place.*Currently HETAS lists a total of 568 wood burning appliances of which 380 (67%) are exclusivelyfor wood burning and 114 (20%) are ‘exempted’ for use in smoke control areas.Domestic freestanding log biomass boilers are becoming more popular in larger properties as the ‘engines’ of the primary heating and hot water system. Where supplementary heating is required, we believe the consumer should be incentivised to maximise on what effectively becomesthe total displacement of mineral fuels. Appendix 2 further examines wood log consumption from both production and supply and usage perspectives.

5. AN ALTERNATIVE APPROACHThe RHI consultation excludes the provision of incentives for wood burning stoves on the grounds of complexity and administrative cost. We believe there is a way to supplement the existing proposals and answer the difficulties it poses.We believe we have established that there is a market for wood burning stoves and that this market is growing annually. We have also established that there are wood burning only appliances available to the market and, of these, a significant percentage that meet the highest standards ofefficiency and emissions.Taking as an example the recent ‘boiler scrappage scheme’ promoted by the EST, we believe an incentive can be offered to potential purchasers of wood burning stoves using simple but effective criteria that could work as follows;5.1 The consumer seeks a quotation from a HETAS registered installer for the supply and installation of a new wood burning stove or boiler stove.5.2 The consumer is advised that only appliances from the HETAS approved list that also appear on DEFRA’s list of ‘exempt’ appliances are eligible for the incentive irrespective of whether or not the proposed installation is in a smoke control area.5.3 The installation is completed and the consumer provides a copy of the invoice for the work completed and evidence of the fuel they will be using. The HETAS registered installer will also be required to submit confirmation of completion and ‘register’ the installation with HETAS.5.4 The consumer retains records of wood log purchases for auditing.

We believe an alternative approach of this type provides an opportunity for DECC to include wood burning stoves in the scope of the RHI proposals because;• Consumers will benefit from lower cost fuel and improved security of supply• Modern stove technology offers consumers high and increasing efficiency• Only appliances manufactured for wood burning would qualify eliminating the potential difficulties of discriminating between wood log and mineral fuel use• Irrespective of installation location, consumers would only be able to select a DEFRA ‘exempt’ appliance thus maintaining the high standards already imposed in urban areas and leading to reduced emissions in non urban areas.

NOIn respect of this submission and in particular wood log burning and stoves, there is already a comprehensive and established approval process in existence. HETAS Approval of dry wood burning appliances is a robust and long standing ‘Approvals Scheme’ containing many suitable wood burning stoves and appliances and clearly identifies which appliances only burn wood and also those exempted for use in smoke control areas.There is also an established list of competent and HETAS registered log stove installers throughout UK. These installers are inspected, have access to technical support and have recourse to a complaints procedure. Many of these installers are one man operators (sole traders) and will not have in place the complex and costly management controls expected of UKAS Accredited MCS scheme installers.The somewhat onerous requirements of the latter would mean that few would ever register as MCS installers as they see HETAS registration as sufficient control. Manufacturers, retailers and the industry in general have confirmed their continued support for HETAS and strongly advocate the use of HETAS Registered Installers and HETAS Approved Appliances for the relevant incentives offered via RHI.

Disagree, additional infoQuestion: Q04

22 June 2010 Page 1002 of 1348

NOWe believe that, with a slightly amended approach, wood log burning appliances can be included. The process as outlined in the consultation document is robust and provides for an assessment made on deemed kWh. We propose that, with the addition of a requirement to demonstrate that both the correct appliance and correct fuel are used, incentives can be provided for wood burning which will;• Enhance the desirability and credibility of biomass,• Support the suppliers of ‘approved’ high quality appliances• Support the suppliers of ‘quality’ fuels meeting recognised standards,• Benefit the manufacturers who requires a specified fuel quality to support the integrity of appliance guarantees and warranties,• Provide reassurance to consumers wishing to avoid chimney fires, inadequate appliance performance and the degradation of flues and/or chimneys,• Protect the environment by the use of the most appropriate appliances and high quality fuels that, in combination, give cleaner emissionsThe only additional requirement to the process currently proposed, an addition we consider essential to the use of biomass, is a mechanism that checks that an RHI claimant is using the right fuel. This could be affected by a simple clause in the agreement which can be tested as part of the proposed sampling/auditing of agreements for self-certification (see page 25 of the consultation document). We submit that the provision of an invoice from a supplier who is a member of a recognised fuel quality scheme such as the HETAS UK Solid Biomass Assurance Scheme (established with funds from DECC), wouldsuffice.This approach provides DECC with the significant advantage that RHI can only relate to the use of the recognised biomass fuel quality in properly installed systems. The deemed kWh calculation can be used to ensure that claimants are not claiming too much with the proposed EU Standard on biomass fuel quality already proposing that deliveries of biomass fuel might declare the equivalent kWh. This approach does not, in our view, place any additional burden on the proposed approach.Our proposal also benefits sustainability. Any member of a UK Solid Biomass Assurance Scheme will be asked to demonstrate how they meet sustainability criteria which, for example, might be met by tree felling licences, forestry stewardship schemes or others.Our proposal will also answer some of the concerns of the solid fuel sector who fear a levy will effectively give their competitors market advantage. Solid fuel suppliers have, for the most part, very well developed supply structures that cover large areas of the country and these can be utilised for the distribution of biomass. Applying RHI as we advocate would provide solid fuel suppliers with an incentive to become part of the biomass industry.In summary, our proposal builds on the self certification statement in the consultation document (page 25). By adding a declaration of fuel quality and providing the incentive via the fuel purchased supports wood log burning appliances certified under the DEFRA exemption scheme to maintain a benchmark of clean burning. Providing incentives for increased use of biomass without including fuel quality in the criteria presents a risk of damage to the reputation of biomass and to our air quality.


NOOur response is concerned with domestic size appliances for which current air quality standards in smoke control areas are robust. We therefore propose that the exemption requirements for smoke control areas are utilised for all incentivised biomass appliances.


NOWe believe that the current England & Wales Building Regulations, Approved Document L and Domestic Heating Compliance Guide efficiency standards should be utilised. Lot 15 of EuP may make alternative proposals which will become regulation throughout Europe.

Question: Q10

NOIn respect of domestic biomass fired appliances deeming is necessary. We can convert a deemed kWh figure in to an annual fuel demand figure as a means of assessing fuel need and incentive amounts.


NOFor domestic dwellings SAP appears to be the most appropriate way to deem for RHI. It will also in future allow more than one primary heat source. It should be possible to use the SAP calculation to determine the percentage of each and therefore to pay differing tariffs for each.


549 Dundee City Local Government / A

22 June 2010 Page 1003 of 1348

No

Comments:

The section titled air quality standards claims that DECC recognises that large numbers of biomass installations may cumulatively have a detrimental impact on air quality in urban areas. Biomass combustion is more polluting than gas for all pollutants though concern has largely focussed on NOx and fine particles. In particular fine particulate matter (PM2,5) is responsible for significant negative impacts on human health. Further, there is as yet no identifiable threshold below which PM2,5 would not pose a risk. Consequently, the EC Directive 2008/50/EC states that this pollutant should not be regulated in the same way as other air pollutants. It directs that the approach should aim at a general reduction of concentrations in the urban background to ensure that large sections of the population benefit from improved air quality (the population exposure reduction target approach). (NB The EC Directive must be transposed into UK law by June 2010.)

The Scottish Government Report ED 43209: "Measurement and Modelling of Fine Particulate Emissions (PM10 & PM2.5) from Wood-Burning Biomass Boilers" explored what the implications of a cumulative impact of widespread biomass installations may be on the urban background concentrations of fine particles in Dundee and Edinburgh. Emission limits of 20g/GJ and 60g/GJ were modelled. For Dundee the 2020 scenarios showed that:Without widespread biomass uptake (and all else remaining the same) only a 2% exposure reduction would be achieved,With a deployment of 20g/GJ emission limit no exposure reduction would be achieved; and With a 60g/GJ emission limit the population would experience a 4% increase in exposure to the non-threshold pollutants.DEFRA acknowledges that the widespread uptake of gas for combustion at both domestic and industrial levels (in the 1980’s) has been accompanied by improvements in air pollution especially in urban areas such as Dundee. An adverse upward swing in population exposure of up to 6% (depending on the choice of emission limit) not only has implications for air quality but also for public health.

As reported the regulatory regimes for biomass installations such as the IPPC, Waste Incineration Directive and the LAPPC can set emission standards for developments greater than 20MW. Whilst such emission limits may be used to help ensure that ambient air quality standards are met, they do not address the exposure reduction target set for non-threshold pollutants such as PM2.5. Also there is no current regulatory regime, including the Clean Air Act, that considers or is able to control the cumulative impacts of the likely increase in uptake of biomass heat on air quality.

The current regulatory regimes do not safeguard air quality (and public health) from the point of view of the exposure reduction target for non-threshold pollution. It is therefore somewhat disingenuous to say that there is no need for the RHI to impose any additional eligibility requirements.

Furthermore, results of the DEFRA analysis on the impacts of biomass heat on air quality in the Renewable Energy Strategy consultation document, depended upon the following conditions being met: all new small-scale biomass plant to be of ‘high quality’ plant - assumed to meet the criteria of 20g/GJ for PM10 and 50g/GJ for NOX;the majority of biomass heat uptake to replace existing coal and oil-fired heating, and be located off the gas grid or away from densely populated urban areas;* and in Air Quality Management Areas (classified under section 83 of the Environment Act 1995) deployment to be substantially lower than other areas (this would be the case if biomass is used primarily off the gas grid).

"*(We expect this to be the case following the introduction of the RHI. At present the main drivers for biomass heat deployment are from new developments complying with planning guidance, predominantly in urban areas (due to higher build rates in urban areas). The RHI will encourage replacement of existing heating units and in particular those using solid fuels, where on-site fuel storage is required or where relative fuel costs are closer.)"(Quote from RES)

Not only has there been a departure from the ‘high quality’ plant criteria but it is far from evident what elements of the RHI have been designed to help ensure that the other criteria will be achieved in order to support public health and air quality standards.


550 Anaerobic Digestion and Biogas Association Trade Association

Metering, technology

Question: a) Summary

22 June 2010 Page 1004 of 1348

The Anaerobic Digestion and Biogas Association (ADBA) is the representative tradeassociation for the Anaerobic Digestion (AD) industry in the UK. Our members representtechnology suppliers, small, medium and large scale developers, utility companies, wastecompanies, consultants and universities.

ADBA believes that AD has an important role to play in meeting the UK’s climate changeemissions reduction targets. AD is a unique, proven technology that converts organicmaterials into useful renewable heat and electricity and is, today, the only proventechnology for the production of biomethane.The response is based on our belief that biomethane injected into the grid is a particularlyeffective mechanism for reducing carbon emissions. Biomethane has the unique advantagethat it can be used as a carrier of energy through existing infrastructure (the gas grid)directly to UK homes. This means that biomethane can be used to offset carbon dioxideemissions without the need to build district heating systems, which can be capital intensiveand would also have an embedded carbon cost. Therefore ADBA believes that, biomethaneshould be developed, where possible as a priority, as it has a greater potential for reducingcarbon dioxide and other climate change emissions than other technologies.

MORE INFO IN COVERING LETTER


Clarification is required on the eligibility of heat used for keeping the plant in operation. Is this applicable to heat used to maintain the anaerobic digester at operating temperature (typically 35˚C or 55˚C) or does it also apply to other technologies typically used on site. Specifically:• Does this apply to heat for pasteurisation of feed materials?• Does this apply to heat that may be used in pre-processing of waste to remove packaging, such as autoclaving in MRF and liquid separation?• Does this apply to heat that may be used to dry packaging after it is removed from organic material before or after digestion?• Does this apply to heat that may be used to dry digestate after digestion?• Does this apply to heat used to regenerate chemicals used in a process to clean up and upgrade biogas to make biomethane for injection into the gas grid?

NB – There was (and still is), considerable confusion over the parasitic electricity under theROC scheme as to what electricity was deducted from the tariff and what was not due tolack of clarity about what constituted a generation station.

ADBA is willing to assist DECC, and would welcome the opportunity, to produce any guidance documents for the RHI in addition to producing the final documentation for the scheme. It is not the intent of this response to elicit an immediate response on these issues, but to raise them for further clarification. We would particularly welcome a discussion on using excess heat that would otherwise be wasted to offset additional heat demands from gas upgrade that may otherwise be met by electricity or natural gas.

We also feel that there is potential to offset considerable carbon emissions by the inclusion of renewable cooling within the RHI and would welcome further discussions on this subject. Many industrial plants, for example food production and storage, use considerable amounts of electricity for cooling and this could be provided by heat from anaerobic digestion plants. We believe there is potentially a big benefit here as waste from the factory could be anaerobically digested to produce power and heat which could then be used to reduce electricity used in cooling.

Question: Q07

The association would welcome moves to encourage energy efficiency. Whilst our aim is to produce as much renewable biomethane and heat as possible it is also essential that we work to minimise wastage of this heat (for example by poor insulation).

Question: Q10

In principal we welcome the proposal that biomethane injection shall be metered and believe this is the best approach for biomethane generation. This approach will allow accurate data to be gathered and reported to show not only the volume of biomethane due for tariff but also the degree of carbon offset achieved.

Metering also enables the staged payment approach suggested within this response, both in terms of banding on annual energy production and the proposed introductory tariff band to accelerate technology uptake.

In principle, we welcome the idea of deeming heat use on site, however there are two concerns:

• A simple scheme will need to be developed to build competent capacity in the market place to assess heat demand for potentially complex industrial plant so that the correct heat use on site is deemed.

• A simple system where sites can be re assessed at regular intervals would be welcomed to ensure that the deemed heat use does not substantially change either to a greater amount or lesser amount than originally deemed to ensure ongoing fair compensation. A system of competent assessors is required, however we would not welcome a scheme where RHI claimants were ‘held to ransom’ by qualified assessors.

Question: Q12

22 June 2010 Page 1005 of 1348

Some of our members have concerns that, for large installations, metering only with no independent assessment of useful heat would encourage over generation in order to claim tariff. This would in turn have two detrimental effects:

• reduce the available fund that can be used to incentivise useful heat production;• potentially encourage the unnecessary over use of heat to create an artificial need and hence justify the subsidy.

It is possible that the best compromise would be to have an element of deeming to determine an upper limit of how much heat can be usefully used from large installations.

Question: Q14

We agree that the level of support at 5.5p/kWh is a sensible level of support for on site biogas use.

However we believe that capping the potential use of heat to 200kW will reduce the potential to use heat generated by anaerobic digestion plants in local factories and businesses unnecessarily.

One case study in tender for (a member) technology supplier is located on a factory that could use in excess of 2MW of thermal energy which is currently being supplied by natural gas.

Another case study brought to our attention is a steel works with 5MW of heat demand that could utilise on site anaerobic digestion to supply this, but would not do so under the proposed cap.

If the intent of the RHI is to reduce green house gas emissions then there should be no limit on the practical heat that can be used from an AD plant, as long as a mechanism exists to prevent unnecessary heat generation (see response to Q14 above) We would, therefore, propose an additional band to apply to heat use above 200kW at the lower rate of 4p/kWhr to encourage developers of biogas plants to export as much useful heat as possible to local residential, commercial and industrial users.

Question: Q16

22 June 2010 Page 1006 of 1348

Our members do not feel that the RHI level set at 4p/kWh for biomethane injection is sufficient to encourage even small scale uptake of the technology. At the current banding the financial return from electricity generation is greater than that for biomethane and therefore developers have no incentive to invest in the technology.

We feel that there are a number of misconceptions in the original logic when calculating this banding:• First, the assumption that capital costs for biomethane injection equipment is lower than that for CHP is in error. Capital costs for biomethane upgrade are significantly higher than that for CHP on a like for like basis.• Secondly, additional equipment that has not been accounted for, is required for biogas injection. This includes such things as metering, propane addition, odour addition and telemetry, which cost a minimum of £500k per facility (whatever size).• The operational costs for biomethane upgrade are higher than for CHP where the need for energy to heat AD and for electricity to run the plant, are taken into account. Assuming maintenance costs are equal, biomethane can also have additional operational costs from the electricity required to compress the gas to grid pressure, though this may only be required in around 10% of cases. In such case, the power consumption can amount to several hundred kWe for larger (1MW+ sites).

ADBA proposes the introduction of 2 bands for the RHI to match the banding of the Feed in Tariff for electricity. At the 500kWe (the break point for FiT banding) the equivalent biomethane production level is approximately 1MW thermal value of biomethane to grid. Therefore the proposal is that two bands are introduced for biomethane injection below 1MW and above 1MW.We have undertaken a wide survey of our members who are drawn from all areas of the anaerobic digestion industry and received a wide range of responses to the required RHI levels. The proposed levels below are an approximate mean of the values our members’ financial models require in order to achieve a viable financial project and hence allow investment in biomethane production.

We would suggest a tariff level of 9p/kWhr is required to show parity with the FiT for plantsbelow 1MW thermal input to grid.

We would suggest a level of 6p/kWh is required to show parity with FiT for plants above 1MW thermal input to grid.

Some of our members have argued for a premium in addition to this tariff specifically for ‘on farm’ plants that are processing low energy slurries, manures and or materials requiring a fee to purchase. We feel that as these plants have to pay for feed stock (as opposed to receiving gate fees) then there are additional associated cost.

We therefore propose a premium of 2p/kWhr for plants that use only fee based crops, slurries and manures from farms and receive no additional revenue from commercial gate fees. We propose that this premium is binary and will either apply or not in its entirety. We propose that this will be based on the plants’ permitting regime which will be based on treating only farm-based materials or allow food wastes to be treated.

Many of our members have raised concerns that banding would introduce market distortion. If (for example) a 999kW plant received 9p/kWh and a 1MW plant 6p/kWhr there would be an unfair advantage commercial engineered by the tariff. This would not only distort the market but potentially limit the size of AD facilities and hence limit the potential carbon offset.

We, therefore, propose that the banding applies on a volumetric basis with the high banding applying for the biomethane produced up to (the equivalent of) 1MWt and the lower tariff applying thereafter. This approach will encourage the maximum amount of biomethane to be injected into the grid from each site and hence maximise the carbon offset return.

We have also had much feedback in relation to the risk of investing in a relatively new technology such as biomethane injection as opposed to CHP, which is well proven and standardised. Whilst we fully support the principal of parity between renewable tariffs we feel that there must be an initial (additional) incentive to move to biomethane. ADBA feels strongly that anaerobic digestion is the only technology that will produce biomethane and hence this technology deserves the additional impetus required to develop and standardise infrastructure. Our members feel that, in the current climate, a true like for like financial return from biomethane and electricity generation would result in selection of the lower risk electricity generation.

We, therefore, propose an initial increase over the tariffs above of 25% to encourage the rapid uptake of biomethane and the development of the technology. We understand that DECC has a target of 7TWh pa for biomethane production (equivalent to 800MW continuous production). We propose that a practical approach to achieving this target would be to pay the premium of +25% on the tariffs for the first 2TWh pa (228MW) of installed capacity and then reducing back to the base rate.

This approach will have a number of advantages:• encourage rapid adoption of biomethane production to allow Government to meet its renewable energy and climate change targets; • compensate early adopters for increased risk;• ensure that DECC’s global budget for tariffs is not compromised;• force industry to standardise equipment (hence reducing costs) by introducing a known point at which subsidies will reduce (hence lowering revenue and hence feasible capex).

Question: Q18

Yes, we firmly believe that the RHI should remain fixed (subject to index linking) for the lifetime of the project’s entitlement. Significant delays in financing projects under the ROC scheme occurred due to uncertainty about grandfathering with financial institutions being unwilling to lend money against an uncertain return.

Question: Q22

22 June 2010 Page 1007 of 1348

We do agree with the proposal on degression. However we would urge an early consultation to discuss the terms of the degression, as the time to develop larger projects can take 18 months to 2 years and uncertainty on returns after the first review could have the same inhibitory effect as the lack of grandfathering has had on schemes under the ROC process.

AgreeQuestion: Q23

In principle we believe that it is sensible to synchronise reviews for RHI with FiT and ROC. However we are concerned that large anaerobic digestion projects may take 2 years to plan and build and that an imminent review may be detrimental to investment due to uncertainty.

We, therefore, propose that legislation is framed such that either changes following review are staged to equate to typical project development time lines or applications for tariff rates can be completed during the early stages of a project based on proposed installed capacity.

Question: Q26

We would consider that significant changes to biomethane standards (of injection to grid) may require an emergency review as upgrade costs could significantly increase should injection standards become more onerous.

Our members feel strongly that a serious error was made in the calculation of FiT by underestimating the costs of buying feedstock for ‘on farm’ plant. We therefore feel that should such an omission be repeated this should trigger an emergency review.

Alternatively should injection costs be socialised (brought into the regulated side of gas and hence paid for by the grid) then a downwards review may be appropriate.

Another potential cause for an emergency review that we perceive would be a change to digestate disposal regulations. Current models forecast a disposal cost of £7 per tonne but, should changes to PAS110 (or legislation) be made such that digestate is either no longer a product or becomes prohibitively expensive to treat, then a significant increase in the tariff would be required.

Question: Q27

We agree with this approach for biomethane injection to grid. Our members feel that there may be instances (particularly for Sewage Treatment Plants) where installations installed before this time could usefully export heat from existing sites and that these should be included within the 5.5p/kW thermal output bracket. This would be subject to a new heat user being identified and connected to an existing anaerobic digester system.

AgreeQuestion: Q28

552 David Philip Oldham (individual)

Apologies for the late reply but I would like to input on RHI for ground source heat pumps (GSHP). Due to Breeam excellent compliance we have looked in great detail at low carbon heating for a new building. In the end we had a choice between Photovoltaic and GSHP. The lifetime carbon saving cost for GSHP was £2250/tonneCO2 with RHI and £3500/tonneCO2 without RHI compared to about £2200/tonneCO2 for Photovoltaics including FITs.

Looking into it further the GSHP savings against well designed gas condensing boiler system are quite small, and without our intervention, our well qualified designers may well have produced a design producing few or no carbon savings versus gas, in my opinion.

My suggestion is that the RHI grant for GSHP should reduce if the building is within 200m of a suitable gas supply. I suggest an analysis of carbon savings per square meter of building made between GSHP and new gas heated installations is made (DECs can be a source of info for new gas). Any new government minister should be made aware of the findings before having a blanket single price RHI for all GSHP. I think the savings could be very small if average data for GSHP, and not just the best, is use for comparison.

Money will be very tight in the next 5 years and it is important the UK deals in the real world and does not to put money into grants which could have dubious outcomes.

There is an argument that GSHP removes our dependence on gas but my understanding indicates our electricity supply is presently more strained than our gas.

Question: Q18

553 Richard Earle (individual)

Small scale technologies


22 June 2010 Page 1008 of 1348

Secondly an observation on the practicalities of installing small scale biomass boilers for stand alone heating applications. Heating a house using biomass requires a huge quantity of dry timber,logs, chips or pellets, and requires a substantial volume for storage. As an example, my Baxi 32kW gassifying log boiler uses something like five wheel barrow loads of dry logs per day. The boiler and accumulator tank is also huge in comparison with an equivalent oil or gas fired boiler, and the vast majority of households simply do not have the space to accommodate the boiler or the necessary fuel storage capacity.

Many people are struggling to get hold of dry logs now, and there is just not the infrastructure in place to supply the amount of timber that would be required if biomass heating was to expand to the degree that you hope to promote.



554 Eon UK Supplier

Biomethane, fuel poor


Overall opinion of the RHI Scheme: positive. On the funding Eon believe that power generation should be exempted from a possible levy. They believe more work required in the following areas: role of Ofgem (recommendation is to set up a steering group and take into account lessons learnt from FITs), district heating, fuel poor, and interaction with other schems.


22 June 2010 09 of 1348

Financing the RHI

1. Whilst we understand that Government will continue to review how the scheme is financed, we would like the following points to be considered when developing this mechanism: E.ON believes that the RHI should be funded by a levy applied only to fossil fuels for the purposes of supplying heat to final consumers, and that power generation should be exempt because electricity supply is already subject to the RO, FITs and the EU ETS; Fossil fuels supplied to CHP plants for both heating and electricity should be exempt to ensure that CHP plants are not disadvantaged compared to non CHP power plants; Where the levy is applied, it should reflect the environmental impact of the fuel and be calculated on the carbon emissions which arise from the conversion to heat. Therefore, the higher the CO2 emissions per kWh of the fuel, the higher the levy on these suppliers should be; All gas, coal and oil supplied for residential and SME use should be regarded as supply for heat (as virtually all fuel in this category will be consumed for heat production); it would be impractical to measure the small volumes of fuel used for other purposes or unused. In respect of the supply of gas for large scale industry, there will need to be a process for identifying and separating out fossil fuel supplied for heat and for other purposes; The Government should not implement a cap on the amount of levy paid. This would distort the market by effectively imposing a lower rate/tonne on fossil fuel supply above a given level. A cap could easily lead to suppliers aggregating sales to avoid the levy.Interaction with other schemes

2. There is little reference to how the RHI would interact with other policies such as CERT, CESP and FITs. With a number of schemes being administered in different ways, customers may be discouraged from taking action by the complexity of the different processes. Therefore, it is critical that the body proposed in the HEMS strategy to provide clear and independent advice is established at the earliest possible opportunity. Consumers must be able to understand how to access the different support schemes available and then to assess the appropriate mix of investments to ensure that the CO2 impact of their energy consumption is reduced in the most cost-effective manner from their perspective. Energy suppliers should also have an important role to play in providing information to customers given their involvement in all the key Government support mechanisms.

Fuel Poor3. Whilst we support a levy that reflects the CO2 emissions arising from the fuel used, this may have an adverse effect on rural and ‘off gas’ properties as oil and coal supply for heating will incur a higher rate than gas. These households make up a significant proportion of the fuel poor; 20% of fuel poor households are rural and 25% of fuel poor households are ‘off gas’1. A mechanism is therefore required to identify and target these customers to alleviate the burden of the scheme and to ensure consumers on low incomes do not have to commit significant upfront capital. The Government should consider this as part of its promised consultation later this year. Some current mechanisms are not appropriate. For example CERT is a market based scheme which works well in keeping costs low by prioritising the most cost effective measures but rural housing is often hard to treat and is therefore more expensive. Also the definition of the ‘Priority Group’ in CERT is likely to exclude many fuel poor households as it is based on qualifying benefits as opposed to the proportion of income accounted for by the fuel bill. An appropriate mechanism could, however, be through CESP, Warmfront or Decent Homes.

4. The RHI proposal notes that Registered Social Landlords (RSLs) will be able to access affordable finance and bulk deal savings. Whilst it may be a reasonable assumption, we are concerned that this will not be fully realised. For example, one Housing Association that we have spoken to explained that once the LCBP2E funding for ground source heat pumps (GSHP) expires they will almost certainly cease to buy GSHPs (except where it is the preferred solution for new build Code 4+). This is because they do not have the upfront capital to fund purchases, even when the payback is guaranteed through the RHI. Whilst we understand that Government is looking at ways to release capital to Local Authorities (borrowing against future FIT/RHI income) this facility is not available yet and it may not be available to RSLs (except perhaps those set up as Arm-Length-Management-Organisation (ALMOs) within the LA). We therefore recommend Government consider the practicalities of this and work with RSLs to understand the barriers they face; if the right measures are put in place this market could grow exceptionally rapidly.

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Access to and Effectiveness of the RHI For the RHI to be a success participants must be educated via a communications strategy for industry and the general public. A Government communications strategy, that is both clear and coherent, is pivotal in providing potential heat generators with access to the impartial information and advice that they need in order to be confident of investing. Ensuring this is in place before the RHI goes live will be essential to its early success. Consumers must be able to understand how to access the different support schemes for energy efficiency and renewable heat and electricity generation available and then to assess the appropriate mix of investments to ensure that the CO2 impact of their energy consumption is reduced in the most cost-effective manner from their perspective. Government and energy suppliers have both an important role in supporting customers in making the right decisions. The Government needs to identify a mechanism for identifying, targeting and providing additional support to consumers on low incomes including those in rural areas and off the gas grid to ensure they are able to benefit from the RHI. This should enable them to avoid upfront capital costs.

Question: Q01

22 June 2010 Page 1010 of 1348

5. The most efficient approach to the development of an effective range of financing mechanisms is to support investment in the RHI through delivery of attractive, inflation-proofed, rates of return, and the removal of any existing barriers within the current fiscal framework. The RHI consultation proposes a number of options for financing the RHI and we do not believe this should be limited or mandated to one model only; all the options should be left open in order to facilitate innovative financing packages.

6. PAYS is specifically mentioned as one option within the consultation and we look forward to engaging with Government on the practicalities of this in future. We believe PAYS will be a very useful tool for customers to access finance, but there are a number of risks that have yet to be quantified, which could act as a barrier to such finance schemes coming forward on a large scale: Much of the renewable heat technology market is still relatively undeveloped, especially in the residential sector and may be perceived as having a high risk factor. In particular, investors may be concerned that the lifetime of the equipment will not meet that of the loan, potentially leaving consumers without the RHI payment to put towards the remainder of the outstanding finance; For the PAYS scheme to succeed, customers will need to be offered loans at affordable interest rates. This raises the issue of the credit status of individual customers and how the borrower manages its default risk. How this will work in practice is yet to be explored in either the RHI or HEMS strategy and we look forward to further consultation on this;

7. Other difficulties with financing arise where the equipment is integrated into a building and a borrower is unable to repay their debt. Although the lender may wish to repossess the equipment in the event of non payment and have this written into a contract, the lender has no right to interfere with the buildings fabric so is unable to recover equipment without a court order giving them access to the property. Furthermore, the property has to be ‘made good’ after the removal of the equipment which can be costly and second hand technology is not eligible under the RHI2. This may restrict the development of the scheme. Removal of heating from a property also raises social and health and safety issues so recovery of equipment may not be a credible option which may in turn affect how a lender manages debt.

8. A further barrier may also be the current accounting treatment of capital allowances. Capital allowances cannot, at present, be claimed on equipment installed in a dwelling house and leased to the customer and this could raise the cost of leasing or hire/purchase agreements as a source of finance for microgeneration equipment. Therefore, a change to the rules is necessary to enable microgeneration equipment to be leased to householders and small business owners.

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We need to leave the delivery of the RHI open for innovative financing packages. There are a number of difficulties with funding under the PAYS scheme to enable this to provide funding at an affordable interest rate which need to be addressed as part of both supporting investment in the RHI and energy efficiency which Government needs to consult further on.

Question: Q02

9. Registration and payment must be simple. Ofgem has been appointed to act as a central agent and, therefore, it is essential that Ofgem has the necessary resources in place to carry out this task effectively and efficiently. It may be appropriate to outsource some of its function through a tendering exercise to appropriately experienced organisations to design, build and operate the payment system.

10. The administrator’s role must include provision of an efficient complaints handling process with an adequate call centre to handle the appropriate level of enquiries. The provision of high quality customer care is critical to the long term success of the RHI.

11. Lessons must be learnt from the FIT implementation and it is critical to engage on the structure and implementation of the RHI at an early stage. A Steering Group should be set up as soon as practical between Ofgem, DECC and suppliers to ensure issues are managed without delay in order to avoid the problems encountered under the FIT scheme.

12. The introduction of the RHI is likely to drive a rapid uptake of heat pump technologies. Heat pumps have a very high power requirement and our internal modelling has shown that these devices (alongside electric vehicles) could create significant problems for electricity distribution networks going forward. In the medium to long term, smart grids are likely to provide some answers but, in the near term, ad-hoc local network issues including voltage instability, thermal overload and supply quality could increase both DNO operating and capital costs. A similar tracking mechanism to that required for micro-generation (in Engineering Recommendation G83) should be set up to enable the DNO to understand where the technology is being connected so that it can assess what action may be needed before quality of service is adversely impacted.

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The Role of Ofgem We welcome the proposal that the administration of the scheme will be carried out by Ofgem E-Serve. Having said this, the administration of the RHI scheme is a task far greater than any that Ofgem has been required to do to date. We would urge Government to ensure that Ofgem is well resourced to administer this scheme and that measures are put in place to support them at an early stage. It is also essential that the administration of the scheme is carried out efficiently and in a cost effective manner. A Steering Group should be set up as soon as practical with Ofgem, DECC and Industry to ensure this support is in place and that lessons are learnt from the work underway as part of the FIT scheme.

Question: Q03

13. Yes, we are very supportive of this as it is important to ensure customers are well protected and we believe this to be a reasonable capacity level for requiring accreditation.

AgreeQuestion: Q04

22 June 2010 Page 1011 of 1348

14. Yes we agree with this.

AgreeQuestion: Q05

15. We believe that MCS should be the main accreditation body. We recognise that the MCS scheme is not flawless, but the number of concerns that have arisen from it can be addressed in time to enable it to be successful for the RHI.

16. There are a number of internationally recognised standards and where appropriate these should also be treated as though they are equivalent to the MCS, for example Solar Keymark.

17. It is critical that the RHI scheme, from the outset, specifies the standard of equipment and installation capability that is required in handling projects greater than 45kW. This is to avoid issues like those caused when LCBP2E extended grants up to 300kW limit but did not have in place the standards which needed to be complied with (e.g. product appears on the Energy Technologies List etc).

Question: Q06

18. We believe that new plant, any increase in capacity of an existing plant and any plant where the prime heat generator has been replaced should be eligible for RHI support.

19. For existing plants that currently operate as fossil or renewable fuelled electricity only plant, it should be possible to allow these stations to have access to the RHI if they convert to renewable fuel and develop heat capacity. In the case of CHP and district heating, new equipment should be defined as equipment relating to the supply of heat from the interface with the steam turbine through to the end customer. Defining new equipment in this way will enable a wider range of existing stations to participate. Such plants will still need to invest in additional equipment such as back up boilers, heat exchangers and heat pipe work, and should therefore have access to the same tariffs to allow better utilisation of existing power generation plant.

20. The extension of any existing district heating scheme network to be used for renewable heat supply, or increases in capacity should be eligible for support under the RHI, as should the capital cost of any work on the existing network to enable that connection or improve efficiency of the network. New networks using existing CHP plants for the supply of renewable heat should also be eligible.

21. Heat generation from bio-fluids should be included within the RHI. Heat from organic process waste, produced as an industrial by-product should also be eligible and classified as a renewable fuel for the RHI. This would incentivse, for example, where combustion of organic process waste (for example from the paper industry) to produce industrial heat, reducing landfill requirements and displacing fossil fuel use.

22. Cooling (‘chill’) should qualify as renewable heat, as energy is required to create chill in a very similar way to the creation of heat. In many cases, ranging from refrigeration distribution centres to data centres, biomass CHP plants can optimise efficiency through these ideal low grade and base load applications.


23. We have no comments on this question.

No OpinionQuestion: Q08

24. In general, we agree with the limits suggested. However, we do not agree that the RHI should be subject to compliance with emission standards, as emissions standards are already regulated via international and national legislation. Standards need to be based upon best available technique most relevant to the size of plant, to ensure the correct balance between cost and potential impacts upon health and air quality.

Question: Q09

25. E.ON agrees that there are strong synergies between heat and broader objectives of encouraging better energy efficiency. We therefore support the proposed approach to encourage adoption of a basic level of energy efficiency measures in homes, by means of deeming the RHI at a small and medium-scale level. Deeming energy heat loads will assume a certain minimum level of energy efficiency measures has been implemented: at least 125mm of loft insulation, and cavity wall insulation where possible and appropriate is installed in the home. This level is not onerous, and whilst we agree with the consultation that this does not need to be mandated, using deeming should at least encourage customers to take this up first as otherwise the full benefits will not be realised.

26. Whilst ensuring homes meet the right level of energy efficiency remains a key priority, we do not wish to see householders deterred, particularly when customers are looking to invest in RHI eligible equipment as a distress purchase. It is necessary to balance the need to encourage consumers to increase the efficiency of their homes whilst not deterring them from purchasing RHI eligible technologies. We believe that both the independent advice body proposed in the HEMS publication and installers will play a central role here in terms of guiding customers.

Question: Q10

22 June 2010 Page 1012 of 1348

27. One way to mitigate this undesirable outcome is to set minimum fabric efficiency standards under the Code for Sustainable Homes when specifying renewable heat technologies. In order to enable this, a requirement will need to be added into the recently closed Code consultation; it should fall within the remit of Building Control Officers to ensure that house builders are complying.

28. Further consideration on how the RHI can best be applied by house-builders post 2013 is required, especially in regards to bringing benefits not only to their home owners (i.e. customers) but also the community as a whole.

29. The recently published ‘Home Energy Management Strategy’ and the currently open consultation on the ‘PPS: Planning for a Low Carbon Future in a Changing Climate’, encourage, where appropriate, the deployment of district heating schemes. We welcome this, and believe that in the right settings, district heating can represent a ‘future proof’ infrastructure investment to transfer efficiently low carbon/renewable heat around a built environment. However, one of the most significant barriers currently facing the deployment of such schemes is the cost of pipe work and associated legal costs.

30. We are concerned that the high cost of pipe work may deter house builders from connecting their developments to existing district schemes, even where they are in close proximity, and instead pursue on-site solutions, which may be less carbon and cost effective overall. Connecting to an existing scheme could not only benefit the house-builder by providing access to a renewable source of heat (thus enabling compliance with building regulations), but it could also bring benefits to existing customers and the wider community. The more loads/customers a heat network has, the greater the possibility of accessing economies of scale which should in turn reduce the cost of delivered heat to all customers. However, we anticipate that as district heating becomes more widely deployed in appropriate settings, more pipe work suppliers will be attracted to the market and thus in the longer term this barrier will become less significant as the market becomes more price competitive. However, in the short term this cost barrier may push developers to deploy solutions that are not as carbon effective at a building scale and thus the growth of district heating schemes in relevant areas may be inhibited.

31. Therefore, we would urge Government to consider how the RHI could be applied within a new build context, to support and encourage developers to connect to existing or planned district heating schemes using renewable heat and thus support their organic growth, aligned to a local spatial plan. We would suggest that in instances where connection is both logical and consistent with the local energy master plan, and where the cost of connection is a barrier, that housebuilders are able to access a level of RHI which thus avoids them deploying less carbon effective, renewable solutions on their site.

Question: Q11

32. Due to the relatively high costs of heat metering for small-scale heat generation (perhaps in the order of £200 for microgeneration-level heat), we accept that deeming of heat is appropriate at this level. Larger-scale technologies should have heat metering, and metering should be used wherever economically viable. The current method used by CHPQA is generally reasonable and appropriate.

33. We also believe that deeming at a domestic level will encourage energy efficiency (if set at the right level as discussed above in response to question 10).

34. We would urge government to put in place measures to ensure that customers are in fact using the plant installed, avoiding situations where the RHI is still being paid for a system which is no longer functioning. For example, recipients of the RHI could be asked to confirm annually that their system is fully operational, or have an annual inspection, and it should be made clear that receipt of the RHI where renewable heat is not being produced is classed as fraud.

AgreeQuestion: Q12

35. Evaluating the usefulness of existing processes such as SAP/SBEM and EPCs is an appropriate starting point. SAP already provides an output relating to heat load and, given its centrality in determining the energy performance of a dwelling, we support its use in principle in implementing deeming at a domestic level. SAP determines approach for occupancy levels, water usage etc and therefore has many benefits. However, we believe SAP should be reviewed as SAP data is essential in designing a high quality appropriate solution for heating replacement. It should also be reviewed to ensure it remains effective and appropriate for the purposes of deeming over the life of the RHI.

36. There is a concern that for commercial buildings SBEM is not wholly suitable since the occupancy/usage of a building can vary dramatically over a couple of decades. Therefore, it may be preferable for heat to be metered in any building which is not a dwelling.

37. If these tools are to be used, we propose that they are subject to rigorous and urgent assessment of how they function in real-life situations, so that any shortcomings can be addressed as a matter of urgency. The results of the assessments should then be published, alongside any proposed plan for rectifying the defects so that confidence in the schemes can be enhanced.

Question: Q13

38. We agree that the potential is low provided that any vents on such a heat network are also metered to show when “potential” over-generation could be occurring. In this scenario, the use of such vents would have to be agreed as to when it was acceptable to vent and when it was not. The solution would be to make it clear in the contract for acceptance of the RHI, that if someone generates additional income and dumps the heat that this constitutes fraud.

39. Metering at large scale can also help to ensure that the technology is working efficiently. If a technology is not set up properly then it may over compensate as a result of this. Understanding the output pattern can help determine whether the kit has been appropriately set up and may actually help to reduce the need to over-generate.

Question: Q14

22 June 2010 Page 1013 of 1348

40. The level of support regarding the RHI needs to consider not only the amount of revenue lost from ROCs/electricity etc but also the additional risk that the generator is taking on regarding operational guarantees which would not be relevant to an electric only plant. In addition, back up plant will need to be required and additional fuels will be necessary for times when the biomass and energy from waste (efw) CHP plants are unavailable.

41. A figure towards the higher end of the proposed tariff levels for large scale biomass CHP plant would seem to be appropriate to initiate biomass development in industrial areas where large heat loads are sustainable. However, this should be over a 20 year period as is the case under the RO. Shorter periods would not support investment given the additional risks associated with CHP/Heat plant (continuity in the heat load from industrial customers) over electricity-only generation. In terms of indexing or grandfathering the same fuel will be used to generate both heat and power for biomass CHP plant and the reward mechanism needs to be consistent. Fixed rewards under the RHI imply fixed price feedstock, a variable fuel ROC in the RO implies variable fuel costs. This is inconsistent and needs to be aligned.

42. For district heating networks to residential or commercial properties, generation plants need to be compensated for lower load factors compared to industrial loads. A district heating network where the biomass CHP plant is designed to provide the peak heat demand will typically export less than half of the heat which could have been supplied to a baseload industrial customer. It is also necessary to provide an uplift to compensate for the extra costs, compared to industrial CHP applications, for the additional back up and peaking plant plus the significantly higher costs for the district heating pipework infrastructure. This requires further analysis but our preliminary view is that generating stations supplying district heating networks should receive double the incentive received by CHP industrial applications, as a minimum.

43. A large-scale good quality efw CHP plant could achieve 0.5ROC (deemed) or higher (according to FMS) for the power it generates under the RO. Since the efw plant efficiency is lower than a biomass plant and receiving less ROCs because of the lower bio-content of the fuel, the proposed £25/MWh is not appropriate for an efw CHP exporting heat which is less than 30% of its input energy. A range of £35-40/MWh would seem to be reasonable. However, this may over-incentivise large scale heat schemes. A hybrid incentive scheme, whereby efw CHP projects continue to be supported by the RO up to CHPQA’s quality index of 100, and then receive the RHI for further heat export, may be appropriate.

Question: Q15

44. We have understood this question to relate to onsite combustion and at present the use of biogas within an onsite CHP will attract ROCs. Any additional incentive should be considered where the heat is useful and could be based on the additional cost of gasifiers and the down rating of a CHP plant as a result of the lower calorific value of syngas/biogas.

45. The majority of this biogas is produced by water companies or AD plants, which tend to be away from areas that can utilise this heat. This does not incentivise the use of CHP. We believe it would be better to incentive it at the point at which it can be used which may be onsite or offsite (i.e. transported through the grid). Please refer to Appendix A which discusses a similar proposition for biomethane.

, additional infoQuestion: Q16

46. No.

Question: Q17

22 June 2010 Page 1014 of 1348

47. On the whole we support the approach that Government has adopted in setting tariff levels, given that it has not decided to cap the level of support for more expensive technologies as we recommended in our response to the heat and energy saving strategy consultation.

48. For heat from biomass or from efw the tariff level lifetimes should be extended to be in line with those of the Renewables Obligation. Best practice for biomass should be for the fuel to be used as efficiently as possible within a CHP plant. This will not only improve efficiency but also provide the best economic returns for a generator which should partly mitigate the risks to generators of increasing fuel prices. However, if the RO and the RHI lifetimes are of differing timescales (15 years for the RHI and 20 years for the RO), this would mean an unfair advantage to younger plant (still receiving the RHI, when older plants have reached the end of the 15 year incentive period), which would be able to use this additional revenue to pay a higher price for fuel due to the incentive mechanism price distortion. As a worst case scenario this could mean early closure of plants which are unable to compete for fuel due to the imbalance in revenues.

49. A figure towards the higher end of the proposed tariff levels for large scale biomass CHP plant would be appropriate to initiate biomass development in industrial areas where large heat loads are sustainable. However, this should be for a 20 year period as is the case under the RO. Shorter periods would reduce investment incentives as discussed in response to Q15.

50. Please also refer to our response to Q15 for our views on RO/RHI support for efw CHP plants.

51. We believe the proposed tariff level for biomethane is too low and that it will not incentivise any investment. The tariff should be based on the same methodology used for rewarding other sources of renewable heat, aiming to provide a specific rate of return on investment. We would like to see the tariff level raised to 8p/kWh and Appendix A (confidential) provides evidence to support this.

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RHI tariff levels and Biomethane Biomethane, whether for use in heating or for power generation, can make a valuable contribution to reducing the carbon impact of gas consumption. Incentivising the consumption of biomethane would provide an additional stimulus to biomethane development, by creating a market which biomethane producers can respond to. It would, for example, allow biomethane to be used for the supply of heat to zero carbon homes and CHP plant. Overall we support the proposed tariff levels for renewable heat technologies; however we believe that the proposed tariff level for biomethane is currently too low to stimulate demand and should be raised. We attach supporting documentation to show why this is the case (See Appendix A).


52. A situation could arise where biogas is produced on site either via an AD process or advance thermal gasification and used in a gas CHP. It is not commercially practical to run a separate CHP for the biogas therefore we do not agree with the proposed approach; this situation should be treated as for the bioliquid example illustrated in the RHI consultation in chapter two.

53. For efw plants, it is both impractical and financially unviable to use dedicated boilers for renewable fuel (i.e. >90% bio energy content fuel). Waste streams such as Municipal waste, SRF, C&I waste as well as waste wood are normally delivered on site separately but they share the same reception hall and fuel bunker. Separating these waste steams into biomass and non-biomass and burning those in separate boilers is unreasonable.

Question: Q19

22 June 2010 Page 1015 of 1348

54. Yes. District heating is currently one of the most practical ways of reducing carbon across multiple residential and commercial properties and enables rapid switching to renewable fuel sources. As with other infrastructure such as electric networks, heat networks are fuel agnostic, providing a system that can evolve over time responding to different priorities and costs. For example, a network originally serviced through coal boilers may move to gas CHP and then to biogas and heat pumps in the future.

55. However, there are still a number of commercial challenges facing the introduction of district heating and in particular the costs to the customer compared with traditional gas heating. The price comparator is difficult as the cost of the infrastructure needs to be paid for across a small number of users. Therefore, an incentive payable for the heat taken from a heat network will facilitate the adoption of heat networks throughout the UK and greater acceptance by customers.

56. The RHI has the potential to drive a step change in renewable heating in the UK. In many areas individual solutions may be both cost and carbon efficient but in areas of dense buildings, individual solutions may be difficult to deliver and could potentially lead to significant challenges for infrastructure. For example, the delivery and storage of biomass in urban areas can be difficult and carbon intensive but energy centres3 can resolve these issues by providing a central location for fuel delivery and storage and using lower carbon delivery options such as rail freight. Furthermore, in dense urban areas where electricity networks may be under stress, a move away from gas heating to heating using electricity may significantly increase the burden on the distribution network. The installation of a district heating network which could combine electricity and heat generation with the use of technologies such as heat pumps, may avoid some of the issues highlighted whilst delivering significant renewable heat. In some situations district heating may, therefore, be the best or only solution to delivering renewable heat and, if the RHI is to be available to as many individuals and organisations as possible, it is vital that renewable district heating is supported from the outset of the scheme.

57. The level of reward needed to make district heating network generation plant from renewable sources viable needs to reflect the lower heat load compared to industrial loads. A district heating network where the biomass CHP plant is designed to provide the peak heat demand will typically export less than half of the heat which could have been supplied to abaseload industrial customer. Further analysis is required on this but our preliminary view is that generating stations supplying district heating networks should receive double the incentive received for heat delivery from renewable CHP industrial applications as a minimum. It is also necessary to provide an uplift to compensate for the extra costs, compared to industrial CHP applications, for the additional back up and peaking plant plus the significantly higher costs for the district heating pipework infrastructure.

58. The introduction of the RHI may incentivise developers to install heat pumps and may act as a disincentive to the take up of district heating solutions where CHP and heat networks would otherwise have been a more cost-effective and lower carbon alternative. Therefore, any uplift for district heating should aim to create a level playing field between it and alternative renewable heat technologies.

3 An energy centre may be a backup boiler to feed the district heating network

AgreeQuestion: Q20

22 June 2010 Page 1016 of 1348

59. The Government proposal is that only ‘hard to treat buildings’ be eligible for support under the RHI District Heat Network (DHN) uplift. However, the likelihood is that hard to treat buildings will be dispersed across a given locality. Limiting support to hard to treat buildings may mean that the resultant networks would bypass non qualifying buildings even if they could benefit from renewable heat from DHN. Indeed, the consultation appears to suggest that a potential penalty (through a reduced RHI uplift) could apply to a developer connecting ineligible buildings to a scheme supported under the RHI. If this were the case, the only solution open to buildings deemed ineligible for DHN support would be individual solutions even if this were at greater overall cost to the RHI scheme. Furthermore, the ‘hard to treat’ building requirement could trigger the development of sub-optimal networks both from a cost and efficiency perspective. Any support for the development of DHN needs to stimulate ‘logical networks’ which have the potential to expand with new opportunities. E.ON believes, therefore, that the definition of hard to treat be removed from the requirement for receiving the RHI DHN uplift.

60. Under any RHI DHN uplift, it is necessary to determine areas that are suitable for support. Determining uplift eligibility must be simple and cost effective, both for the developer and Government. A scheme requiring developers to provide substantial evidence to demonstrate scheme eligibility for the RHI DHN uplift would be costly to developers and resource intensive for officials reviewing each proposal. In addition, developers investigating the feasibility of creating or extending a network need to know in advance whether the scheme would be eligible for the RHI DHN uplift. We recommend, therefore, that eligibility for the RHI DHN uplift be determined by an existing metric of heat demand. The Government’s decision to develop a UK wide heat-map, similar to that for London, provides a valuableopportunity for developing a system for determining site eligibility. Sites with a heat demand above a given threshold should automatically qualify for eligibility for the RHI DHN uplift. Connection to buildings at a site would, therefore, not be restricted. Instead the developer would be free to seek to supply as many customers as possible from the network. The proposed methodology does, however, present potential problems for sites ideal for DHN but not recognised by the heat map for reasons such as a lack of adequate heat map resolution or specific building issues. As a result, E.ON recommends that developers be able to present proposals for DHN eligibility in areas not covered by the heat map for individual consideration.

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District Heating Networks We welcome the inclusion of district heating within the proposals. Currently, district heating is one of the most practical ways of reducing carbon across multiple residential and commercial properties and it enables rapid switching to renewable fuel sources. It is also an efficient way of moving heat around a densely built environment. We believe this provides a significant opportunity to encourage the growth and expansion of networks in terms of changing use of heat in the future. The level of reward needed to make district heating network generation plant from renewable sources viable needs to reflect the lower heat load compared to industrial loads. It is also necessary to provide an uplift to compensate for the extra costs, compared to industrial CHP applications, for the additional back up and peaking plant required plus the costs for the district heating pipe work infrastructure. The level of support for district heating should aim to create a level playing field between it and alternative renewable heat technologies such as ground source heat pumps. The District Heating uplift should not be limited to hard-to-treat building, as many of these buildings will be dispersed across given locality. Limiting the uplift therefore to hard to treat buildings may result in networks bypassing non-qualifying buildings even if they could benefit from renewable heat from district heating networks. Any support for the development of District Heat Networks should stimulate ‘logical networks’ which have the potential to expand with new opportunities. E.ON believes, therefore, that the definition of hard to treat be removed from the requirement for receiving the RHI DHN uplift.

Question: Q21

61. Our position on this issue is subject to ongoing analysis on the implications of biomass grandfathering under the RO. In general, E.ON feels that all tariffs should be grandfathered and fully fixed, other than to correct for inflation. This provides the certainty necessary to secure investment in most renewable heat technologies.

62. We can fully understand why DECC has proposed the alternative to full grandfathering for bio-energy, which is to “split the bio-energy tariffs…into a [grandfathered] fuel component and a [free-floating] non-fuel component”. This would, in theory, allow DECC to alter the level of support in line with fluctuating fuel prices, thereby addressing one of the major risks for a bio-energy project.

63. However, based on our knowledge and experience of the market, we also strongly agree with DECC’s observation that “it would be very difficult, certainly in the near future, to find a reliable price index [for biomass]”.

64. Notwithstanding the level of support under each solution, the decision as to which is best (full grandfathering, or a split tariff which is partially grandfathered) is completely dependent on the detail of if and how DECC could achieve effective and timely biomass fuel indexation, for the likely spectrum of potential projects and fuel types under the latter option.

65. Clarification of this detail is being sought from DECC as part of the RO biomass grandfathering consultation; until this is available, it is not possible to justify a decision for bio-energy tariffs either way.

66. Equally importantly, the treatment of bio-energy under the RHI must be compatible with the RO, as under DECC’s proposed transition arrangements, CHP generators would fall under both support mechanisms. Incompatibility would also be likely to result in fuel market distortion, which in turn would affect all biomass projects, not just those with CHP.

67. In light of the above, E.ON’s position on this issue is subject to further analysis of the implications of (and will be outlined as part of our response to) DECC’s consultation on biomass grandfathering under the RO.

Question: Q22

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68. We support the proposal not to introduce degression from the outset. Given the challenge in meeting the UK’s 2020 renewables target we need to ensure we drive uptake as quickly as possible. The market for heat is relatively immature and therefore introducing degression too early would be inappropriate.

69. Degression could and should be introduced when a critical mass has been reached in terms of renewable heat uptake and cost curves for key technologies can be observed to have reduced sufficiently.

AgreeQuestion: Q23

70. We support the proposed approach, but would also urge Government to ensure that the Appendix Q process for evaluating and integrating new technologies into SAP is suitably modified to prevent it from becoming a barrier to innovation uptake.

AgreeQuestion: Q24

71. The RHI should itself stimulate an increased take-up which will then lead to more sophisticated supply changes and ultimately lower unit costs. Technologies that provide better performance should emerge naturally if the degression and incentive levels have been appropriately set. We do not believe therefore that there is a need to impose any additional restrictions.

72. In addition, the creation of a mature, suitably qualified/accredited and competitive installation market is just as important as improvements in the design or efficiency of the product itself.

73. International comparison with countries such as Germany may be helpful.

Question: Q25

74. Yes we find this to be acceptable.

AgreeQuestion: Q26

75. We support the inclusion of provisions that would allow for emergency reviews, providing the criteria for what constitutes an emergency is clearly defined so that they are not triggered frequently. Such examples may include:

changes in the energy market (to include relative fuel prices);

material changes in capital or fuel costs;

Technology developments that could not have been foreseen at the regular banding review, that are likely to have an adverse or material impact on the roll out of RHI accredited heat devices, or that will adversely impact on the security of supply or the ability of Government to meet internationally binding targets;

Enduring changes in Exchange Rates (in particular £ to € for equipment/service supplies, and £ to $ to include fuel supply from overseas).

Question: Q27

76. Existing power plants constructed prior to 15th July 2009 should be encouraged to participate in expanding and creating new heat networks eligible for the RHI. Fossil plants that convert after that date to renewable fuel, regardless of whether the heat infrastructure exists or is new, should be eligible for the RHI. If a power plant installed before July 2009 seeks to develop a renewable fuel heat network then this should also be incentivised within the RHI mechanism. This is the easiest method to switch existing CHP stations to renewable fuels and increase the levels of renewable heat generated. CHP situations should be regarded as the highest priority for combustion of finite renewable fuel sources to ensure the fuels are utilised in the most effective way.

77. However these refurbished plants will have a lower capex than new plants which should be reflected in the tariff level offered. At this stage as costs are not defined clearly we would welcome the opportunity to discuss what the optimum tariff level should be with Government.

78. We support the proposed 2013 date after which CHP biomass projects can no longer claim the incremental ½ ROC support under the RO for CHP although renewable CHP with district heating will require a higher level of support and the introduction of an uplift, as discussed in response to question 20. However, in respect of efw CHP projects (which E.ON is now developing as a business in the UK) developers have expressed concern about the 2013 date in relation to the impact on the viability of efw projects of the new RO +RHI approach. They have proposed, because of the extended timescales for bringing efw projects to fruition (including negotiating contracts under pfi arrangements), a later date (say 2016) which would enable existing projects already in preparation to move to an investment decision within the existing framework. We would recommend that DECC explore the impact of the change with the efw industry to ensure that incentives to invest in efw projects are maintained.

Question: Q28

79. Overall we support the RHI proposal and believe the approach that has been adopted balances the need to protect the scheme whilst limiting abuse. This is a new scheme that will be heavily influenced by the way that it is run and therefore setting up the scheme in a timely manner, that is simple and easy to access by all customers (large and small, energy professionals and non-energy professionals) is essential. We look forward to working with Government to take this proposal forward and ensure it is a success.

Question: Q29

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80. There is no standard heat network that we recommend to use as a reference site as each site and development has it own challenges including heat sources, customer numbers, pipe lengths, demand profiles and thermal losses. We have a number of sites currently under operation and would be happy to work with Government to determine the level of uplift. We therefore recommend that the uplift is determined by assessing several reference networks across different type of development and locations

81. As discussed above, the introduction of RHI for heat pumps and solar will disincentivise developers from taking up district heating solutions, which in many cases represents a more efficient and lower carbon solution. Therefore any uplift should seek to level the playing field for district heating.

Question: Q30

555 Mull Wood Fuel Users Group Other

(only Q.28 answered - see the full response for case study/figures etc)

The Mull Wood Fuel Users Group is based on the Isle of Mull, Scotland. The group consists of householders, wood fuel suppliers, farmers and small businesses all using woodfuel as an alternative to fossil fuels for heating/hot water.We have confined our response to the main issues directly affecting us. See Q.28.Four members of the group did the Ignite Wood Fuel Training Course in 2007, held by the Rural Development Initiatives, and have used information gathered from this accredited course and the RDI Energy Use Calculator to produce some of the calculations below.


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(See full response for further info - tables supplied)From this section of the Consultation we understand that pre 15th July 2009 installations will not be eligible for support from the RHI. We disagree with this for 5 reasons. a. Those pre 15th July 2009 installations have been ground breaking projects, which have served to demonstrate a positive view of renewable heat technologies, and have encouraged recent and future renewable heating systems which will be eligible for RHI support. Here on the Isle of Mull, we worked closely together to create a working market with a strong supply chain, both responsible early adopters and local suppliers to create an efficient and sustainable business model. Critically the survival of this local market is predicated upon the price of wood from Forestry Commission Scotland remaining predictable and constant.b. Pre 15th July 2009 grant aided installations generally received 30% (households) or 50% (small businesses) capital grant towards their installation costs but no support for ongoing running costs. The RHI is designed to cover capital and ongoing maintenance costs for the life time of the technology. In the woodfuel case the RHI states this would be for 15 years. We therefore consider that the RHI scheme should enable earlier installations – both domestic and non domestic - to claim at least the running costs element of the RHI Tariff.

c. The expected increase in demand for wood will significantly affect future running costs for early adopters. The RHI will stimulate the woodfuel market exponentially, and this will have a major effect on fuel costs because the demand for timber will inevitably rise . This was not an issue for early users prior to the introduction of the RHI, as the timber utilized in woodfuel was plentiful and considered low value. Presumably the anticipated increase in the price of wood has been factored into the calculations which generated the tariff figures themselves. d. On the basis of the proposed RHI tariff (see page 51 of the Consultation document) we calculate that over a 15 year period a semi-detached 3 bedroom house will lose £14,495 in assistance from being an early adopter (this is after taking into account the maximum £4000 grant to householders.) In addition, we submit a table below, showing the impact on two identical 25kWh Vigas Log Boiler installations on the Isle of Mull where one installation would qualify for the RHI and the other would not as it was installed prior to the qualifying date.

It is manifestly unjust for those who were prepared to take risks and motivated to protect the environment and encourage an embryonic industry that they should be so disadvantaged. Early adopters frozen out of the new tariff will have to bear the impact of the increased price of wood. The net impact therefore on early adopters will be a loss of a minimum of £14,495 for householders together with the higher price they will have to pay for fuel under the new arrangement. This will have an even larger impact on non domestic early adopters. Most of these have had to seek bank borrowing to install their boilers. In one instance the impact of an anticipated increase in the price of wood of 20% over 2 years (from April 2011) combined with an anticipated increase in fuel oil of 20% over the same period results in a 14% increase in woodchip price which makes their operation non-viable.

Below is a case study (see full response for this) to show the impact of future price increases on an Isle of Mull non domestic installation. This installation (a Froling 70kWh Woodchip boiler heating 5 properties) was awarded a 50% SRDP grant, and the project completed in April 2009. The monetary benefit to the business at 2008 prices was estimated to be £580. (See table below, an extract from SRDP application in 2008.) The carbon savings were estimated at 50T per annum.As you can see, a conservative estimate of a 14% rise in woodchip prices will leave a negligible ‘profit’ before boiler servicing/maintenance costs are taken out. A possible 25% increase in woodchip costs will put the project into jeopardy, not able to pay for maintenance/servicing costs and not able to service the costs of the loan. Woodchip price in 2008: 3.2p/kWh. Current price: 3.5p/kWh. With a 14% increase it will be 4p/kWh.

Because pre July 2009 installations will not receive any financial support towards their running costs this new regime therefore affects the viability and future of these pioneering projects. e. The probable effect on community projects - many early installations of woodchip boilers have been in community housing and leisure facilities. If they were commissioned before 15th July 2009 they will not qualify for RHI but they will be subject to the same future rise in fuel costs mentioned above again without running cost support. This would represent a serious loss to those organizations, who are trying to provide affordable heat to potentially ‘fuel poor’ customers and may even render them unviable and unable to continue.

2. We also question the issue of domestic installations between 15th July 2009 and April 2011 not having to repay any grants received in order to claim the RHI – whereas non-domestic recipients do. See extract below from p66. Where a project is otherwise eligible for RHI support but has received or receives a central Government grant, we may require that such grant monies be paid back in order for the project to be eligible for RHI support. As stated in the RES, we will not require this for grants received at the domestic level before the start of the RHI. At this level, householders will not have to pay back central Government grants in order to receive RHI support.

a. This is manifestly unjust as ALL early adopters were contributors to Government targets to lower carbon emissions whether domestic or otherwise.

Recipients of non domestic grants (such as SRDP in Scotland and LCBP in England) must be able to join the RHI and either receive a smaller tariff payment as suggested above, or be offered the chance to re-pay their grant and thus benefit in full from the RHI tariff scheme, as with the FIT’s tariffs.

Other Critical Issues Block Exemption for State Aid Purposes


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It has been suggested by some commentators that the European State Aid regulations will not permit grants to be awarded under the scheme to businesses on the Island of Mull which have adopted micro renewable systems. We consider this view to be erroneous for the following three reasons. Firstly, the EU takes action on reducing carbon emissions very seriously and action across Europe is required. If ever a programme area was considered appropriate for a Block Exemption in terms of State Aid rules it is the installation of micro-renewable systems. Therefore if it does not already exist we call for an immediate introduction of block exemptions for businesses that have adopted these systems. Second, all businesses in Mull are SMEs and should therefore be permitted exemption from state aid. Third the amounts of money involved are in the ‘ de minimis’ amounts and should be treated accordingly. Scottish Government Action as a Devolved Administration The consultation document makes clear that heat is a devolved area of responsibility. Accordingly although we are of course submitting these representations to DECC we also submit these in parallel to the Scottish Government. We call on the Scottish Government to use its already acknowledged powers in the area to treat early adopters fairly by including them fully in the scheme. This also accords with its policy of supporting areas outside the urban conurbations that do not have access to mains gas. We have met with the Scottish Minister for Energy and already made these representations verbally. We expect him to follow up on our representations and ensure that he uses the powers devolved to the Scottish government to rectify this injustice and support early adopters.

556 ELEXON Local Government / A

The RHI consultation outlines various activities to be undertaken by the Administrator. There are significant synergies between these activities and the processes that ELEXON currently successfully operates in the GB electricity market:

Accreditation We undertake qualification, registration and ongoing assurance of companies, their systems and their procedures.

Auditing We have developed and employ a tailored, risk based approach to auditing the compliance of the systems used by suppliers and generators with the performance standards prescribed in the BSC.

Deemed Installations The electricity arrangements include provisions for “unmetered supplies” (e.g. street lighting). The efficacy of this arrangement is dependent on maintaining inventories of the assets and their ratings. This too is subject to checks and periodic process review. The electricity arrangements also address the differing risks and metering requirements of consumers, from the large industrial to the small domestic. We established and operate pragmatic solutions (e.g. profiling) that enable all to participate in the market, and for units that are too small and impractical to meter we have arrangements which ensure accurate representation of consumption. We are currently working on how to leverage the added quality data that a technology enabled (smart metered) world will support.

Enforcement We operate a Performance Assurance Framework that includes a range of published sanctions to promote good performance, but ultimately can include removal of accreditation and exclusion from the market.Rights of Redress We operate disputes and appeals procedures. We have resolved over 370 queries and disputes in the last ten years. A measure of the effectiveness of our procedures is that no decision under our process has ever been referred onward to the energy arbitrator.Data Collection We currently collect, process, analyse and report market data. This data underpins the effective balancing and settlement of electricity as well as being a valued source of information and analysis for the industry.

Outside of these areas highlighted in the consultation we also have synergies with other scheme fundamentals:Payments to RHI Recipients We make daily payments to market participants (including managing initial settlement and subsequent reconciliation runs, making interest adjustments, managing credit and instructing payment transfers).Operating a Transitional Arrangement We have operated under transitional arrangements, both when the market was opened in England and Wales and then when subsequently extended to Scotland.Project Delivery Also relevant to the introduction of a new scheme is our industry acknowledged track record of delivering projects involving the implementation of both systems and processes efficiently to time and to budget.Strong Delivery Partnerships We have strong partners in the fields of Business Process Outsourcing and Hosting and Application Maintenance and Development.Metering We have strong experience in metering arrangements and ensuring that the standards (and hence costs) of such equipment are commensurate. We support the testing of meters and their acceptance into the market, and ongoing type testing.ELEXON would like to further discuss the implementation, operation, and evolution of the Scheme, with a view to delivering these services to DECC or Ofgem.


557 Flamefix Installer

solar thermal tariffs


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In conjunction with the document contributed to and supported by the STA on the RHI ofwhich I support I also raise my companies personal view on the initiative.I take issue with the Renewable heat incentives disparity between technologies and thetariff structure imposed.Without question heating at 75% of the energy used in space and water heatingrepresents by far the greatest contribution to CO2 output from the domestic market.Reducing this will not be achieved unless the heating system is fundamentally changed.The cost of doing so and the time involved far exceeds the effort required for installingSolar PV. Yet the ROI and the RHI is not reflecting this.Solar can be used to far greater affect in space heating if the heating system is set up forlow temperature heating and the solar is tuned to give winter heat input from the sun.The storage of the thermal energy needs to be considered and this requires a mechanismto store heat energy. An effective way to do this is using thermal stores of a size 1000l andhigher.Rather than supplying 60% of water heating a winterised solar system could provide 30-50% of space heating and 60% of hot water heating even more if the property is cat 5 and6. This would be a much more effective use of solar energy. It is also a much more efficientway of converting solar energy into useable energy.Effectively we can halve or reduce to two thirds our heat energy requirements bycombining energy reduction in the form of insulation, and more effective energymanagement in the form of heating controls and low temperature heating emitters.Smoothing the supply of energy via storage of energy from daylight to night time usagecheaply via thermal stores means heating is available when required. This could besupplemented either by conventional condensing gas boilers or off peak electrical unitscharging part of the store over night on off peak electricity.The costs to do this are £15k - £20k similar to installing PV but the effort required is fargreater in terms of labour and upheaval. Yet at the same time the payback is far quickerand realistic whereas PV is only economical because of the FIT. PV is only 15-20%efficient at converting solar energy into useable energy, solar thermal is 4times moreefficient at doing so!Unless the RHI matches that of PV then the effect will be to penalise the most effectivemethod of reducing energy consumption in the home and CO2 emissions.Having just spent three weeks on a transfer of Technology course in Germany funded bythe EU I can categorically state we will end up with a system that is biased towards PVand will track the decline in Solar Thermal installed in the same manner as has happenedin Germany. Where currently PV represents 70% of the solar arrays installed and solarthermal is only 30%, purely because of the artificial ROI that PV offers.The RHI needs to reflect the type of Solar thermal system installed and match greaterfunding to the greater effort and return of the system installed. As such the currentproposal falls far short of the requirement for a more effective reconfiguration of thedomestic heating and water system in the domestic home. The cost of which will only beattractive if the homeowner is similarly incentivised to contemplate.For to long Solar thermal has been treated as a second-class citizen, even recently theboiler scrappage scheme for condensing boilers was set at £400. This was the maximumavailable under the complicated grant scheme that was supposed to promote Solar! Thecontempt that Government has for Solar thermal is diametrically opposed to the benefits itbrings.Without an equal FIT I will not be able to employ the numbers I would like to in the industrywith a FIT equality I would be looking to expand significantly and employ 10 – 20 installersfrom the current 1-2.For the sake of the nation and our world we should consider the Carbon effect of thetechnologies introduced and the real benefit to the consumer not simply the ROI of anartificial pricing structure for PV electricity over Solar thermal.To compete fairly both must be equally funded.


558 EDF Energy Supplier

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EDF Energy is one of the UK’s largest energy companies with activities throughout the energy chain. Our interests include nuclear, renewables, coal and gas-fired electricity generation, combined heat and power, electricity networks and energy supply to end users. We have over five million electricity and gas customer accounts in the UK, including both residential and business users.We welcome the opportunity to respond to DECC’s consultation on the Renewable Heat Incentive (RHI). EDF Energy strongly supports the development of policy to decarbonise heat and the introduction of incentives to bring forward the commercial development of low carbon heating solutions.EDF Energy believes that renewable heat must play an important role in meeting the UK’s 2020 renewable energy target, and will also be necessary to achieve the long term target to reduce carbon dioxide emissions by 80% by 2050. In the Energy Market Assessment, Government recognises that the electricity sector needs to be largely decarbonised by the 2030s and that low carbon electricity will then provide a very large proportion of the UK’s future low carbon energy. It is therefore important that the RHI is developed as part of a coherent long term policy framework to decarbonise the UK economy and ensure that consumers do not pay more than they need to in delivering this important policy goal.Decarbonising heat is also likely to bring benefits in terms of security of supply, by reducing the reliance on fossil fuels to produce heat and replacing them with low carbon alternatives.Subsidising low carbon heat or ensuring that existing heating solutions pay for their carbon emissions will have an associated cost and we believe it is important that Government and all stakeholders are transparent about these impacts, to ensure the widest possible consumer engagement and support in the long term. We need clarity at the earliest opportunity on how the RHI will be funded. We believe that a levy that reflects the carbon intensity of fossil fuels used to produce heat provides a good solution in terms of transparency and ensuring an equitable contribution from all sectors and consumers.

We recognise the potential regressive impacts of the RHI, given that all consumers will contribute, and yet not all will be able to access these funds, because they are not able to afford the upfront costs of technologies. Assigning RHI payments can help to bring the benefits of low carbon heating to more customers, allowing third parties such as registered social landlords to pay for the upfront costs of equipment in return for RHI payments. We therefore agree that Government should commit to look at how alternative funding mechanisms, including Pay As You Save (PAYS), could be used to help more households access low carbon heating solutions.The RHI should be designed to minimise cost impacts for all customers. We do not believe that the RHI should be designed as a mechanism to tackle fuel poverty, as it will not be an efficient way to target those in greatest need and is likely to have adverse or unintended consequences that will reduce the effectiveness of the policy and increase the overall costs. The primary objective of the RHI should be clear, in that it should be designed to direct investment to the most affordable, secure low carbon heat solutions and help maintain affordable prices for all customers.To help minimise the cost of funding the incentive, we believe that the RHI should offer time limited tariffs that are focussed on bringing the best technologies to market to deliver low carbon heat. Another important consideration in setting the incentive level will be to ensure that there is a coherent approach across all support and subsidy regimes; RHI, FIT, RO and RTFO, and that reviews of support levels are coordinated to maintain a coherent approach and prevent arbitrage opportunities in support levels across schemes. In the long term, subsidies should be phased out to create a level playing field for all low carbon heating.EDF Energy believes that renewable heat provides an opportunity to deliver the UK’s renewable energy target cost effectively. Our analysis has shown that technologies such as heat pumps can compete on a £/MWh of renewable energy cost with offshore wind farms. We also believe that the opportunities to reduce the costs of renewable and low carbon heat technologies through wide-spread deployment of scalable technologies such as heat pumps are much greater than those that exist for offshore wind. We believe this sets an important benchmark in harnessing our efforts and implementing policy to deliver the UK renewable energy targets; and the potential for renewable heat should not be underestimated.Looking more specifically at the heat sector, a broad mix of renewable and low carbon heating solutions will be required, and it is clear that some technologies have greater potential than others. EDF Energy believes that there should be a clear commitment to only use bio-energy that is truly sustainable, through the development of UK and EU standards. While some forms of bio-energy (biomass and biofuels) have very good sustainability credentials, there is a range of bio-energy sources that present significant challenges in overcoming supply chain constraints and protecting the integrity of these environmental credentials. We believe that sustainable bio-energy resources are scarce and should as such be treated as a premium energy resource to be used specifically in applications where other low carbon solutions are not readily available. We provide analysis in our detailed response that demonstrates the sensitivity of the CO2 benefits of edfenergy.com3using bio-energy that is not carbon neutral. We believe these factors must be assessed in determining the tariffs in the RHI to prevent the exploitation of unsustainable bio-energy.Renewable District Heating, including with CHP, can play a role as part of a diverse mix of low carbon heating solutions. We believe that this should be supported through the RHI where there are good opportunities for this technology in terms of demonstrating economic and environmental benefits. This is likely to be in areas of high density heat load or where groups of properties are scheduled to be upgraded at the same time such as social housing projects.As Government identifies, the main barrier to District Heating is the high upfront capital investment required for heat networks. These technologies are mature and the potential for achieving cost savings through technical innovation and wide-scale deployment supported by subsidy is limited. Therefore, we do not believe that it would be appropriate for these schemes to benefit from higher support levels compared with other low carbon heating solutions. Other policies would be more appropriate to facilitate District Heating such as planning reform to reduce delays and uncertainty over infrastructure projects and securing low cost of capital finance for networks, for example through public sector loan guarantees,.It is important to learn from the implementation of FIT and that their needs to be commitment to a clear timetable for implementing the RHI and to have key milestones to be achieved through secondary legislation. This timetable should be published with Government’s response to the consultation.The administrative functions of the RHI should be run by a body with sufficient capacity to run a large-scale billing and payments system and provide high levels of customer service. We welcome that Ofgem is carrying out a feasibility study into what is required to run the scheme and to assess the potential benefits of tendering. Early decisions should be made on putting this out to tender and on key elements of the design of the system, with assurances from Government that there will be enough time to develop a cost effective and workable solution for the RHI to start on 1 April 2011.Finally, the RHI should be accessible and it should be straightforward for generators to acquire impartial information on finance, accredited technologies and installers. We agree that for small scale generators the Microgeneration Certification Scheme (MCS) or specified equivalent national and international standards should be used to clearly identify and accredit RHI installers. For confidence in the scheme, the MCS must


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undergo a thorough review of workings, funding and governance structures to ensure it will be fit for purpose for 1 April 2011. We support deemed payments for the small and medium scale, where a full SAP evaluation has taken place, to robustly assess a building’s energy demand, with assumptions on energy efficiency measures being in place. Measurement tools for deeming, such as EPC, SAP/ SBEM, should be thoroughly reviewed to assess their potential to measure heat demand in practice before the scheme goes live. MCS installers must be properly trained in using these tools to assess heat demand and to accurately assess the correct-sized technologies and deemed payment levels. Independent spot checks carried out by the RHI administrative body should also be used to minimise the potential for fraud.

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EDF Energy welcomes the Renewable Heat Incentive (RHI) consultation and strongly supports the development of policy on decarbonising heat. With heat accounting for 47% of the UK’s CO2 emissions, we must get policy in this area right if we are to meet the UK’s target to reduce carbon emissions by 80% by 2050.Reducing energy demand and fundamentally changing the way we generate and use heat will be essential.Understandably, the RHI is being developed with the near term priority of meeting the renewable energy target in 2020. However, it is important not to lose sight of the longer term challenges. With energy investments spanning many decades, much of the infrastructure we build today will still be in use in 2050 and beyond. Decisions on appropriate solutions made now should not preclude options required for the longer term.Decarbonising heat has many benefits in terms of security of supply, through reducing energy use, as well as cutting carbon emissions and increasing renewable energy by displacing fossil fuel heat sources such as oil and gas with renewable alternatives. To achieve these benefits, heat must be decarbonised in a way that complements efforts to decarbonise other sectors. In the Energy Market Assessment, Government recognises that, along with ambitious energy demand reduction, “low carbon electricity will provide a very large proportion of the UK’s future low carbon energy” and “a substantial level of electrification of heating and surface transport is required.” 1 Decarbonised heat must therefore be developed in a way that provides the best long term investment climate for all forms of low carbon generation and helps maintain a competitive and sustainable UK economy. The RHI should be developed in close coordination with DECC’s wider policy work on the roadmap to 2050.FundingReducing carbon emissions from heat will have an associated cost. Unlike the electricity sector, carbon emissions from heat do not have a price signal and this has not encouraged innovation in low carbon heating solutions.

With increasing energy prices and a greater focus on the impacts of environmental levies on bills, it is important that the RHI is designed to minimise costs for consumers and that these costs are transparent.We welcome Government’s continued commitment to the RHI as outlined in the Budget 2010 and confirmation that RHI payments will be exempt from income tax. However, it is important for HM Treasury to clarify how the RHI will be funded as soon as possible to build this into the design of the scheme and to avoid delay to its start, especially if primary legislation has to be revisited.To minimise the potential regressive impacts of the RHI, funding must be equitable, transparent and efficient in reducing carbon emissions through renewable heat delivery. We believe that a levy on fossil fuels for heating, to reflect the carbon intensity of fuels, is a good solution to meet these aims. As the RHI will support projects of all scales, including Industrial and Commercial users, it would not be appropriate for the RHI to be funded only by one subset of fossil fuel customers, for example, domestic gas customers, even as a temporary solution. Large business customers are often subject to long-term fixed contracts which cannot be adjusted unless Government sets a new levy or tax and so the additional burden would fall on domestic customers. To avoid this, the level of cost recovery must be clearly set out by Government to enable all fossil fuel heat consumers to fund the RHI.We do not believe that the RHI should be designed as a mechanism to tackle fuel poverty, as this is likely to have adverse or unintended consequences that will reduce the effectiveness of the policy and increase the overall costs for all customers. The primary objective of the RHI should be clear, in that it should be designed to direct investment to the most affordable, secure low carbon heat solutions and help maintain affordable prices for all customers.Enabling third parties to fund the upfront cost of renewable technologies and receive RHI payments directly in return is a key opportunity to help customers who do not have access to capital for the upfront costs of kit. Consideration should also be given to how the implementation of other Government policies such as the Carbon Emissions Reduction Target (CERT) and Community Energy Saving Programme (CESP), and future policies such as Household Energy Management Strategy (HEM) and Pay As You Save (PAYS) could help secure the funding to help more customers have access to low carbon heating solutions. Legal and technical details must be resolved to make the assignment of payments work in practice and to avoid fraudulent claims which could undermine the scheme and push up prices for all customers.Minimising subsidy costsDespite the costs involved, we believe it is right to support renewable heat.Supply chains for renewable heat are in their infancy. Asking consumers to think differently about the way they produce and use heat, and the tendency for heat technologies to be distress purchases, mean that subsidies are required to kick-start a mass- market roll out.Subsidies should be focussed on making renewable heat technologies commercially viable and should be time limited. As the market develops, the associated costs will decrease and, as for other subsidies (including the RO and CCS levy), in the long term these should be phased out to provide a level playing field for all forms of low carbon generation, underpinned by a robust carbon price.TechnologiesThe challenge will be in targeting subsidies to enable optimal solutions for delivering renewable heat and reducing carbon, in a cost-effective manner. To meet Government’s targets, all renewable heat technologies can play a role, but it is clear that some will be more suitable than others in terms of cost of carbon abatement and their ability to overcome practical barriers to ensure their technical potential is realised.Our analysis below demonstrates that Air and Ground Source Heat Pumps can be subsidised at a comparable rate (£/MWh) to offshore wind generation to allow an increase in renewable heat output. Wide-scale deployment of heat pumps using decarbonised electricity can therefore provide cost effective scalable heating solutions in contribution to the UK’s renewable energy target, and the potential from the renewable heat sector should not be underestimated.While Bio-energy can play a role in decarbonising heat, we believe that there should be caution over its use. Biomass will vary greatly in terms of its energy and carbon content which could significantly impact on the costs of the RHI and the delivery of low carbon heat.Sustainable bio-energy resources are limited and this can affect the sustainability of a large-scale exploitation of bio-energy. There are considerable uncertainties over land use impacts, fuel and transportation costs, emissions from transportation, storage and air quality issues, especially in urban areas. With these factors in mind, bio-energy should be used where it can gain maximum efficiencies. For heat, it is most suitable for use in Industrial and Commercial scale applications. For homes, due to air quality, transport and fuel storage and supply chain constraints, the potential for individual biomass boilers will be a niche rather than mass-market solution and will be most suitable for rural locations.Figure 2 illustrates our analysis to compare the CO2 abatement costs for biomass which varies according to the relative carbon content, with Ground and Air Source heat pumps. Our analysis has shown that for the domestic scale, heat pumps can compete on a £/MWh basis with biomass boilers, with both sets of technologies having similar annualised costs based on current best estimates.More significantly, the analysis also shows that as the grid decarbonises (as we would expect it to do so if the UK is to meet its 2050 carbon reduction target), heat pumps will increasingly allow comparable CO2 savings to be made for similar costs, when compared to biomass boilers that are fuelled by carbon neutral supplies of biomass (i.e. 100% carbon saved when burnt).While the current carbon intensity of the electricity grid is known, and there are projections for future levels, there is considerable difference in the


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carbon content of sustainable biomass supplies. It is not reasonable to assume that the majority of biomass supplies will provide a carbon neutral solution. In reality, the carbon savings achievable from biomass are wide ranging, depending on their type and source. This variability is reflected, for example, by the sustainability criteria for biofuels, as set out in the EU Renewable Energy Directive [Article 17(2)], which establishes a minimum greenhouse gas saving value of 35%, rising to 50% from 2017 and to 60% from 2018. So for example, by using biomass in a boiler that allowed for only 50% carbon savings instead of 100%, abatement costs would increase significantly to over £2,000/tCO2 from less than £500/tCO2 (in comparison to a gas boiler).Heat pumps are therefore subject to the same variability in terms of carbon intensity and will therefore become increasingly comparable in terms of CO2 abatement costs with biomass boilers as the electricity grid decarbonises.CHP and District HeatingWe agree with DECC that it is not appropriate for the RHI to support gas- fired CHP as our analysis demonstrates this can only offer marginal carbon savings in the short term compared with a high efficiency conventional boiler and grid electricity. As the grid decarbonises and innovation improves the Coefficient of Performance (CoP) of heat pumps, efficiency gains and carbon reduction will only continue to increase. It therefore makes sense for policy to support solutions that will be applicable over the long term.Renewable District Heating, including with CHP, can play a role as part of a diverse mix of low carbon heating solutions. We believe that this should be supported through the RHI where there are good opportunities for this technology in terms of demonstrating economic and environmental benefits. This is likely to be in areas of high density heat load or where groups of properties are scheduled to be upgraded at the same time such as social housing projects.Subsidies for heat should encourage supply chains to develop and help reduce costs through technical innovation and economies of scale achieved by encouraging wide-scale deployment. As Government identifies, the main barrier to District Heating is the high upfront capital investment required for heat networks. Furthermore these technologies are mature and the potential for achieving cost savings through technical innovation and wide-scale deployment supported by subsidy is limited. Therefore, we do not believe that it would be appropriate for these schemes to benefit from higher support levels compared with other low carbon heating solutions. Other policies such as planning reform to reduce delays and uncertainty over infrastructure projects and securing low costs of capital finance for networks, for example through public sector loan guarantees, would be more appropriate to facilitate District Heating.

To make the RHI a success, the scheme needs to be designed so that it is accessible and straightforward for generators to acquire finance and information on accredited technologies and installers. This is particularly important for domestic scale generators and non-energy experts. Our experience with domestic customers and microgeneration is that upfront cost is the most significant barrier to uptake.Enabling the permanent assignment of payment rights will be essential to unlock innovative financing measures to help with the capital costs of generating equipment and to allow lend-based purchasing to increase the amount of customers who can access the RHI. Assigning payment rights may also lead to reduced credit risk and lower cost finance if the lender can deal directly with the RHI payment body rather than the end customer.Many related policy areas are already being designed to anticipate this development as part of the work on the HEM Strategy, such as PAYS. Third party payments must work to support these policies and allow a greater number of households to take up measures.For example, for PAYS, the assignment of payment rights will enable a greater number of consumers to be able to access capital finance. As the credit risk of the loan will be connected to the property and the assignment of payments could be paid directly to the lender from the payments body, the cost of borrowing could be reduced and allow householders with a higher credit risk to take part in the scheme. It is clear however, that PAYS is a more suitable instrument for the able to pay sector and more consideration is needed as to how to all householders could benefit from energy efficiency measures and renewable heat and electricity technologies. We therefore welcome Government’s commitment to looking at this issue further.Government should clarify how the assignment of payments could work in practice and set out robust

Question: Q02

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RegistrationWhere possible the registration processes for the RHI should build on the processes being developed for FIT and be consistent with the workings of the Renewables Obligation (RO). We agree that Ofgem should hold registration data on the RHI in the same central database for FIT or in a compatible system to enable Ofgem to hold data on all technologies (heat and electricity) accredited to a generator. This will be important as whole-house solutions are implemented under the HEM Strategy. As the RHI will cover many fuels and technologies, it is important that a central body manages registration processes. It would not be appropriate for energy suppliers to carry out this function.

Accreditation - Small and Medium GeneratorsThe process from registration to payment for the RHI must be simple to follow for generators and installers, and keep administration to a minimum. Information on renewable heat technologies should be clear and easily accessible and policy on providing impartial and consistent information to consumers should link up with the HEM Strategy. As for FIT, a summary certificate for the installed technology should be sent to Ofgem by the generator to receive payment.Accreditation - Large - scale GeneratorsFor generators outside the scope of the maximum heat output capacity threshold of the MCS, we agree that these should register and seek accreditation directly with Ofgem by developing existing processes for the RO. Again, these processes should be proportionate and not place undue administrative burden on generators.PaymentsThe payments process for the RHI must be robust, customer-friendly and be run by an administrative body with the capacity to manage a complex billing and customer services system. We welcome that Ofgem is currently carrying out a feasibility study into what is required to run the scheme and an assessment of the potential benefits of tendering. Before allocating responsibility for the payments service, there should be a thorough assessment of the costs, consideration of alternative bodies and clarification of the timetable for tendering or contracting out services with commitment to an early decision on how actions will be taken forward. It should not be presumed that suppliers will be the default body to the run the scheme if an alternative solution is not found. It is important that the selection of the administrative body does not delay the start of the RHI and that decisions are made in good time to implement the scheme with a cost effective and workable solution for 1 April 2011. Whichever body is chosen to carry out these functions, it must be fully resourced and must provide a high quality customer service. There may be a need to look at separating the functions of the administrative body as it may not be appropriate for a single body to make payments and also be responsible for auditing, managing queries and complaints.Verification and AuditingWe support that RHI generators should provide evidence that they are correctly using and maintaining technologies, particularly where payments are deemed. The accreditation of maintenance repairs would require further development of the MCS to act on behalf of all renewable heat technologies as the Gas Safe mark does for gas installers. This process should be subject to a more robust assessment of the possible legal implications in practice. The administrative body should carry out periodic spot checks on generators to verify/audit payments, with the potential for introducing fines if the rules are broken.If payments are assigned, third parties would require strict contracts and guarantees that technologies are being used and maintained properly to ensure return on their investment. For long-term agreements, multiple users would be required to carry out these assessments and this would require ongoing consumer engagement. Legislation to implement PAYS and connect loans to properties rather than individuals is required to make this work.

Change of Payee and ComplaintsA simple, but robust, change of ownership and payee process and complaints procedure with recourse to an appropriate independent ombudsman must be developed. However, the design of appropriate processes will depend on the administrative body assigned to run the scheme. These processes must be clearly set out for RHI generators and installers at the start of the scheme.

Question: Q03

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For the RHI to be a success, renewable heat generators, particularly householders or non-energy experts, need to be confident that quality products are being installed and that these are suitable for their properties. MCS will be used to accredit small scale electricity generators under FIT and so it makes sense for this to be used for small-scale technologies under the RHI.However, as for FIT, the MCS will require significant development to be robust enough to meet the requirements of both schemes. Government should therefore consider how this will be tackled in the interim, commit to a review of the functions and funding of the MCS and set out a timetable for its development. To provide greater flexibility and help widen the amount of installers, Government should assess specified MCS equivalent standards from the UK and internationally and allow these to be used. This will be particularly important for technologies at scales that fall outside of the current scope of the MCS.We have identified some of the areas for development of the MCS below:Currently only circa 400 installers are registered under MCS, this will not be sufficient for a large-scale roll out of technologies.The MCS does not currently cover all technologies in the RHI, or FIT, and there are concerns that the list of approved products will not be ready in time for the introduction of the RHI in April 2011.There is a lack of transparency on the MCS’ governance structures and its decision making is slow. MCS’ Chief Executive and Steering Group members are part time and employed on a pro-bono basis which limits the time spent on developing the MCS.MCS tends to focus on the demands of the certification industry rather than commercial requirements of businesses and is burdensome in terms of administrative requirements and costs.It is expensive for installers, especially small companies, to gain the standard and on-going maintenance which is in excess of £1500 per technology per year.The MCS will need to be developed so that it can be used to carry out proactive checks and inspections that installers are installing/sizing appropriate technologies and accurately calculating deeming values.

AgreeQuestion: Q04

We agree that the MCS or an equivalent mechanism is required for technologies above the current limit to maintain a clear standard for installers and generators and to limit the potential for fraud for a greater range of technologies. This should be part of the review and development of the MCS referred to above. However, as it is likely to take time for installers to develop capabilities at a larger scale, transitional arrangements are likely to be required to enable technologies to be accredited from 1 April 2011. This could include allowing specified appropriate existing product standards from the UK and abroad to be used to certify installers and using RO processes in the interim.

AgreeQuestion: Q05

International manufacturers face cost barriers to registering their products under the MCS. These international firms may have already received accreditation under applicable European standards and so face the cost of registering and testing products again to enter the UK market. To counter this, the MCS should be an umbrella standard that recognises appropriate specified EU standards. A list of appropriate equivalent standards should be published by the RHI administrator to help guide installers and product developers.For example, the European Heat Pump Association (EHPA) has a label scheme for quality and performance. This scheme has been adopted by Germany, Austria, Switzerland, and Sweden, with France and Finland set to join. The EHPA label should be recognised under the MCS and products should receive automatic accreditation as has been the case for SolarKey Mark for solar thermal products. This could simplify the approval procedure, reduce the time for products to be registered and reduce costs for manufacturers.

Question: Q06

We agree with the principle that the RHI should only support useful renewable heat generation and should avoid perverse incentives to overgenerate or dump heat.As for FIT, a robust definition and enforcement of rules for defining eligible technologies and sites are required to avoid gaming. For example, for multiple installations at a single site, installed in different years. Some sites may also have FIT, or RO technologies and so a consistent approach must be adopted for all schemes. MCS installers will have to be adequately trained to identify this. Independent spot checks should also be carried out by the administrative body.The RHI should evolve as new technologies come forward. We believe that between RHI reviews, emerging technologies should be provided initial support at a tariff level akin to similar technologies, after an assessment of cost impacts on the wider scheme. Bespoke tariffs can then be set at reviews to be consistent with FIT and the RO.

We appreciate that cooling is not currently eligible for the RHI and could make the scheme more complicated for an 1 April 2011 start. However, it is worth considering how cooling could be incentivised at a later date. Similarly, emerging hybrid heat pumps could be included at a later date, if further evidence comes forward on their potential. The dynamics of managing a building’s energy demands and reducing carbon requires a coherent approach to heating and cooling. Some technologies such as heat pumps can provide renewable heating and cooling and so these additional benefits should not be disincentivised.

AgreeQuestion: Q07

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EDF Energy supports the inclusion of bioliquids in the RHI where these replace domestic heating oil (up to 45kWth) and meet sustainability and wider impact criteria outlined in the Renewable Energy Strategy. We agree that Fatty Acid Methyl Ester (FAME) blended with heating oil should be eligible for RHI support.To be consistent with the RO and Renewable Transport Fuels Obligation, the renewable content of blended fuels for RHI support should be certified. Support for bioliquids under the RO and RTFO should not be duplicated under the RHI. To be consistent with the Renewable Energy Directive, DECC should adopt Ofgem’s proposed approach to recognising the renewable proportion of biodiesel and glycerol set out in Ofgem’s decision document from March 2009.4 Future consideration of blends and fuels should be carried out in conjunction with reviews of the RO, RTFO and RHI.

AgreeQuestion: Q08

Biofuels and biogas have a role to play in helping the UK deliver its renewable energy targets. However, we believe that the amount of bio-energy produced from sustainable sources will be limited and as the market for biomass is global, there are uncertainties over the supply chain and prices. Therefore, bio-energy should be used in high efficiency applications and appropriate locations to maximise its impact.We believe that the greatest potential for biomass boilers is at the industrial and commercial scale, rather than individual installations in domestic properties, due to the limitations of available biomass and other supply chain constraints such as transportation, fuel storage and air quality issues, particularly in urban areas. There are challenges with retrofitting biomass boilers in existing households and the potential for roll out remains at the niche rather than mass market level. The full carbon impact of biomass, including for transportation which tends to be by road in urban areas, should also be considered when developing support levels under the RHI.Increases in numbers of small scale biomass generation would cause an increase in NOx emission levels in an urban environment. Even with tight emission limits, this increase could still be significant in Air Quality Management Areas. Further analysis is required to assess the likely impacts. 5Biomass fuels vary significantly in source, form, carbon and energy content. Many undergo a number of physical and thermal processes before being combusted in a boiler or CHP system. These processes can include torrefaction (heating to 200-320°C to remove moisture and volatiles) and densification (compacting; usually into pellet form). Both these processes require a significant amount of energy and will decrease the amount of “embedded energy” of the fuel and could increase the “embedded carbon”.To ensure that the estimated energy and carbon savings achieved by combusting biomass fuels are aligned with the RHI targets, the fuels must come from a certified source where the embedded energy / carbon of the fuel is known. There are few standards currently in existence although specifications for solid biofuels are being set out in the upcoming European Standard, EN3356. The Renewable Energy Directive sets out sustainability criteria so that biomass as a minimum must save at least 35% of greenhouse gas emissions, rising to 50% on 1 January 2017 and 60% from 1 January 2018. Clear rules on expected levels of standardisation and certification must be set out before the start of the RHI scheme.Much of the biomass that is used in the UK today has been transported to the UK from other countries and the carbon footprint of biomass transport (especially for small scale urban biomass combustion) can significantly reduce the apparent carbon savings. In an urban environment, a high level of biomass boilers will generate significant increases in traffic movements, traffic congestion and additional increases in NOx emissions. The air quality impacts of transporting biomass into urban areas must also be assessed as it could compare to the carbon from combustion itself. Therefore for homes, biomass boilers will be most appropriate for rural locations.We agree with the proposal to introduce emissions standards for biomass boilers below 20 MW. Because of the reasons outlined above, there will be different air quality specifications for biomass boilers in rural and urban areas. Standards should be proportionate to the location in smoke or non-smoke controlled areas. Different standards for air quality could however place an extra burden on the Environment Agency when enforcing these standards.

Question: Q09

EDF Energy recognises that there is an important role for energy efficiency to reduce carbon emissions and that in many cases this can have positive net cost benefits. To decarbonise all buildings, energy efficiency will be part of the solution along with low carbon heating and a decarbonised grid.Energy efficiency measures should be encouraged, but not mandated by the RHI as they are already covered by other policies such as the HEM Strategy and the Building Regulations. Setting too stringent requirements may also act as a further barrier to installing renewable heat technologies and would increase the administrative complexity of the scheme.

DeemingQuestion: Q10

Energy efficiency standards for new build will be set and enforced through the Building Regulations and it will not be possible to control this through the RHI. We believe that the benefits of a decarbonised supply, especially from renewable heat technologies such as heat pumps should make a key contribution to meeting the zero carbon homes and buildings standards.

Question: Q11

We support the principle of deeming for smaller scale installations rather than metering. However, assurances must be made as to how MCS installers will be trained to carry out this function and the need for additional independent spot checks by the administrative body. Deeming payments would be subject to contractual agreements and assurances on the maintenance, repair and proper upkeep of technologies.For biogas injection into the grid, it is appropriate to meter this at all scales. EDF Energy believes that CV and volume should be metered accurately to ensure that bio-methane injection receives the appropriate level of RHI payment.

AgreeQuestion: Q12

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We believe it is appropriate to use existing mechanisms, and of these, SAP currently provides the most robust process in place to measure the heat demand of properties for deeming. To enforce this, MCS installers must be able to capture the required information under a full SAP assessment, fit the correct sized technology accordingly and provide details to Ofgem for accreditation. Independent spot checks should also be carried out by the administrative body. The methodology for calculating deemed demand must evolve with related policy on energy efficiency and the Building Regulations.For heat pumps, correct sizing and installation of equipment is essential for ensuring that full replacement technologies are fitted and to avoid the use of supplementary energy. State of the art models do not require back up heaters and are able to cope with even extended sub zero (-5 to -7 °C) temperatures. So that the RHI drives the take up of higher efficiency products and innovation, the MCS should use the same methodology as outlined in SAP Appendix Q which also takes into account the Seasonal Performance Factor (SPF) of technologies rather than just the Coefficient of Performance (CoP). The SAP Appendix Q methodology will also incorporate the EU product standard EN3516 to allow a greater range of accredited products to be installed and help facilitate wide-scale deployment of heat pumps. This could be accompanied by a higher tariff reward for the best performing heat pumps to reflect their greater potential to reduce carbon than standard models.

AgreeQuestion: Q13

We believe that if support under the RHI is set at too high a level, there is a high risk of providing a perverse incentive to over generate heat. The RHI should therefore be designed to minimise this risk. To help counter this risk, metering for this scale should include an output meter on the generator and usage meters on every outlet from the system, including vents. Systems of this scale should already be configured with this level of metering. Standards for certification and calibration of metering are required to create a level playing field for all generators.It should also be demonstrated that useful heat is being rewarded, which may have to be provided on an evidence based approach on a case-by-case basis. There should be clear rules set out in the RHI that prohibit the dumping of renewable heat, with the administrative body responsible for auditing and applying penalties or withdrawing the right to RHI payments if the scheme is abused.

Question: Q14

It is difficult to calculate a single RHI support level as CHP systems are usually designed to meet a bespoke requirement. The best use of biomass and biogas resources and tariff levels in the different support schemes, including for CHP, should be assessed as part of DECC’s bio-energy strategy.As a general principle, generators should not be rewarded twice for the same heat. When setting levels of support under the RHI, this must be consistent with support across all renewable energy schemes (FIT, RO and RTFO) to avoid distortion. A review of support bands in the RHI must be carried out to avoid a drop off in support or the incentive to under or oversize technologies to receive preferential rates. Distortions within the RHI must also be avoided and generators should not be incentivised to install sub-optimal heat technologies due to differences in rates of return on different heat technologies.We support the proposals that existing renewable CHP installed after 15 July 2009, should qualify for transitional support under the RO with the uplift (1.5 ROCs) or the RHI up until 2013 when the RO will be reviewed. After 2013, new biomass CHP plant should receive standard RO support for the electricity produced without the uplift (1 ROC) and RHI support for the heat.For biogas injection, the tariff level under the RHI should be set at the same level for FIT for consistency and to avoid distortion between the two schemes. Bio-methane injection can play a role in utilising existing infrastructure and switching fuels to reduce carbon emissions. However, DECC should further clarify the appropriate level of requirements for matching quality and safety standards of biogas with natural gas. Gas currently delivered to the network has to meet the Gas Safety Management Regulations GS(M)R within upper and lower limits. If biogas has to adhere to similar levels of standards, this could imply extra costs. National Grid Gas has estimated that if bio-methane were to be injected into the networks to meet GS(M)R requirements at 37MJ/m3 , this could result in a cost to consumers in the range of £10m to £14.7m per year due to a mismatch between supplied and billed energy7. EDF Energy therefore believes that a cost benefit analysis should be carried out to determine whether the costs of biogas meeting gas quality standards is less expensive to fund via the RHI tariff or by socialising the costs through unbilled energy costs.

Question: Q16

In Annex 2 we have provided some overview data on heat pumps in the commercial sector in terms of market penetration, sectors, trends, main producer companies and cost estimations for different types based on typical commercial applications.It is difficult to recommend a uniform tariff level for large scale heat pumps at this stage as output units above 100kW are currently niche installations, with costs assessed on a case-by-case basis. However, installations of this scale are already being installed to produce renewable heat and can be reverted to also provide air conditioning. While we appreciate that the RHI currently does not cover cooling, it is important to note that an integrated approach is required when managing a building’s energy demands for both heating and edfenergy.com19cooling. It is important therefore that the RHI recognises this potential and does not disincentivise such systems.As a rule of thumb, Air Source Heat Pump systems are sized according to heat gains which can be around 100W/m2. A 350kW system would therefore indicate a building having a floor area of 3,500m2. Approximate installation costs could be between £80 and £100/kW, giving a total installation cost of between £280,000 and £350,000 for a 350kW system. As for other heat technologies, these costs will continue to reduce as innovation improves and with economies of scale.Different types of heat pumps have cost effective potential for deployment in the industrial and commercial sectors as recognised by NERA/AEA study for DECC “The UK Supply Curve for Renewable Heat” 8 At the beginning of this year, the IEA launched a 3 year project to raise the profile and performance of heat pumps as energy savers in the industrial sector. EDF R&D is one of the members contributing to this work. Such studies should be drawn upon to develop specific support levels for large-scale heat pumps under the RHI. We would be happy to facilitate further engagement with DECC on this.

Question: Q17

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TariffsTariff support for the RHI must be designed to promote technologies with the greatest potential to deliver renewable heat at the overall lowest subsidy cost.We support the proposal for 12% return on capital costs (6% for solar thermal), plus additional support for hassle factor costs and to cover the difference between fossil and renewable heating fuels. For transparency on the expected rate of return, it should be made clear to generators that the 12% return on capital expenditure covers the difference in capital costs of a fossil fuel and renewable heat technology.We agree that tariffs for technologies should be banded to help reduce the overall cost of subsidies and to reduce the cost variability of different models. We have some recommendations where adjustments could be made to the current banding structure.Reference installations and bandingDECC’s proposals to set tariff bands on the basis of a reference installation at 50% of perceived potential output, means that some technologies will receive more than the 12% return, while others will receive less, depending on the variation in costs of a technology. This may skew the market in favour of certain models or specific technologies where variability is high.

To illustrate this, graphs from NERA’s study9 above show the reference installation level and the market potential curve for small GSHPs, ASHPs and biomass. Steeper curves in the graphs indicate higher cost variability. Technologies that fall below the red dotted lines and above the curve will be favoured under the RHI. To reduce subsidy costs and reduce cost variability, additional tariff bands should be added to minimise this distortion. Maintaining consistency within technologies in the RHI will help to reduce the overall costs of the scheme. The graph above illustrates that ASHPs can provide a cost effective contribution to deliver renewable heat and adding additional bands can reduce costs for GSHP subsidies. As the graph10 on small GSHP above illustrates, cost variability is greatest above 2 TWh. An additional band at this point at 4p/kWh may correct this distortion and help reduce subsidy costs.BiomassThere is a distortion in the tariff setting for medium scale biomass. The graph11 below indicates that the reference installation has been set above what is needed to support the majority of installations. This anomaly should be corrected to reduce subsidy costs.

TechnologiesAll renewable heat technologies can play a role, but it is clear that some will be more suitable than others in terms of cost of carbon abatement and their ability to overcome practical barriers to ensure their technical potential is realised. As we have advocated above, biomass should be used in installations where it can achieve the greatest efficiency as there are considerable uncertainties over supply chain, fuel costs, air quality impacts, sustainability and the full lifecycle carbon footprint. It is not appropriate for wide-scale deployment in individual domestic boilers, especially in urban locations. We believe that biomass would be better used in commercial scale boilers or in rural areas.Government has indicated that it is committed to decarbonising electricity to help secure, affordable and low carbon supplies. Heat pumps already offer a lower carbon heating solution and their potential to reduce carbon emissions will continue to increase with innovation in efficiencies and as the electricity grid is decarbonised. Experience in international markets such as Sweden and France demonstrate that heat pumps can be deployed at scale and this has been demonstrated by rapid growth in sales. In 2008, 130 000 heat pumps were sold in France alone.12Therefore, tariff levels should not provide an equal level of support for biomass and heat pumps for the domestic scale. We believe that for the domestic heat market, due to the limiting factors outlined above, biomass will be a niche solution and tariffs should be adjusted downwards. We believe that heat pumps, which can achieve mass market penetration, are able to optimise the use of low carbon electricity to achieve decarbonisation of the heating sector and can significantly contribute to delivering the renewable heat target, and should be incentivised to reflect this. As we have advocated under Question 13, using the methodology under SAP appendix Q to incentivise the highest efficiency heat pumps and to drive innovation in performance could be further enhanced by a higher tariff rate for the most efficient products with the greatest potential to reduce carbon.


When setting requirements for mixed fuels, there should be consistency across the RO, FIT, RHI and RTFO. We agree that where an installation can generate heat from both renewable and non-renewable fuels, the RHI tariff should only reward the renewable part of the mixed fuel load. Where plant is used to generate heat from municipal waste, we agree with the proposed approach to follow the principles under the RO whereby generators agree with Ofgem to deem biomass content from Energy from Waste (EfW) at 50% to obtain the RHI biomass tariff.

For the start of the scheme, the RHI should require the use of a dedicated boiler for the renewable fuel. As robust fuel measurement and monitoring are developed, mixed firing in a single plant could be allowed at a later date to increase the volume of large-scale biomass heat production. The first review of the RHI could consider how this could be implemented and criteria to monitor and verify the biomass content.

Question: Q19

See answer to question 30.

AgreeQuestion: Q20

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It is essential to ensure consistency of support between and stability within the different mechanisms: FIT, RHI, RO and RTFO. There is the risk that differentials in future fuel prices could cause some RHI participants to make lower or higher returns over the course of the scheme. However, it is difficult to find an appropriate index to peg RHI tariffs to in order to accurately reflect fluctuations in gas, electricity, commodity and biomass prices while maintaining a transparent and stable scheme for generators and investors. The scheme could be complex to administer and could make investment decisions more complicated for non-energy experts to consider.We therefore support that the tariffs should be fully fixed and linked to the RPI index to reflect inflation as for FIT and the RO buy out price. To refine the mechanism further, in addition to linking the RHI to RPI, it could also be linked to a wholesale/retail price index to help minimise fluctuations in annualised CAPEX returns for technologies, but this would have to be consistent for all technologies and across all support mechanisms to avoid distortion.The RHI review, which should occur at the same time as for the other renewable support schemes, could make required adjustments to tariff levels to reflect fuel price differentials without the need to split up the tariff and have a separate variable rate for fuel.We support the proposal to include bio-energy tariffs in an RHI grandfathering commitment. At present, biomass is not grandfathered in the RO and this is currently being consulted upon separately. We support proposals to grandfather biomass in the RO on the same basis as all other RO eligible renewable technologies to maintain a level playing field between these technologies and to avoid any distortion in the RO. This will also provide certainty on the level of support over the life of biomass projects from the RHI and RO when they are grandfathered at a band review. To ensure a consistent approach across the RO and RHI for biomass grandfathering, it is important to recognise that biomass fuel costs will impact all biomass projects in both schemes and those claiming subsidies from both mechanisms. However, a large commercial biomass generator will ensure that it has continuity of fuel supply at the price required to minimise its exposure to biomass fuel price volatility through commercial contracts.

Question: Q22

As for FIT, it is important for generators and suppliers to have clarity over the arrangements for degression and how RHI support will reduce once technologies become more established and supply chains develop. Degression will also help reduce the costs of the scheme. We support the proposal to apply the first RHI degression at the first review of the scheme. Reviews of all the support schemes, FIT, RHI, RO and RTFO should coincide to ensure consistency.

AgreeQuestion: Q23

We agree that the priority for the RHI is to have the scheme up and running for 1 April 2011 and to define support for technologies closest to market and ready for wide-scale deployment. We support that new and innovative technologies should be offered a mainstream level of tariff support currently proposed for comparable technologies. The review of the RHI should then look more closely at assigning bespoke tariffs to emerging technologies when more supporting evidence is available.In addition to our proposals on additional banding in the tariff levels under Qu. 19, technology cost reductions could be also encouraged by ensuring other non-financial barriers are removed to promote wider uptake, achieve economies of scale and develop supply chains. For example, agreeing Permitted Development status for Air Source Heat Pumps.

Question: Q25

As stated above, it is important to have clarity on the timing of reviews and to have consistency between all support schemes. We support that the first review of RHI should take place in 2013 as scheduled for FIT and the RO. Even though this is relatively close to the start of the RHI, a new and innovative scheme is likely to have initial areas for adjustment and would benefit from an early assessment to refine where necessary.

AgreeQuestion: Q26

The emergency review should follow a similar approach to the RO to be determined by the Secretary of State or relevant Devolved Authority. However, for clarity and greater certainty for investors, emergency review criteria must be robust and clearly set out to avoid tampering or unnecessary interference in the scheme between reviews.

We suggest that a review could be launched when:Analysis of significant changes in differentials between fossil fuels, commodity prices and renewable heating fuels can be provided;International policy changes are introduced e.g. EU review of sustainability criteria for biomass or agreement by EU to increase commitment to further reduce CO2 emissions;Evidence is presented on security of supply and supply chain constraints for renewable fuels;Fundamental changes occur to other renewable support schemes that will impact the RHI support. For example: changes in RO banding for biomass;Evidence is provided of significant and sustained variations in net costs which change the economics of set tariff or banding levels.

Question: Q27

To minimise the cost impacts of the RHI, we agree with the clear cut off date of 15 July 2009 to establish projects that are eligible for RHI support. Projects that were installed before this date were able to go ahead without tariff support and may have received either Government grants or commercial financing. Grandfathering support to existing installations may have significant cost as the RHI covers all scale installations. It is unfair for this cost to be borne by future consumers of fossil fuel heat.

AgreeQuestion: Q28

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The following issues require further consideration to avoid perverse consequences:Third party payments – assigning payment rights must work in order to establish opportunities for lend purchase agreements and to help lower the cost of capital for finance for upfront capital costs of technologies. While DECC has confirmed that it is working to ensure that owners can assign payment rights to third parties, it is currently not clear how this could be implemented in practice. To avoid fraud, strict legal and contractual arrangements are required to manage the long term leasing and pay back required to fund kit.Multiple installs on one site – as for FIT, the registration system must accurately record details of technologies installed per site. In some cases, this may include technologies receiving FIT and RHI support or even support for different installs that occur in different years with varying tariff rates applicable.CHP support under FIT, RHI and RO – FIT will not offer any compensation or uplift for heat output of CHP. The RHI consultation proposes that the useful heat output of FIT eligible CHP installations should be eligible for RHI support. It is difficult to see how this ‘useful heat output’ would be measured and recorded accurately to avoid the possibility of double support. The RHI, FIT and RO must be developed coherently to avoid distortion or overlap.Support for micro-CHP under FIT – we believe renewable micro-CHP would have been more appropriately placed under the RHI than FIT as generators will be incentivised to produce power but not use the resulting heat. If in future micro-CHP is to be included under the RHI scheme, it should no longer be eligible for FIT. Fossil-fuel micro-CHP should not be included in either scheme as it offers marginal carbon reductions and is not a renewable technology. This should be addressed at the first review of the FIT and RHI.Deeming– we support that small scale installations should have their payments deemed according to calculated heat demand. Installers, MCS accredited, will require support with gaining skills to determine the heat demand for properties and sizing up kit accordingly. It is not clear how this will be monitored and enforced. For new properties, Building inspectors could advise under the Building regulations, but enforcement is not always carried out in practice. A solution for the existing stock is also required.Self certification - We support the idea of generators providing assurances that they are using and maintaining technologies correctly to avoid false claims. However, this must be monitored via robust contractual arrangements which may be attached to properties rather than individuals to cover the lifespan of the installation. The administrative body should carry out periodic spot checks.Complaints/redress procedure – this should be developed in conjunction with the related procedures for FIT to provide clarity for generators. The appropriate complaints procedure and redress to an independent complaints assessor will depend on the administrative body chosen to run the scheme. Different scale generators will require varying levels of support in terms of handling queries and repeals over payments or complaints. If as proposed Ofgem administers the payments for the RHI, there would have to be a clear separation of its functions in terms of payee and complaints handler.

Question: Q29

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In our responses to both the Heat Call for Evidence in 2008 and the Heat and Energy Saving Strategy in 2009 we outlined our views on District and Community heat solutions, including with CHP. We would like to reiterate these views.We believe that renewable District Heating can play a role in terms of providing renewable heat, where the local conditions are right, the environmental and economic benefits can be demonstrated and where there is sufficient heat load to make the schemes viable. However, we believe the potential for these schemes remains at the niche rather than mass market level and must be part of a diverse mix of low carbon heating solutions. We therefore support DECC’s view that District Heating systems are likely to be most appropriate where renewable heat solutions are not an option for individual properties e.g. a block of flats or dense urban infill and where there Local Authorities and Social Landlords can identify benefits and opportunities for development in a group of properties.

We agree with DECC that it is not appropriate for gas-fired CHP to receive support under the RHI. Modern gas-fired condensing boilers in homes can achieve efficiencies greater than 90% and modern CCGTs can generate electricity at efficiencies of over 50%. Based on the heat and electricity requirements of a domestic property, CHP would have to operate at efficiency of over 75% to achieve any carbon savings. In practice, it is difficult to achieve this level of efficiency and therefore carbon gains will be marginal. As the grid decarbonises, the gains in carbon emissions reductions from CHP will be less than from a high efficiency condensing boiler and grid mix electricity. It therefore should not be incentivised over other technologies which could provide cost effective scalable low carbon heating solutions for the long term such as heat pumps and whose potential for reducing carbon emissions will only continue to increase as the grid decarbonises.CHP should only be developed where the best opportunities exist. In practice it is very difficult to match demand patterns for heat and electricity for industrial and domestic users. Power stations are located according to criteria such as proximity to cooling water, convenient grid connections and fuel sources and therefore tend to be far from industrial and domestic heat demand. This limits the scope for the economically viable use of low grade waste heat from the existing power generation fleet. Locating power stations closer to large populations to gauge the necessary heat demand is likely to face problems with public acceptance. It is therefore more appropriate to invest in technologies such as heat pumps that can be deployed at scale to deliver carbon savings both now and increasingly over the longer term as the grid decarbonises.We agree with Government that the costs of District Heating are dependent on a wider range of factors and not just the fuel for heat. District Heating schemes have high upfront capital costs for infrastructure and to construct the necessary heat networks which, in conjunction with the mismatch of heat demands outlined above, makes the economics of schemes unworkable. More generally subsidies for heat should encourage supply chains to develop and help reduce costs through technical innovation and economies of scale achieved by encouraging wide scale deployment. District Heating and CHP are mature technologies and the potential for achieving cost savings through technical innovation and wide scale deployment supported by subsidy is limited. Therefore, we do not believe that it would be appropriate for these schemes to benefit from higher support levels compared with other low carbon heating solutionsSetting a tariff level for District heating will have to be assessed on a case-by-case basis as there are is not a typical reference case. All schemes will have different characteristics depending on the specifics of the site where they are located, (urban, brownfield, rural etc) number of buildings and technologies used. It would be more appropriate to assess schemes in terms of the heat demand and heat load that they will serve rather than having a minimum number of customers to be served by the network and this will be required to match the appropriate technology and infrastructure. Equally, it is difficult to determine what is meant by ‘hard to treat’ networks. For the avoidance of doubt, we have interpreted this as DECC states as cases whereby individual renewable solutions are not physically possible or cost – prohibitive. A more detailed cost benefit analysis will be required to determine which technologies are cost effective for the specifics of the site in question.

Rather than providing expensive levels of support through the RHI mechanism, Government could encourage District Heating schemes in other ways for example through reforms to the planning system to reduce uncertainty and delay for schemes. Local Authorities and the public sector more broadly, can also contribute to securing a lower cost of capital for heat networks by underwriting schemes for private investors.

Question: Q30

559 Mitsubishi Electric UK Manufacturer

It is essential that the current proposals be modified so that the RHI incentivises genuine additional Renewable Heating and to ensure that the tariffs fairly reflect financial and non-financial barriers. The following issues must be addressed:•It is essential that the RHI incentivise ‘heating only’ Air Source Heat Pumps. Failure to differentiate between ‘heating only’ and ‘cooling capable’ heat pump systems will lead to unnecessary support for the installation of cooling-led installations.•We estimate the cost of supporting ‘cooling capable’ Air Source Heat Pumps equates to a 30% increase on the overall cost of the scheme to 2020 – for no additional benefit. •The assumptions related to capital cost and ongoing maintenance cost for above 45kW Air Source Heat Pumps are incorrect and substantially below costs reported by independent market research of the leading technology providers to this market.•The tariff for above 45kW heat pumps needs to be clarified so that it supports ‘heating only’ systems and increased to 4.8p/kWh so that a 12% rate of return can be delivered.•Air Source Heat Pumps above 350kW capacity are suitable for many applications in the UK, and should receive similar support to the 45-300kW range. Market info is provided with our response.


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Early announcement will give industry confidence especially with regards to funding. We recommend levies to be across all customer and all fossil fuel types to make the process as equitable as possible.

Clarity is required regarding any tax liability to be applied to the incentive payments. Mitsubishi Electric’s assessments and calculations are based on the assumption that no tax liability is incurred.

Mitsubishi Electric’s view is that the application of Income Tax to RHI payments would reduce the attractiveness of the incentive to a position where it would significantly reduce the intended impact of the scheme.

Question: Q01

Mitsubishi Electric supports the general principle of giving as much support as possible to overcoming initial capital cost barriers for renewable and/or more efficient heating solutions. Capital costs are a greater issue within the domestic market and particularly for those experiencing fuel poverty.

Mitsubishi Electric supports the broader principle of ability to assign the benefits of the incentive payment to a party other than the ‘owner’. Whilst this is partially addressed in the consultation document with regard to building developers, it is recognised that there are risks associated when there is a potential separation of the short term capital payments and the long term incentive benefit. These possible scenarios will act as a disincentive to potential installers of renewable alternatives.

Question: Q02

A key requirement for the RHI scheme is an effective and efficient administration process. Mitsubishi Electric state a concern that the capability and capacity of Ofgem to administer the scheme in it’s entirety is not proven and that either this needs to be demonstrated or a process for determining alternative administrative bodies be identified. Failure to do so is perceived as a high potential risk for the scheme.

The above issues are more fully represented within the Micropower Council’s response document.

Question: Q03

Mitsubishi Electric fully supports the accreditation of both products and installers under the MCS. However, we do not believe that the MCS is currently fit for this purpose:– The current MCS is prohibitively expensive for both manufacturers and installers.– The MCS is a maturing scheme but it is already becoming over-bureaucratic. It must become much more effective and responsive to installers, manufacturers and end-users alike. – The secretariat is currently under-performing, and the scheme has manifestly failed to market itself. The issue of marketing the scheme must be urgently addressed if consumers are to gain the full benefit of the consumer protection it is designed to provide.

Mitsubishi Electric back the use of the MCS for accreditation within the RHI framework but express concern that the MCS needs to be significantly enhanced in terms of cost structures, ease of process and funding before it can be properly utilised for the RHI scheme.

AgreeQuestion: Q04

1. INSTALLERS. Mitsubishi Electric believe that installers should be MCS accredited in order to show competence and experience. This will give the end user confidence and help ensure appropriate application of incentivised technologies.

2. PRODUCTS. The underlying product standards for heat pumps will allow the MCS to be extended to the largest products. However, the current registration process will need to be reviewed as the testing facilities for large equipment are NOT available in the UK and limited elsewhere. Independent assessors could be used to calibrate / approve manufacturer testing chambers and possibly witness test equipment.

Question: Q05

Testing to EN14511 is a necessity, one such organisation currently performing this Europe wide is Eurovent.http://www.eurovent-association.eu

Question: Q06

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Mitsubishi Electric believe there are fundamental errors in the current RHI proposal in not recognising:–The unintended implications of including ‘cooling capable’ heat pumps summarised in this document and detailed in the attached ‘Clarification of Objectives and Issues Relating to Heat Pump Tariffs’ document.–That ‘heating only’ heat pumps are an available option and that all heat pump manufacturers can easily adapt existing product ranges.

Mitsubishi Electric also believe that the calculations used as a basis for the capital and maintenance costs of the larger, commercial air source heat pumps (45kW+) are erroneous and have provided a detailed recalculation and subsequent tariff rate in the attached ‘Treatment of ASHPs Under The Proposed Renewable Heat Incentive’ document

[Mitsubishi Electric have undertaken similar calculations for the domestic sized heat pumps. The proposed tariff rate of 7.5p kWh is very close to our calculated figure of 7.4p kWh and therefore Mitsubishi Electric have concluded that the tariff rate in the proposal document is representative of the required figure and does not need to be challenged.]

Summary of Conclusions

The RHI should only be applicable to Heating Only heat pumps.

If Cooling capable heat pumps are allowed to claim RHI, significant market distortion is likely to occur, along with substantial implications for the credibility of RHI.

If cooling capable systems can claim the RHI the following issues are likely to arise:

–At the domestic level, substantial market uptake for cooling capable heat pumps, used primarily for cooling operation is likely to occur. This will be seen to incentivise cooling in homes, increasing the cost of the RHI dramatically and increasing electricity demand and CO2 emissions in warmer months. This is in direct opposition to both CSFH as well as RHI.

–At the commercial scale, all air conditioning installations in the UK would be able to claim RHI, which would mean UK energy consumers subsidising a £350 million a year market which does not need incentivising. If buildings require cooling then renewable heating would be installed as a benefit of reverse cycle heat pumps, this renewable heating should not be incentivised. Mitsubishi Electric do, however, recommend that a method of recording this renewable contribution should be considered by DECC.

Note: Mitsubishi Electric have undertaken additional work that demonstrates there is no financial benefit in installing a separate cooling system plus an alternative renewable heat source eg a chiller system with an ASHP or Biomass Boiler. These calculations are available if required.

–Media and competitive industries will identify the inequities within such a framework and the resulting ‘debate’ will have a significant adverse impact on the RHI scheme and the positioning of ASHPs within it.

–Mitsubishi Electric have calculated that the combination of removing cooling capable ASHPs and reviewing the commercial tariff rate will provide the following benefit for the RHI scheme (to 2020):

Negate £1.39 billion of unnecessary incentivised payments for systems which can be expected to be installed regardless of the RHI.

Heating only heat pumps should be encouraged, enabling the RHI to incentivise these products over conventional forms of heating, thus achieving a true change in market behaviour away from fossil fuel burning to renewable heating.


We agree with the current approach. Whilst it is appropriate that energy efficiency measures should always be put in place before consideration of microgeneration technologies, the administrative burden of checking that every small scale generator has the right energy efficiency measures in place before gaining access to the RHI could be significant. Therefore, in the interests of limiting the overall cost of the scheme and enabling each application to be processed within a reasonable time frame, a deemed heat requirement that assumes a certain level of insulation is the most sensible solution.

Question: Q10

ADL2010 due to enter force in October 2010 will state minimum energy efficiency for fabric and services. Any adverse impact by the RHI scheme needs to be assessed in conjunction with the detail of these Part L amendments.

Question: Q11

Domestic, We agree with Deeming using full SAP 2009.

Commercial. We believe that both deeming and metering should be an option. Deeming is the simplest way but where heat pumps are used alongside existing boilers as a part and part solution (bi-valent design), metering will be necessary.

Mitsubishi Electric also believe that there should be only 2 tariffs (one for up to 45kW and one for over 45kW) as heat pumps are modular which leads to very little economy of scale. This makes large installations over 350kW no cheaper than those below 350kW and therefore any additional tariff is not required.

Question: Q12

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We support an approach using SAP 2009.

Question: Q13

Mitsubishi Electric have undertaken some detailed work on the ASHP market in the >350kW market. These are detailed in attachment 2: Treatment of ASHP’s Under The Proposed Renewable Heat Incentive.

A summary of the content is as follows:We have mirrored the NERA report methodology for larger that 350kw installations and have determined that the tariff should be in the region of 3.7p per kWh. However as previously stated there is little change in the £/kW capital cost for 45kW to 350kW to the above 350kW category.

Question: Q17

Commercial installation for above 45kW

Please see attached document ‘Treatment of ASHP’s Under The Proposed Renewable Heat Incentive’. (Appendix 2)

To summarise.We believe that the NERA report has substantial inaccuracies regarding the actual £/kW installed cost for air sourced heat pumps as well as the required maintenance and f-gas refrigerant leak checking requirements. We have used the NERA methodology to show the tariff should be raised from the proposed 2p/kWh to 4.8p/kWh.

Domestic Tariff,

We believe that the proposed domestic tariff is very close to our calculations for achieving the target rate of return, with several recent examples set out below:

5kW unit 3bed New property (new radiators) – £6800 / 5kW = £1360/kW

5kW unit 3bed Retrofit (new radiators) – £7100 / 5kW = £1420/kW

8.5kW unit 4bed new property (underfloor heating & radiators) – £11056 / 8.5kW = £1300/kW

5kW 3bed no change of radiators - £4755 / 5kW = £950/kW

8.5kW no change of radiators - £7706 / 8.5kW = £910/kW

Based on the NERA report which suggests a range of £650/kW to £1650/kW with the “50% rule selecting £1100/kW, we believe that a domestic tariff of 7.4p/kWh is correct which is very close to the stated 7.5p/kWh.

Mitsubishi Electric have not submitted the calculations for this as the results match closely to those in the proposal paper but these are available if required.

Higher Performance ProductsIndustry has recently invested heavily in a Government backed SAP Appendix Q project and it is possible to now identify higher performance products than the MCS standard. The RHI payment should be increased by a flat 10% for products that are higher than this MCS benchmark efficiency


All district heating networks should eligible for uplift.

Question: Q21

Yes. Mitsubishi Electric supports inflation linked but otherwise fully fixed tariffs. The risk and future market assessment should be made at the purchase point – as with any other capital investment decision.No comment on Bio energy.

Question: Q22

We strongly support this. The renewable heating market in the UK has significant potential, but organisations and consumers must be given time to develop understanding, distribution models and installer skills before substantial reductions in installed costs can be achieved.

It is appropriate to review.

AgreeQuestion: Q23

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Market forces and competition will actively drive the industry to reduce cost as well as inefficiencies. As stated in response to Q23, the renewable heating market in the UK has huge potential, but organisations and consumers must be given time to develop understanding, distribution models and installer skills before substantial reductions in installed costs can be achieved.

Mitsubishi Electric see two areas where the RHI can directly influence technology costs:-Economies of scale: by giving flexibility of transferability of benefit, the RHI can encourage large scale adoption of new technologies by mass installers and third party financial investors. -Competition: by ensuring that a range of competing product technologies within the same market are encouraged by the RHI, normal competitive forces will impact on price.

Question: Q25

Mitsubishi Electric believe that the circumstances forcing an emergency review must be limited and justified in order to give confidence through the markets and supply chains. Potential circumstances should include contradictory evidence against technology performance or material changes on other impacting legislation.

Question: Q27

Mitsubishi Electric understands the requirement to avoid an open ended commitment to historical activity and is therefore supportive of the proposed date.

Question: Q28

Mitsubishi Electric have outlined in this response document and in the associated attachments the potentially significant issues regarding incentivising ‘cooling capable’ air source heat pumps although we have also demonstrated an easily implementable solution.

Irrespective of any logical flaws in the RHI proposal, Mitsubishi Electric would support transparency and ease of administration as key requirement to ensure inappropriate use / abuse of incentivisation is minimised. To be successful, the RHI must be simple to implement, easy to use and have the full confidence of the markets, the investors, the manufacturers and the supply chains.

Question: Q29

560 Econic Installer

The issue of renewable cooling is not covered. Many heat pump projects in commercial buildings have a cooling element and should be encouraged as an alternative to more traditional forms of air-conditioning.

Question: Q01

The fundamental question of how the whole scheme is to be funded is obviously not yet clear. There are existing leasing schemes for renewable energy equipment that include plant that cannot easily be removed (ground source heat pump collectors for example) so it is clearly possible to develop such schemes. The bigger question is over building ownership in the commercial sector where developers have many models for financing from straight sale to long term leasing etc. The question of who owns the building vs. who owns the renewable heating system could be a complex one to unravel for commercial developments. This is particularly true for communal and district heating where some management entity needs to be established. There is an opportunity for ESCO type businesses to take over the complete supply of energy to buildings and collect the RHI payments themselves. These things need to be allowed for in the RHI scheme.

Question: Q02

The basic concept looks fine. The devil will be in the details as usual. How is the registration and payment system going to be resourced? Quality of service will be vital if the scheme is going to succeed. A student loans company style fiasco could kill the whole thing off.

AgreeQuestion: Q03

Makes sense as the MCS scheme is already up and running and some products have already been assessed. There are problems with the MCS scheme that should be dealt with (outside the scope of this consultation) that could delay the take up of the RHI due to a lack of choice in MCS products.

AgreeQuestion: Q04

Many of the MCS approved installers are already doing work on larger installations and many of the same issues are applicable. The 45kW limit is somewhat arbitrary. Larger scale installations are generally designed by highly competent engineering consultants who take design responsibility and carry insurance. A caveat emptor approach could be used for larger schemes. It’s really the domestic sector that needs the protection of the MCS approval.

AgreeQuestion: Q05

Don’t know of specifics but Germany and Scandinavia must have been through this question in the past.

Question: Q06

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There is no encouragement to innovation for heat pump installers and manufacturers. A higher performing, more expensive system will not gain additional rewards. This could lead to a lowest common denominator approach to installation and adversely impact the carbon saving gaols of the scheme.


Obviously energy efficiency should be encouraged but it’s hard to see how this could be policed in reality without a huge increase in building control staff.


Regulations on minimum U-values is one way but developers will still look toreduce build costs to a minimum. In many cases renewable heating will be a last resort. It’s often more cost effective to improve the fabric of the bui. lding than to add a heat pump for example. The RHI is unlikely to perversely influence developers to reduce energy efficiency

Question: Q11

Seems reasonable. Metering could be moved down the scale later as standard technology becomes more widely available.

AgreeQuestion: Q12

SAP and SBEM are very imperfect measures of the real building performance. A number of building types should be monitored to see how close the actual heating energy load compares to the deemed figures from SAP SBEM. Building usage patterns often change as a building changes hands so the deemed figure may end up bearing no relation to the actual energy load.


Heat metering is widely used in district heating systems in mainland Europe and has been for many years. Sure the technology exists to make this a non-issue.

Question: Q14

The tariffs are supposed to provide a 12% ROI. It’s hard to see how this works for the air source and ground source heat pump examples where the tariff is more generous for air source despite the capital cost being about half that of the ground source system. Air source systems are less efficient and there should be an incentive to spend more on a ground source heat pump reflected in the tariff structure.The system lifetimes are fine.

Question: Q18

The additional complexity of setting up such a scheme would make an uplift useful.

AgreeQuestion: Q20

Keep it simple.

Question: Q21

Market growth will help to stimulate new technology and reduce costs. Lots of competition should result from this scheme being available.

Question: Q25

Some people will be unhappy that as early adopters they don’t qualify and there are in reality not many systems out there to worry about. It would not add significantly to the programme costs if all existing, qualifying schemes were given access to the RHI.


Will need careful ongoing review to ensure that people are not abusing the system.

Question: Q29

561 Scottish and Southern Energy Supplier

22 June 2010 Page 1039 of 1348

SSE welcomes the opportunity to respond to this consultation on the Renewable Heat Incentive.SSE fully supports the ambition to achieve an 80% reduction in CO2 emissions by 2050 and theinterim carbon targets, and recognises the need for a mechanism to decarbonise the heat sector as akey component of this ambition.SSE has some concerns that the scheme is too focussed on domestic and small-scale consumers.The NERA reports to DECC in support of the RHI policy make it clear that the bulk of the renewableheat brought forward by the RHI is expected to come from the medium and large bands, i.e. fromcommercial and industrial installations. These reports also show that the majority of new heatinstallations in these sectors in 2020 will need to be renewable. While we understand the need tolimit costs overall, we believe that the tariff levels are on the low side at the larger scales and shouldbe increased to ensure sufficient take up in these bands.It is important that lessons are learnt from the introduction of the Feed in Tariffs. In particular, a cleartimetable for legislation and other key milestones should be drawn up and adhered to so that industryand the administrator have sufficient time to develop systems and processes ahead of April 2011.


SSE welcomes the commitment to introduce the RHI in April 2011 despite the uncertainty over themechanism to finance the scheme. However the financing of the RHI does need to be finalised assoon as possible.The banding approach will always lead to some perverse incentives and opportunities for gaming.These need to be minimised as far as possible. We would highlight two in particular:· The first is that there is a tendency to develop the banding and incentives by considering eachtechnology in isolation, but building operators will look across one or more technologies tofind a suitable solution for their particular building. Therefore it is important that the bands arearranged so that as far as possible there is no incentive to choose a particular technologysimply because of where the banding thresholds sit rather than by considering the optimalsolution for the building.· The second is that the focus on achieving the renewable energy targets could disadvantagesome low carbon, non renewable technologies, which could lead to sub-optimal solutions interms of resource use and carbon emissions.The RHI needs to be supported by a coherent communications strategy. Given that a significantnumber of new heat installations will need to be renewable, and that in many cases renewable heatsystems need to be chosen ahead of need (because they cannot be simply plugged in in place of a broken down boiler), customers will need to be made aware of the RHI incentive in order toproactively choose to take advantage of it.The RHI will need to sit within a wider supportive framework to make it easy for consumers to chooserenewable heat alternatives and benefit from the RHI. This might include:· Understanding and removing any barriers caused by the ability of electricity infrastructure tosupport heat pumps;· Creating an environment to enable rapid growth in the supply chain for renewable heat whilstensuring high standards; and· A supportive planning system including permitted development where appropriate.SSE believes that, while Ofgem could retain overall responsibility for implementing the RHI, wherepossible functions such as customer services and billing should be put out to tender. This would helpto reduce costs to consumers and ensure that organisations with the best experience andcompetencies deliver these services.Finally SSE supports the concept of certification for renewable biogas (analogous to renewableelectricity) to create market pull and facilitate better auditing and disclosure for renewables.

Question: Q01

SSE considers that it should be possible to assign RHI payments to a third party (similar to FITs) toenable innovative financing schemes by reducing risk for providers of capital.

Question: Q02

Broadly yes.SSE particularly welcomes the proposals for self-certification and requiring maintenance by qualifiedpersons in order to continue to receive RHI payments.It is worth noting that the discussion about the first step in the process and ensuring that consumershave access to the information they need in order to choose renewable heat solutions is critical. Inmany cases consumers will need this information in advance of a distressed purchase due to boilerbreakdown, because many renewable heating systems will not simply plug in as a direct replacementfor the existing boiler. This could be exacerbated by installers of conventional heating systems whowill have no incentive to promote renewable alternatives unless they supply or install themthemselves. There remains considerable further work to be done in this area, and we recognise thatenergy companies such as SSE have a role to play in this.

AgreeQuestion: Q03

22 June 2010 Page 1040 of 1348

SSE strongly supports the use of the MCS. There have been some teething problems under the FITswhere in some cases information required by the FITs licensee from MCS certificates is unavailable;we expect these to have been cleared up before the implementation of the RHI. We also recognisethat there may be a need for some reforms to the MCS to ensure it is fit for purpose.

AgreeQuestion: Q04

AgreeQuestion: Q05

SSE supports the proposal from Scottish Renewables and others for installations audited through theCertifier of Construction scheme in Scotland to count as equivalent to MCS accreditation.SSE does not have details of specific schemes for products. However, we believe that minimisingbarriers to entry for renewable heat products from around the world can only benefit the UK byreducing costs through increased competition. A review of standards outside the UK (which shouldalso look beyond the EU) would be helpful to identify those that might be counted as equivalent toMCS. There may also be cases where only a small amount of additional accreditation on top of anexisting standard, rather than full MCS accreditation, might be sufficient.Finally, it might make sense for MCS to automatically accredit the products meeting certain otherrecognised standards so that the RHI legislation can simply refer to MCS and not an ever changinglist of standards.

Question: Q06

The consultation states that “Any increase in capacity would be eligible for RHI support as if it were anew installation.” Clarification is needed for those cases where the increase in capacity crosses abanding threshold as to whether the tariff level for the new installation would be based on the loweror the higher band. Either way, this creates an incentive to deliberately install capacity in phases inorder to gain higher RHI payments.

Question: Q07

SSE understands that it is possible to use straight vegetable oil in domestic heating systems.If it is possible to use 100% heating oil in converted boilers, or blends with different proportions ofrenewable bioliquids, then the RHI should be paid directly to the producers of the renewable fuelrather than to the end consumer, otherwise enforcement will be very difficult.On the other hand, all other renewable heat technologies supported by the RHI will have to meetstrict standards (e.g. MCS at the domestic scale). This might not be the case for converted oil boilers,which might in some cases be very old or inefficient (for example range cookers also supplying heatfor hot water or a couple of radiators). If the RHI is paid to the fuel producer it will be difficult to avoidrewarding inefficiency. The 15 year lifetime proposed also relies on the conversion of a relatively newboiler.It is also unclear whether eligibility will be dependent on being off the gas grid. If not, there could be aperverse incentive to convert from gas to oil, or to install oil fired heating systems in new sites thatare on the gas grid. Depending on the blend of oil and bioliquids this might not reduce carbonemissions compared to gas fired heating.

SSE therefore believes that more consideration is required before bioliquids can be supportedthrough the RHI to avoid unintended consequences. DECC should also publish any evidence it hason bioliquids.

Question: Q08

SSE agrees that it is important to safeguard air quality. However, the proposed standards could addsignificantly to the cost of biomass boilers. We therefore prefer an approach where boilers installed insmoke control areas would have to meet tight standards, but more relaxed standards could applyoutside these areas.Biomass boilers are particularly appropriate in rural locations where air quality is likely to be good andnot likely to be significantly affected by small biomass systems. Imposing tight standards thatincrease costs could reduce uptake in these locations.Given the small size of the UK market, any emissions standards should ideally be harmonised acrossthe EU as manufacturers are unlikely to provide specific boilers just for the UK.Finally, emissions standards should not be applied retrospectively to boilers installed since 15th July2009. These installations should remain eligible for the RHI provided that they meet the eligibilitycriteria in all other respects.


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SSE agrees that any deeming calculations should assume that minimum energy efficiency standardsare in place.However, consumers often do not install energy efficiency measures even when they are very costeffective. This means that the approach to encourage energy efficiency through deeming might notbe very effective. Paying the RHI without requiring basic energy efficiency measures (loft and cavitywall insulation where feasible) could turn out to be something of a lost opportunity and could lead toincreased resource costs even if subsidy costs are limited through deeming. SSE therefore suggeststhat some form of energy efficiency requirement should be in place in addition to deeming. Thequestion is how strictly this should be enforced. It could be simply a box ticking exercise as is thecase under the Low Carbon Buildings Programme. Alternatively it could be enforced by withholdingRHI payments until energy efficiency measures are complete, which could be verified by accreditedinstallers of either heat equipment or insulation depending on the order in which the installations arecarried out.Finally, the proposed approach relies on the accuracy of the deeming calculations, and should bereviewed in the light of the study called for in our response to question 13.

RequirementQuestion: Q10

The decision has been taken to allow renewable installations to claim RHI revenues even when theyare required to meet building regulations. The same regulations impose minimum standards ofenergy efficiency for new buildings. If developers are incentivised to build buildings that areconsidered sub-optimal by Government then either the energy efficiency minimum standards shouldbe strengthened or RHI support should be restricted in the case of renewables installed in support ofbuilding regulations compliance. Either way this is a matter for the Building Regulations.

Question: Q11

SSE would prefer to see metering extended to cover more installations provided that perverseincentives to over generate can be avoided. Increased use of metering would also create asubstantial demand for heat meters which should drive down the cost of the meters.For this reason SSE sees some merit in the idea of using metered output with a capped subsidybased on a deemed efficient maximum quantity.

Question: Q12

Yes, SSE believes that SAP and SBEM are the most appropriate tools.However, it needs to be demonstrated that these tools are fit for their proposed purpose under theRHI. English Heritage have raised concerns about the accuracy of SAP and EPCs for historicbuildings* and anecdotally it is sometimes said that new buildings tend to use more energy thanpredicted by the assessment tools at the design stage.Clearly building operators (particularly householders) are more likely to have previous meteredconsumption data than modelling results, and are likely to refer to these when considering the costsand benefits of a new heating system. Wide variations between this and the deemed heat demandfor the RHI could represent a consumer engagement issue and a barrier to uptake for someconsumers.Occupancy patterns in particular will have an important bearing on actual heat demand; while itmakes sense to use standard occupancy assumptions to compare the energy rating of houses, itmight not make sense to determine the RHI payments for real consumers.SSE therefore recommends that a study is commissioned to compare the results of deemingcalculations with actual measured heat demand for a range of different building types with differentpatterns of occupancy. This would help determine whether the proposed methodology is sound,which assessment tools are most appropriate for deeming calculations and whether anymodifications to the assessment tools are required.

AgreeQuestion: Q13

As proposed, the risk of an incentive to over generate is low because where metering is proposed thetariff rates are generally lower than the cost of fuel.However, as noted above increased metering should be the direction of travel. Capped subsidies andtariff regression (so that tariffs will eventually be less than or equal to the cost of the fuel) should bothbe used to mitigate the risk of over generation as more metering is introduced.

Question: Q14

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SSE fully supports the principle of separating out the support mechanisms for heat and electricity byremoving the uplift for CHP under the RO.SSE is involved with developing biomass power stations. The scales of the proposed plant are in theorder of 100 MWe, and heat take off for local use is being investigated.Under the current RO regime the rate of return for a project steps up to a financeable level the heatoutput allows the plant to satisfy the good quality CHP (GQCHP) criteria (and the additional 0.5 ROCuplift is applied) however beyond this point there is no incentive for the project to supply any moreheat†. Under the RHI there is a direct linear relationship between heat output and rate of returnhowever a project will not be financeable until a significant and potentially unrealistic level of heat isbeing exported. This is illustrated in Figure 1 below.

There are considerable practical and financial barriers to finding outlets for large quantities of heat,which means that plant of these scales are more likely to be able to export heat at the levels of theGQCHP threshold (approximately 20 MWth) than at the levels where the rates of return under the RHIcatch up (where thermal output would be similar to electrical output).Biomass projects such as these have been developed using financial models within the current ROframework. There have been delays associated with the recession and uncertainty around biomassgrandfathering arrangements that have made securing finance more difficult for some projects. Giventhe long construction periods for these plant (2 to 3 years), the current proposal to allow a transitionperiod until April 2013 during which developers can choose between the RO uplift and the RHI mightbe too short for plant currently in development. SSE therefore believes that the transition period should be extended by 3 years until April 2016, and should be based on accreditation rather thanoperation of plant.


SSE is developing a 9 MW anaerobic digestion project which will operate as CHP. However thetariffs should be set based on heating only using a conventional boiler since CHP should compete onthe basis of efficiency with independent heat and power generation.We have therefore modelled biogas heat based on the costs we have for AD from our own projects,using DECC’s methodology and taking data on load factors and the counterfactual from the NERAreports to DECC. The subsidy required is heavily dependent on the fuel cost, which can varyenormously since some waste fuels have negative costs (they receive gate fees) while others suchas energy crops have to be paid for.SSE believes that the RHI tariffs should be based on fuel costs for energy crops to avoid limiting theresource to wastes only. Furthermore a rapid increase in AD (and other sustainable waste treatmenttechnologies) will increase demand for wastes, suppressing gate fees potentially until they arenegative (i.e. there is a cost for the fuel).The output of this modelling is shown below. Further details can be provided to DECC on request.We would expect these projects to be at the larger end in terms of output, and therefore at thesmaller end of the tariff for the large band for biogas on-site combustion.


SSE understands that air source heat pumps above 350 kW are likely to be modular systems, and assuch could be assumed to have a similar capital cost per kW installed capacity. We recommend thatthe rate for air source heat pumps above 350 kW should be the same as for the medium band. Thiswould allow schemes to be brought forward and better evidence to be gathered so that the rate canbe reviewed and reduced if necessary.

Question: Q17

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SSE has some concerns regarding the use of banding by scale and technology, which is likely tolead to some perverse incentives and opportunities for gaming however carefully designed. Thismethod can also stifle innovation.SSE does agree that renewable heat needs to be incentivised at all scales and that the rates ofreturn need to be sufficiently high to encourage enough uptake to meet national binding targets. Wetherefore welcome the aim to achieve a 12% return on investment above the counterfactual.As noted in the introduction, the bulk of the renewable heat in the Government’s lead scenario isexpected to come from commercial and industrial installations, and we think the tariff rates could behigher across all the technologies in these bands. It is worth noting that more generous tariffs forlarger scale installations could reduce the overall cost per unit of renewable heat, by increasinguptake at the large end with tariffs that are still cheaper per unit than in the smaller bands.To that end we have picked out some recommendations for tariffs for specific technologies andscales below, based on the assumption that Government will continue with the proposed tariffstructure.Heat pumpsSSE believes that the proposed tariff rate under the Renewable Heat Incentive (RHI) for largeinstallations (350 kW and above) is too low. The main reason for this is that the capital costs havebeen underestimated by approximately half. Table 1 and Table 2 below show SSE’s calculation ofthe subsidy rate, which should be at least 4.5 p/kWh.We believe this is conservative for the following reasons.CapexThe capital costs do not include any additional electrical infrastructure costs that may be required,which are generally considerably higher than gas infrastructure costs for the equivalent increase incapacity. Our experience suggests that this can add as much as 35% to the capital costs of heatpumps.Coefficient of PerformanceSSE agrees that a well designed GSHP should achieve a COP of 4. However this might not beachieved by all installations (and is higher than required for compliance with the Renewable EnergyDirective), so from a customer’s perspective subsidy rate should be based on a lower COP of 3.Load factorExperience suggests that there is some unease in practice amongst consultants and designengineers about undersizing capacity in case peak demand exceeds supply. This approach wouldlead to considerably higher capital costs and lower load factors. SSE understands that new CIBSEguidance for heat pump installation is being written currently which should help in this regard.However consideration needs to be given as to whether the RHI is set by how an ideal installationshould be or how a real installation is likely to be presented to actual customers.Opex and ongoing costIn the case of opex and ongoing costs SSE believes DECC has overestimated these figures. Onceinstalled, heat pumps are relatively cheap to maintain, and so we have reduced the opex figure in theassumptions below. Likewise while there are significant upfront barriers associated with groundworksin particular, once installed there should be no ongoing costs other than normal maintenance andfuel, so we have removed these costs altogether in our calculations.Water source heat pumpsSSE believes that water source heat pumps should attract the same rate as ground source heatpumps rather than air source heat pumps. This is because both require heat exchangers, whichincrease installation costs compared to air source heat pumps, and because water source heatpumps are applicable at all scales, yet there is no rate proposed for large scale air source heatpumps.BiogasSSE believes that biogas injection into the gas grid has significant potential to contribute to achievingrenewable energy targets and to decarbonising the gas grid. The technology is attractive as it makesuse of existing infrastructure and potentially enables consumers who are connected to the gas gridbut unable to install renewable heat systems to benefit from the RHI, thereby promoting equity.We therefore believe that biogas injection rates should be calculated using the same methodology asfor the other technologies (i.e. a 12% rate of return on the costs of biogas over and above thecounterfactual costs). The costs used in the calculation should include the AD plant and all costs totransport, upgrade and inject the gas into the grid. This approach might also require banding byscale.SSE has modelled the costs of biogas injection based on our AD projects in development describedin our response to Q16 above. As previously noted, the results are very sensitive to the assumedprice of fuel. At the relatively large scale of the projects in development by SSE, the proposed4p/kWh biogas tariff would be sufficient to incentivised biogas injection where fuel costs are zero ornegative. However SSE believes that biogas should not be limited to waste fuels only and that tariffsshould be based on the fuel costs for energy crops. Waste fuel is likely to become more expensiveover time as demand rises.The results of this modelling are shown below. In this case the counterfactual is simply the cost ofnatural gas, which we have taken as 63p/therm (the global price in 2015 from DECC’s central fuelprice scenario).


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Yes. In respect of biomass fuels and waste fuels there should be no differences in the fuel samplingand testing regime already in place for ROCs, LECs and EU ETS. SSE agrees that consistency withthe RO is appropriate for mixed fuels.There is however considerable scope for non renewable heating systems to be installed alongsidededicated renewable heat equipment at all scales. Even at the domestic scale a householder coulddecide to leave an existing heating system in place as a back up when installing a new renewableone, given that renewable heating systems might well be located in a different place within or outsidethe house. This approach is very likely in larger buildings or for district heating systems. Indeed thebanding of the RHI encourages this; for example it would make sense with the proposed tariffs toinstall a 500 kW biomass boiler and a 100 kW gas boiler instead of a 600 kW biomass boiler.In these cases, where deeming is used the assessment tools clearly need to accurately model theoutput of each source of heat. Alternatively it might be necessary to require metering where there aremultiple heat sources, particularly where the fossil fuel back up might have cheaper fuel costs (e.g.gas) than the renewable alternative, which would create an incentive to install but not use therenewable heating system.Finally, it is also conceivable that multiple renewable heat technologies could be installed alongsideeach other, again to maximise revenues from the RHI banding. The deeming and meteringmethodology will need to account for this situation as well.

Question: Q19

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SSE believes that there is a case for supporting heat networks in the right circumstances. The RHI isnot the ideal mechanism to do this, since heat networks should not necessarily be based aroundrenewable heat (as discussed below) and the RHI is a revenue stream which is not designed toassist with capital funding for infrastructure.In the absence of a dedicated heat network support framework, SSE believes that network costsshould be included in the RHI tariffs where appropriate, but not through the uplift as proposed. Wesee three key problems with this approach:· It would be difficult to define the reference installation given the non uniformity of heatnetworks;· Heat networks, particularly those served by CHP, benefit from a diversity of heat loads, andshould not be restricted to “hard to treat” housing only. If a heat network is being developedthat could sensibly serve housing that could accommodate an individual renewable heatinstallation or non domestic buildings, it should be encouraged to do so particularly where thiswould reduce overall subsidy costs;· Heat network development might be phased, and the restriction on any uplift applying tonetworks built at the same time as the renewable heat source could be very limiting.Instead, we propose two possible alternatives.Regulated rate of return approachA regulated rate of return approach could be adopted, whereby a suitably qualified authority couldassess a developer’s network proposal and its cost, and agree an uplift based on a fixed rate ofreturn on the capital investment.Subsidy based on aggregated RHI tariffsThis approach would work by paying a district heating network supplied with renewable heat thesame amount as the buildings served by the network would have received if they had individualrenewable heat installations. In this way the difference between the higher tariff rates paid for smallinstallations and the lower rates paid for large installations can be directed towards the cost ofdeveloping the network.The steps to calculate this would be as follows:1. The network would be defined and the buildings to be served identified. The type ofrenewable heat source would be chosen.2. The buildings would be assessed as if they were going to have individual installations usingthe same renewable heat technology. This would be based on the heat demand for those buildings (which might be deemed); it could therefore be notional if it is not physically possibleto install that technology in that particular building.3. The tariff rates that would have been paid to each installation in each building would becalculated, using the normal RHI bands.4. The RHI payments to the district heating system (network and heat generation) would be thesum of the tariff rates multiplied by the heat consumption (deemed or metered) for eachbuilding served by the network.The advantage of this method is that it is arguably not an uplift at all: the same amount of money ispaid for the same quantity of delivered heat. It is for the scheme developer to decide whether anetworked solution or individual installations is preferable.Separation of networks and generationIt might be desirable to separate the network payments from the generation payments, so that theycan be operated independently by separate organisations. This could be achieved using either of theapproaches described above. In the regulated rate of return approach the network payments wouldcalculated separately anyway. In the aggregate approach, the network payment could be calculatedas the difference between the aggregated tariff bands and the tariff that would be received by astandalone heat source of the same technology type and capacity as that serving the heat network.Non renewable heat networksThe suggestions described above are designed to make the RHI self-consistent with regards to heatnetworks. However, SSE has some concerns that the RHI could distort the market for low carbonheat more generally.It is likely that heat networks will be incentivised to use RHI eligible renewable heat. This creates adisincentive to use heat from gas fired CHP, industrial processes or power stations, all of whichshould be encouraged. Since heat networks lose heat they are actually less efficient than individualboiler systems, which is offset where low carbon marginal heat is used. Given that heat networks arelikely to be applicable in denser urban areas, which are also likely to be on the gas grid, there is aneed to consider whether using, for example, biomass fuels for heat networks is the most appropriateuse of resources.As an example, SSE has modelled a scenario where 600 residential units are supplied with heat viaa district heating network supplied by either a 499 kW biomass boiler or a 245 kWe gas fired CHP unit(with a gas boiler in both cases to provide back up and peaking load). The CO2 emissions for heatingwould be 151 tCO2 per annum for the biomass solution and 161 tCO2 per annum for the gas CHPsolution. The net cashflow would be £142,000 per annum for the biomass boiler solution (with£190,000 per annum income from the RHI at 6.5 p/kWh) and £22,000 per annum for the gas firedCHP solution. This therefore represents a considerable cost for saving 10 tCO2 per annum, which isnot considered by the impact assessment because gas CHP could only be a counterfactual in a heatnetwork application.

AgreeQuestion: Q20

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SSE therefore believes that there is a need to consider how this explicitly renewable policy sits withinthe wider heat market.

As discussed above, SSE does not believe that heat networks should be limited to hard-to-treatproperties.Regarding the question of a minimum eligibility requirement for an uplift, SSE agrees thatopportunities for gaming should be limited where possible, including where heat networks areproposed. Our proposals above could go some way to removing this problem. However, shouldminimum eligibility criteria be required we do not have any specific recommendations as to whatthese criteria should be.

Question: Q21

Yes.

Question: Q22

SSE believes that the clear, stated expectation should be that tariffs will reduce over time in order toencourage innovation and the reduction of equipment and installation costs. However we agree thatthis trajectory can be pursued after the first review to allow the mechanism to bed in.

AgreeQuestion: Q23

Broadly yes.New technologies should be able to access the RHI using one of the existing tariffs, and the reviewprocess should allow for new bands to be created in the future to accommodate any newtechnologies.Fundamentally the approach of equalising the costs across all technologies will tend not to reducecosts. While it is appropriate to allow the RHI to bed in without degression initially, there should be aclear indication that tariff levels will reduce over time either through set degression rates or throughthe regular review process.It is also important that the accreditation process is as streamlined as possible to reduce barriers fornew technologies to enter the scheme. This could include allowing standards from outside the UK tobe recognised.

AgreeQuestion: Q24

Yes. SSE agrees that regular reviews are necessary and that where possible these should beconducted alongside the reviews of the other renewable energy support mechanisms.

AgreeQuestion: Q26

It is critical that the criteria do in fact constitute an “emergency”. We have already seen 2 reviews ofthe Renewables Obligation within one year, and this is damaging to investor confidence. While grandfathering in the RHI should lessen the impact of reviews compared to the RO, these should belimited to the regular periodic reviews as far as reasonably possible.

Question: Q27

SSE believes that it is risky to deny support for existing installations, as penalising early adoptersmight discourage future investors in renewable technologies.This applies across the board; however the strongest case for a particular exception would be fordomestic biomass installations, because biomass prices might increase if the RHI encourages arapid increase in biomass installations and domestic consumers might have been less able to assessrisk effectively.

AgreeQuestion: Q28

As noted above, there is scope for gaming due to the banding proposals, which is unavoidable.There might also be abuse where there are multiple installations at a site, or where an installationcan use multiple fuels (such as bioliquids and heating oil).Our proposals to carefully test the deeming arrangements would help. Further enforcement through asystem of audits and declarations by generators should be proportionate to the risk, and should besubject to reviews as the RHI progresses.

Question: Q29

No. SSE does not agree with the approach to setting the uplift, nor do we have sufficient data toprovide as a reference example.See our response to Q20.

Question: Q30

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562 Eric Harlow (individual) Existing generator


563 Solutions Renewable Energy Ltd Installer

I note that you propose to exclude wood burning stoves from the RHI because 'These present practical difficulties as it is extremely difficult to monitor how much they are used (they are sually a secondary source of heat the use of which will be optional), and to what extent they are used with renewable fuel rather than, for instance, coal'

While this is a valid argument for 'air heaters, open fires and similar applications' it does not stand up for wood burning stoves, in particular those with back boilers. There are many systems where a wood burner provides space heating and hot water in winter, with a solar system providing hot water in the warmer months. This system is almost completely renewable and carbon neutral and you should be encouraging it. If you replace the woodburner with an air source heat pump, which the RHI will support, you will be using electricity (fossil fuel based for the forseeable future) for at least 20% of the energy input.

In my experience, most people install woodburners to provide heat, not as a decorative feature. Indeed, your own Approved Document L1A of the Building Regulations recommends the use of woodburners in new dwellings where a chimney is fitted, as the choice of a SEDBUK band ?A? gas boiler together with a wood-burning closed appliance for secondary heating would, in many instances, account for nearly all the required carbon savings needed for the DER calculation.

What's more, there is a difference in appliance type between dual-fuel appliances that can burn solid fuel and logs, and woodburners that burn wood only; wood-only appliances do not burn coal because of the different grate design.

Your consultation document stresses in several places the need to allow all households to contribute to saving carbon, not only those that can afford the high capital cost of many renewable technologies. At the moment, installing a woodburner is the cheapest way to introduce renewable energy into the home; by excluding them you also exclude those households you are trying to reach

I would urge you to allow woodburners in the RHI scheme, at the least those that only burn wood and/or have a back boiler, as they are the best carbon-neutral technology available.


564 Advantage West Midlands OGD / Statutory Agenc

Advantage West Midlands (AWM) welcomes the opportunity to respond to the Department of Energy & Climate Change (DECC) consultation on the Renewable Heat Incentive (RHI) scheme (herein referred to as the ‘scheme’) due for implementation from April 2011. As the Regional Development Agency (RDA) for the West Midlands our comments are focussed on the operation of the RHI, the economic impacts for business and unlocking greater market development of renewable heat, including renewable gas to grid developments. We have also responded directly to consultation questions as part of the cross RDA network response led by the North West Development Agency. With the majority of low carbon economic policy initiatives focussed to date on de-carbonising electricity we welcome the introduction of the RHI as a mechanism to incentivise and increase deployment of renewable, low carbon heat generation that can increase efficiency significantly over simple electricity generation. This incentive will be a critical element of achieving the broad range of national economic aspirations and climate change targets. We consider an important principle to be the need for simplicity in design and administration of the scheme to ensure its effective implementation. There needs to be clear and consistent communication as to how the RHI will be applied, the eligibility criteria and clarity over payment mechanisms (including metering) to ensure consumers and developers in domestic and commercial sectors can maximise benefit.The interaction of the RHI with other policy areas (energy, waste, planning, built environment) should be carefully considered and with clear guidance given to each sector, for example settingout its interaction with measures such as the CRC Energy Efficiency Scheme. It is also important that the RHI is aligned with the Feed in Tariff (FIT) scheme for electricity, to ensure consistency and clarity in purpose, design, operation and communication as far as is possible. We particularly welcome the proposal to require Microgeneration Certification Scheme (MCS) accreditation under the RHI, as is the case with FITs, which will increase consumer confidence. We are also confident the RHI will stimulate business opportunities for growth and diversification into this market through increased investor certainty. We recommend that the final design of the RHI seeks to maximise the full range of business and skills opportunities presented by the anticipated growth in the renewable heat markets for both generation and supply.As a growing yet evolving sector we suggest it is very important to consider options for public sector capital investment that complement the RHI. Whilst we fully recognise the rationale that the RHI will provide investor confidence through guaranteed rate of return, the level of enquiries received by AWM to support the front-loaded capital investment costs of new technologies suggests a time-limited bridge to commercial investment barriers is required until the RHI scheme beds down and investment confidence is developed in private finance markets.

Advantage West Midlands welcomes and supports the RHI proposals in principle subject to our views given here and via the RDA network response. The observations set out in this letter are intended to help guide the development of the RHI whilst retaining commercial opportunities and a competitive climate for businesses and consumers in the West Midlands following its implementation.


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The West Midlands has strong potential for the commercial development of renewable gas generation. We have received views from the energy supply industry and prospective biogas generators regarding support for renewable gas generation under the RHI. The energy supply industry suggests that the tariff levels proposed for biomethane injection into the gas mains network may lack economic attractiveness, particularly for early initiatives where investment in approvals, technology and quality assurance is front loaded. The lack of certification in the proposed renewable gas market, thus requiring self certification and regulation, is also highlighted by industry as an unnecessary delay which will be insufficient to trigger large scale investment in this technology.

We have additionally received views from prospective biogas generators that suggest the guarantee of fixed payments for ten years or more under the RHI is an essential part of new scheme development to secure finance. Sufficient remuneration for good quality renewable heat isessential to minimise the risks posed to projects from challenges including finding local heat use and grid connection points in addition to numerous other local criteria such as environmental planning and air quality.Renewable gas generation and injection presents a significant opportunity for the UK and the West Midlands to significantly increase green gas supply through using existing transmission infrastructure and at-market technology. It is essential that the RHI tariff levels acknowledge this tension and support development accordingly.

Question: Q18

AWM strongly supports the consultation proposal to provide an uplift for renewable district heating under the RHI. We are working with key local and regional partners to develop and implement district energy systems at key economic growth locations in the West Midlands. Low carbon renewable heat generation and supply via district networks is a leading priority of this programme with the potential for the provision of large scale renewable heat to commercial and domestic consumers, increasing energy security lowering carbon emissions and creating local economic opportunities. Through dialogue with partners we consider the RHI uplift for district heating as a positive stimulus required to create financially viable schemes and to unlock large scale decentralised infrastructure development and private sector investment.

AgreeQuestion: Q20

565 Ranheat Engineering Ltd Manufacturer

The RHI does not seem to take into account existing legislation that covers the installation of Biomass fired boilers such as PG1/12 (04) It seems to lean towards new standards yet ignores existing. There needs to be a clear divide between industrial and domestic installations.

Question: Q01

Will projects be eligible for Gov. Funding such as the Carbon Trust Loan Scheme?

Question: Q02

Industrial units must include warm air heaters if automatically fed, otherwise you are excluding a very large sector from using wood as a fuel. Warm air space heating is very prevalent in the UK as a heating method in industrial premises.

AgreeQuestion: Q03

This sector of the market will be predominantly domestic users and some method of registration for installers will be needed but keep it to the limit of 45 kW and do not extend it to include boilers and warm air heaters up to 300 kW provided they are fitted with automatic feed systems.

AgreeQuestion: Q04

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There is enough regulation on boilers and warm air heaters in the range up to 0.4 MW net thermal input.

Again I can see the need to protect domestic users and the need to have qualified installers at the domestic end of the scale. Domestic users will have little knowledge about the use of Biomass at home. The old limit of 45 kW and below would seem to be at the correct level to protect domestic installations and to a greater extent will apply to batch loading systems. Care must be taken with this type of unit to prevent overheating and waste of the fuel against fluctuating heat demands.

Automatically fed appliances are generally above this limit and again I would suggest that industrial automatically fed systems both boiler and warm air be taken out of the requirement for MCS-certified installers.

Almost all automatic systems will be installed by the OEM and commissioned and serviced by them. At this size of plant specialist knowledge, equipment and skills are needed to install maintain and service. It is unlikely that this level of expertise would be obtained by a non OEM.

Most high efficiency units are PLC controlled and most OEMs would be reluctant to pass on the programmes and programming software to enable diagnostics and set up of this type of equipment. It is unlikely that a MCS certified installer would have the necessary level of competence and equipment to carry out these functions.

If we look at the MCS certification of Biomass boilers in the range of up to 300 kW we are guided to the BS EN303-5 1999 again this only covers biomass boilers and not warm air space heaters. The main purpose of adopting the EN standard is the testing and efficiency of the boilers, In general warm air heaters have a higher efficiency than boiler equivalents.

The RHI seems to want to set standards via the MCS certification system but at the moment seems to ignore current UK legislation with regard to the exempt appliances contained within the clean air act and IPPC. To qualify for RHI it should be essential that the appliance that is to receive the RHI must have been exemption tested for the type of fuel that it is to be used with.

It also makes no mention of permitting on plants over 0.4 MW net thermal input. Any installations over this size will require a permit from the local authority. Plants over 150 kW (approximately burning over 45 Kgs per hour) also need chimney height approval from the LA and planning permission for the chimney.

By using this existing legislation local authorities will be aware of all installations in their area as they will have approved the chimney height and location and approved via the planning department the dimensions and location of the chimney. Plants that are permitted will require some form of monitoring equipment and an annual test to ensure compliance with the guidance note PG1/12(04)

The annual test and the permitting will ensure that the equipment is in use for the life of the plant and hence continues to receive payments under the RHI. If no test result are forthcoming then no RHI payment should be made.

Again the RHI makes no mention of the guidance note that already exists and covers installations of this size PG1/12 (04). The guidance note also takes account of warm air heaters as well as boilers at this size.

Again this reinforces the case for the inclusion of warm air heaters under the RHI. To meet the strict limits set by PG1/12(04) again the equipment will be automatically fed and controlled and serviced and maintained by the OEM.

The RHI makes no allowance or consideration for the use of re-cycled timber either as a by product of timber manufacturing process or re-cycled from local authority CA sites. The effects on climate change, of using this valuable resource for fuel, is immense. Not only does it displace the use of conventional fuels but it uses a resource that has completed its’ original function and is ready for re-use as a fuel.

The following text is taken from the Carbon Trust Biomass Heat Accelerator.

“Biomass has considerable untapped resource potential and, in future, could play a significant role in helping the UK to meet a range of existing renewable energy and greenhouse gas (GHG) reduction targets.

The use of biomass energy has the potential to significantly reduce carbon dioxide emissions if used to displace fossil fuels: while carbon dioxide is emitted during the processes of energy conversion (e.g. combustion), this is largely balanced by the carbon dioxide that has been captured in its own growth. Fresh growth on an annual cycle could recapture the emitted carbon dioxide, if resources are managed sustainably, and result in very low net emissions to the atmosphere.

Where biomass resources which would normally be discarded as wastes (such as wood off-cuts, used pallets etc.) are used to displace fossil fuels, the savings are particularly significant as the alternative end-use for these 'wastes' may be landfill (e.g. waste wood) or to be spread on fields (e.g. animal slurries). In these situations, gases of decomposition such as methane would be released to the atmosphere which are far more powerful greenhouse gases than carbon dioxide alone (methane has a global warming potential 21 times higher than that of carbon dioxide)”

Considering the above the use of re-cycled timber should be at the fore-front of the RHI both in terms of energy from renewable sources and the reduction of Bio-degradable material to landfill thus meeting more than one government set targets with regard to climate change.The WID covers the use of material containing Halogenated Organic Compounds or Heavy Metals. Only a small amount of wood containing these treatments need go to landfill. With the correct design of the combustion system it is possible to burn material currently under WID with lower emission levels than that of wood pellets and wood chips from virgin timber.In 2008 Ranheat built and tested a 150 kW warm air heater with a unique combustion system that was tested on all types of wood containing treatments, this plant was tested by an independent laboratory and witnessed by local authority officers in Northampton.


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Exemption testing for inclusion into smoke control areas and guidance note PG 1/12(04)

Question: Q06

More use must be made of lower grade fuels such as straw and also the use of re-cycled timber. Some of the lower grade fuels cannot operate at high efficiencies due to the moisture content of the fuel.


Biomass boilers below 20 MW is too large a band. There should be existing standards that are used for example plant between 0.4 and 3 MW currently come under IPPC and are permitted and monitored by the local authority Plants over 3 MW could be banded with the proposals so have a band that is 3-20 MW.


Yes. In general domestic users less than 45 kW will not have their own source of fuel so will be buying the wood fuel in. Most likely in the form of pellets. The pellets will be to a standard and have a set moisture content. The equipment to burn this high grade of bio fuel can be of high efficiency.

Non domestic units may well be used with other forms of fuel such as wood chips and straw so will have a higher moisture content. The higher moisture content means that the heaters used cannot run at such higher efficiencies on wetter fuel.

The use of deeming on domestic units is essential to the scheme. Non domestic units with automatic stokers can be set up to record the amount of energy produced .

Question: Q10

AgreeQuestion: Q12

AgreeQuestion: Q13

There seems to be a large jump between the tariff below and above 500 kW.

Question: Q18

566 ICOM Energy Association Trade Association

We have several concerns;

1. What will be the ceiling to the funds available for Pay As You Save? If the take-up by householders is as huge as might be expected, will the available funds be quickly exhausted, so that people without the significant capital resources for a renewable heat installation defer to the much lower capital costs of a like-for-like fossil fuel boiler replacement?

2. If banks and other commercial lenders supply the finance, how will they be encouraged to expand their willingness to lend if the face of significant recent reluctance?

Question: Q02

What policing procedures will be put into place to ensure the maintenance, repair and continued operation of the installed plant? For instance, EPCs have been law for all property put onto the market for a long time now, yet it is well documented that over two thirds of properties put on the market still do not comply. What will make this any different?

AgreeQuestion: Q03

If the person is not a member of a competent Persons Scheme or if that scheme is not deemed satisfactory for the installation of certain technologies

e.g. In the case of the solar thermal which is more wide spread then any other renewable technology it is maybe an idea to drop the requirement for an installer to be MCS registered if they can demonstrate that they have the appropriate solar training. Certainly for installations of up 10m2 solar thermal.

AgreeQuestion: Q04

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From the Carbon Trust’s administration of the Energy Technology List, it has become evident that large output equipment often relies upon manufacturer self-certification, either because it is custom-made or because of the restricted availability of Notified Bodies with adequate test facilities. We believe there should be a similar reliance on manufacturer self-certification with large plant for the RHI.In this scenario, it is the manufacturer alone who is truly competent to assess the ability of the installer to fit, commission and service this equipment, and train as necessary. Hence, we believe that specific manufacturer training should be the pre-requisite rather than generic MCS installer certification.


There is an established EHPA-DACHs product approval scheme for heat pumps and a EU Quality training skill scheme in the making

Question: Q06

We would also support the RHI being made available to all commercial properties that use a bio-fuel blend - including new build in order to achieve 25% aggregated low carbon targets.

This is a flexible and cost effective way of encouraging take up of renewable heating where other options are more prohibitive.

AgreeQuestion: Q07

ICOM and OFTEC have developed three blended fuel types using FAME and are not aware of any other bio-liquids that are suitable for heating in commercial or domestic properties. We request that the FAME in these fuels is accepted as eligible for RHI and recognise that it will be applied only to the biofuel element.

AgreeQuestion: Q08

EN 303-5 is currently being redrafted by CEN/ TC 57 WG1 and is close to completion. This document increases the scope of output to 500 kW and includes both limits on emissions of CO, OGC and particulates (dust) and a classification system. There should be co-ordination with this group in deciding any emission limits

Low PM limits to meet required air quality will often require the use of high quality filtration units. Therefore, relevant technology developers need to be consulted.

The technology to reach the lower limits is not currently main stream. The consistency and quality of the fuel is also an important factor for constant NOx.


Yes. Energy conservation measures should always precede renewable technology installation.

The use of energy meters pre-installed on renewable equipment could be usefull for policing usage. We don’t share the view that a metered system is more abused for over generation. The equipment is already expensive, and to fit a larger heat pump so heat can be wasted or dumped to earn more money seems to be far fetched when the additional investment to dump heat is greater than the reward.

A metered system has the advantage that a meter is already in place and unlike water meters avoids costly retro fit projects in 10-20years time.

Question: Q10

Compliance with Building Regs Part L1a and L2a would ensure that reasonable measures to ensure energy conservation have been taken, without recourse to additional legislation

Question: Q11

Based on industry knowledge of operator /owner misuse of biomass plant to gain the 10% renewables target, there should always be a heat meter fitted when multiple plant / dual fuel systems are installed.

AgreeQuestion: Q12

But if we use metering on equipment then this is not required.

AgreeQuestion: Q13

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The current level of 5.5p/kWh for biogas operated CHP units (upto 200kW) is a bit thin or do those installation enjoy the feed-in tariff for electricity?Above 200kW is the same issue. CHP will produce heat whilst it generates electricity. On a heat driven installation that should be supported by:

•No climate change levy•No VAT on gas•RHI tariff of 5-8p/kWh•Tariff for electricity produced (metered)

Electricity driven CHP units are operating less efficient and the produced heat has to be wasted. Reduced benefits should apply.

Question: Q16

No. Annual service charges should apply to ALL technologies as all should be serviced / checked for efficiency, condition and safety.

We would also like to see a more even playing field with respect to giving an average of 12% rate of return e.g. liquid biofuel does not receive 12%.

Question: Q18

Yes. See answer to Q12

Question: Q19

District heating schemes could make a big contribution to carbon reduction, but they will need financial support to be incentivised, since capital costs may be very significant per capita compared to costs for independent households.

Large District Heating schemes offer an opportunity for fuel diversity that individual households do not. For example, they can burn lower calorific value biomass fuels when there is adequate storage and delivery space that typical households may not be able to use. This fuel diversity will be of great benefit to energy security, provided the financial incentive is there to start with.

AgreeQuestion: Q20

A case-by-case decision basis would deter the misappropriation of valuable funds to finance upgrading of installations (which might be due in any case) for the benefit of relatively few.

Question: Q21

Yes.

Question: Q22

AgreeQuestion: Q23

AgreeQuestion: Q24

AgreeQuestion: Q26

AgreeQuestion: Q28

567 National Housing Federation NGO

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The National Housing Federation is pleased to respond to this consultation on the proposed Renewable Heat Incentive (RHI) financial support scheme by the Department of Energy and Climate Change and is happy for its response to be published.

The Federation represents 1200 independent, not for profit social housing providers in England. Its members include housing associations, co-operatives, trusts and stock transfer organisations. They own and/or manage 2.5 million homes provided for affordable rent, supported housing and low cost home ownership, including an increasingly diverse range of community and regeneration services. Our members are fully committed to reducing the carbon emissions from their housing stock, not only to help meet the Government‟s 80% carbon reduction target by 2050, but also to reduce tenants‟ fuel bills and protect them from future price increases too. Housing associations have used most of the sources of renewable energy covered by this consultation and have provided evidence to the Federation based on their experience in their design and operation.Housing associations have a track record in building good quality affordable and sustainable housing. They meet, and in many cases exceed, level 3 of the Code for Sustainable Homes when building new affordable housing under the National Affordable Housing Programme (NAHP). We welcome these proposals to improve the economics of renewable heat generation, both for new build and for existing homes, that should help the Government meet the carbon reduction target.While the Federation has responded to the specific questions in the consultation document we have summarised our key points below.

Design of the IncentiveWe welcome these proposed incentives to encourage the use of renewable energy sources and reduce CO2 emissions from buildings. It is important that RHI operates in a straightforward way, with as few administrative hurdles as possible. However, it is crucial to ensure that the proposed design of the scheme is consistent and compatible with other Government policies to reduce CO2 emissions and tackle fuel poverty, such as the Household Energy Management Strategy (HEMS) and the Carbon Emissions Reduction Target (CERT).

The RHI is designed to incentivise renewable heat generation and so there is only a passing reference to building standards and energy efficiency. We do not consider this a problem in relation to new homes being built by housing associations since they are required to meet level 3 of the Code for Sustainable Homes. The Government has proposed strengthening the requirements for fabric energy efficiency in its recent consultation on the Code so that it better rewards higher levels of fabric energy efficiency to reduce reliance on renewable energy technologies to achieve the emission targets. We fully support this approach to reducing CO2 emissions that starts with a high level of energy efficiency in the dwelling fabric before trying to minimise CO2 emissions through the use of renewable energy sources.

In relation to existing homes, the experience of housing association and others working on energy efficient retrofits has shown that renewable heat works most effectively in well insulated homes. In this respect the importance of fabric energy efficiency in relation to installing renewable heat should be explained to help consumers understand the benefits of a „whole house‟ approach. We consider that there is scope to increase the amount of accessible loft insulation in the proposed minimum standard of fabric energy efficiency for existing homes since this would be a simple and affordable requirement. While further improvements to fabric energy efficiency are desirable, these require significant capital investment that would be a barrier to applying for RHI if required at the same time. Consequently, we consider that RHI should be designed to ensure that other funding can be used alongside it for a „whole house‟ approach.

Since CO2 emissions resulting from heating (both space and water) are much greater in poorly insulated existing homes, RHI would be particularly effective in reducing these when coupled with improved fabric energy efficiency. In contrast new homes, built to higher fabric energy efficiency, produce lower CO2 emissions from space heating. There are higher CO2 emissions where space and water heating is provided by electricity, such as in off-gas grid rural areas. We see RHI, when used in existing homes and in off-gas grid rural areas, as a particularly effective way of helping meet the target of 15% energy sourced from renewable sources.

RHI does not address the differing installation requirements relevant to each of the renewable heat technologies. For example, in respect of the installation of heat pumps, these require a higher level of fabric energy efficiency than other renewable heat technologies to be effective. In relation to biomass boilers, these are better suited for planned boiler replacement programmes because there are practical constraints when dealing with„distress‟ (emergency breakdown) boiler replacements. For example they are much larger in size, have differing flue requirements and need both fuel (biomass) storage and supply to the boiler.

It is important that the incentives do not result in inappropriate installation of renewable heat technologies, such as the unnecessary early replacement of existing efficient space and water heating systems, for example gas condensing boilers, by renewable heat. This would be poor asset management for housing associations, particularly with their finite maintenance budgets. The use of such technology on its own could result in higher fuel bills for tenants pushing more into fuel poverty. Some of the technology can also have higher maintenance costs than gas central heating systems that need to be factored into landlords‟ running costs. However, where housing associations have installed renewable heat and improved fabric energy efficiency, both fuel bills and CO2 emissions have been reduced.

Proposed beneficiariesThe Federation considers RHI as an important opportunity for housing associations because it provides a direct repayment mechanism for those that are able to invest in renewable heat technologies. Energy efficiency improvements and installation of renewable technologies in existing homes require significant capital investments by associations that they are typically unable to recover. However, housing association tenants enjoy all the financial benefits through reduced energy costs.

The recognition in RHI of the benefits of renewable heat to rural communities, especially where there is no gas grid connection, is particularly welcomed.

Adequate funding and tariff levelsGiven housing associations‟ finite asset management budgets it is essential that any scheme to incentivise a reduction in CO2 emissions should be adequately funded. Without this, RHI, however well designed, will not enable associations to make the significant investments in renewable heat technologies. If funding is limited, we propose that RHI should focus on off-gas grid communities and existing fuel poor homes where the greatest social benefits could be accrued from efficient renewable energy generation.


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The tariff levels and length of payment periods do not fully recognise the installation costs of the differing technologies. For example there are increased costs for retrofitting renewable heat to existing homes compared with new housing development but the proposed tariffs do not distinguish between retrofit and new build unlike the Feed in Tariffs (FITs). Another example is ground and air source heat pumps, particularly in retrofits; housing associations see ground source as a better solution but there are higher installation costs that are not fully compensated even with the longer payment period. A higher tariff is necessary.

However, at whatever levels tariffs are set, a significant incentive for housing associations would be for RHI to contribute to installation costs particularly for retrofit.

Assumptions for calculating RHI (deeming)We are concerned that the standard assumptions for occupancy in SAP or an EPC do not accurately reflect the longer and fuller occupancy patterns in housing association stock and so may underestimate heating loads in social housing. This would result in the „deemed‟ heat use being less than the actual heat used by their tenants. We consider that these standard assumptions should be reviewed to better reflect realistic heating costs in social housing.

YesComments:There needs to be clarity and certainty on: The ability to transfer RHI obligations and payments from one body to another at change of ownership (or otherwise). Whether RHI will cover the costs of associated specialist equipment as part of an RHI installation (plumbing, controls, meters, infrastructure etc.) because this will determine the financial viability in relation to proposed tariff/repayments. Whether „CHP‟ and „renewable CHP‟, used interchangeably, will both be included in RHI since CHP systems are not strictly renewable unless they use non-fossil fuel. However, fossil-fuelled CHP systems can meet local renewable planning requirements.There is a need to ensure that RHI: Is consistent with and complementary to other Government policies to reduce CO2 emissions, such as the Household Energy Management Strategy (HEMS) and the Carbon Emissions Reduction Target (CERT). Can be used together with these other funding schemes so that the fabric energy efficiency can be improved as part of a „whole house‟ approach. For example, in relation to social housing we believe that additional capital to help finance the initial investment in renewable heat should be made available as part of HEMS.There should be better emphasis on the importance of fabric energy efficiency, as set out in the Government‟s zero carbon homes policy.

Question: Q01

YesComments:If housing associations are to invest in renewable heat technologies at the scale to maximise the potential step-change in renewable heat production envisaged by RHI, they will have to be able to access competitively priced capital. Many will have to borrow for the capital cost of installation, and so RHI tariff must be high enough to cover the interest on the borrowing and any additional maintenance and replacement costs compared to the existing fossil fuel heating systems. Ideally we would like to see RHI, or another source of funding, contributing to the upfront costs because this would be a positive incentive for renewable heat by making it easier to make the initial capital investments.For housing associations, current legislation precludes the introduction of any pay-as-you-save (PAYS) type charge placed on the property in the form of a service charge or rent supplement. Without a change to this primary legislation, they will be unable to use any PAYS financing scheme.Direct financing relationships between a tenant and third parties such as ESCOs, energy suppliers, etc. would not be applicable since housing associations hold the obligation for installing and maintaining the domestic heating system (individual or communal) at their tenanted properties. Any financing arrangements would have to work within the framework of a relationship between the finance provider and the landlord.The description and treatment of RHI leases will be very important. It is preferable that RHI is not categorised as a finance lease since this would then appear „on balance sheet‟ and thus impact on financial indicators (e.g. gearing). It would be helpful if RHI leases could have a lower VAT rating since some housing associations are not able to recover VAT.Ensuring financial viability will need greater clarity on the way biomass fuel prices might develop – particularly whether they might, or might not, track gas prices.Housing associations‟ experience in community heating schemes, where the market is immature, is that there are prohibitive costs and added difficulties, compared to the individual central heating boilers. There are particular problems in metering and billing.

Question: Q02

YesComments: We are in general agreement, but have these comments:There needs to be clarity on the “ownership” of the plant since the Energy Act specifies that RHI payments can only be made to the “owner” of the plant. This is said to mean that in the case of hire-purchase agreements, etc. the owner is the person in possession of the plant (the occupier) and, therefore, they get the payment. The consultation recognises that there are instances where the owner and the person operating the equipment are different entities with the example of a local authority installing the equipment and retaining the obligations and rights along with the RHI payment. So while it seems clear that housing associations would have no barriers in claiming the RHI for the plant installed at their properties, it is unclear on whether developers, ESCO‟s or other social enterprises could have the RHI „signed-over‟ to them in the event that they pay for the installation and ongoing maintenance of the equipment. This would avoid the need for a separate on-payment agreement with the occupier. Such flexibility may help wider and simpler application of the scheme.We have commented above about the uncertainty as to how the RHI will operate at change of ownership – i.e. when a property is transferred from one landlord to another. As the new owner will be taking up the responsibilities of maintenance/upkeep, the RHI payment should also transfer.It would be preferable to have RHI paid at the beginning of each period rather than the end.

AgreeQuestion: Q03

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YesComments:Given that renewable heat is expensive to install, it is essential that the technology is reliable. MCS was designed for this purpose, to build consumer confidence by the design and installation of reliable technology. Certainty that warranties will be available for all installations would also provide customer assurance.However, there is currently an inadequate number of MCS certified installers that constrains the installation of renewable technologies. The costs and difficulties of registering under MCS deter small companies and sole traders and yet these are the people advising home owners on boiler replacements and home improvements. It is essential that the Government considers how to increase the numbers of registered installers, particularly among small companies and sole traders. We suggest that the Government keeps the MCS barriers to entry under review.

AgreeQuestion: Q04

As above.

AgreeQuestion: Q05

YesComments: RHI needs to be clear on whether refurbished and converted technology would be eligible, particularly within the scope of retrofitting existing district heating systems. One example would be a scheme that enabled, with minor conversion required for the equipment, renewable biogas from waste as a part of the fuel mix feeding a district gas boiler.

AgreeQuestion: Q07

AgreeQuestion: Q08

YesComments: The proposed standards are sensible to ensure accessibility and cost effectiveness for the purposes of the scheme. Housing associations would be concerned should a significant increase in take-up of biomass boilers in high-density urban areas be detrimental to urban air quality. This is particularly a risk with boilers that result in higher emissions of particulates and nitrogen oxides than existing fossil fuel solutions. However, there is a conflict since biomass is typically required on dense urban sites to reach higher levels of the Code for Sustainable Homes. We consider that safeguards should be introduced in RHI to ensure that biomass technology, installed under the RHI, would not be required to be replaced within their lifetimes for cleaner technologies at high cost. It will be important to have control over biomass take-up in urban areas to safeguard air quality whilst balancing with cost effective roll-out of low-carbon heat.

AgreeQuestion: Q09

YesComments:We have commented above on the importance of „whole-house‟ retrofit in relation to the installation of renewable heat but the policy instruments such as PAYS are not in place to fund the fabric measures before or at the same time as the installation of renewable energy supply technologies. However, we consider that the proposed minimum standard of fabric energy efficiency should require at least 270mm of loft insulation in accessible lofts since this is both practical and affordable and so should not present a barrier to the success of RHI. To encourage solar thermal (hot water) installations there should be no other administrative requirements than the minimum necessary to ensure efficient and reliable installations.The deeming mechanism should encourage energy conservation and investment in energy efficiency to make the most of the RHI payments. However, there are two important considerations to note when installing renewable heat in existing homes: If the renewable heat technology is installed before improvements to the fabric energy efficiency, it will subsequently be oversized once the home is improved. However, unless a mechanism can be found to provide the funding for fabric improvements at the same time as RHI, as proposed in HEMS, it is essential that the technology is not underspecified in anticipation of a future upgrade and so not meet current heat requirements. The majority of installations for private homeowners and a significant proportion of social landlord replacements are distress replacements (where a boiler breaks down and the occupant needs a rapid replacement). RHI needs to be able to respond quickly in such cases and to cover all ancillary costs. However, there are practical limitations to replacing a gas boiler with renewable heat technology but this is not addressed by RHI so that it cannot take such opportunities.

Question: Q10

YesComments: The proposals in the „zero carbon homes policy‟ could be used to set a minimum standard of fabric energy efficiency for new housing developments to qualify for RHI. Suitable standards are being developed by the Zero Carbon Hub and proposed for the future operation of the Code for Sustainable Homes.

Question: Q11

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YesComments: We agree with the use of „deeming‟ for smaller installations and consider that this provides an incentive to not waste renewable heat. It is important that there are safeguards to the deeming assessment being carried out by the installer to avoid the situation where an installer “over-deems” to provide a higher rate of RHI payment. MCS should protect against the specification a bigger-than-necessary, and more expensive, piece of equipment, with the installer getting a higher commission.However, some form of metering or monitoring equipment may be necessary to ensure and to demonstrate that the equipment is working as designed and still eligible for RHI payments.

AgreeQuestion: Q12

YesComments:SAP should be used as the methodology for deeming within housing. For new housing full SAP calculations will be available but for existing homes whether a full SAP is required needs careful consideration. A full SAP would be a better predictor of heat demand for deeming but is costly. We are concerned that the standard assumptions for occupancy in SAP or an EPC may lead to an underestimate of heat loads in social housing. The accuracy and fairness of any deeming calculations needs to be monitored in the first few years to ensure that they are sufficient. While we recognise the need for a deeming mechanism, we are concerned that the cost of an EPC or SAP is a disincentive, especially when consumers do not need either to buy or replace a gas boiler.

AgreeQuestion: Q13

YesComments: To reduce risk of „overgeneration‟ there needs to be a mechanism to assess what is reasonable demand as a comparator with meter readings. However, we are aware that there are problems with communal heat metering and billing, complicated by the sector currently being immature. The Government should support the development of reliable, affordable heat-metering technology and billing by working with social landlords and the communal energy sector.

Question: Q14

NoComments: We have commented above that the tariffs do not distinguish between new build and retrofit installations and recommend higher tariffs for retrofit as a more balanced incentive. In relation to the individual technologies, we have recommended a higher rate for ground source heat pumps than air source ones. Consideration should also be given to a higher rate of return for solar thermal than 6%, but not as high as 12%, since it is not widely used despite being a proven and reliable technology. This would reduce the differential rate of return with other technologies and help guard against inappropriate choices based on rates alone.

Question: Q18

Yes

Question: Q19

YesComments: District heating is promoted in Government strategies (HEMS and others) but there are financial and administrative challenges that deter investment. This is particularly the case for using district heating for existing homes, where connection charges can be £5,000-£7,000 per dwelling. An uplift to assist investment in renewable district heating would support these strategies and also increase the potential renewable heat generation.

AgreeQuestion: Q20

NoComments: An eligibility factor to the uplift is a further complication. We would like to see RHI incentivise refurbishing/extending existing infrastructure that does not have individual heat metering for example.

Question: Q21

YesComments: While fixed tariffs provide investor certainty, they will be operating on long-term contracts and we suggest that an appropriate alternative might be a fixed tariff for the first five years, with the rates being reviewed every five years.

Question: Q22

YesComments: We agree with not introducing degression at the outset because it provides certainty for investors and allows reasonable time for the market and general public to be more confident in such technology.

AgreeQuestion: Q23

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NoComments: An important priority for RHI is to inspire public confidence in well-proven renewable heat technology being reliable, fully-developed and well understood. The Federation considers that RHI is not the right mechanism to encourage innovative technology; there are other funding streams designed to promote research and innovation, through bodies such as the Technology Strategy Board. It should be possible as the RHI is periodically reviewed, for new proven technologies (e.g. through rigorous trials) to be added to the list of eligible technologies.

AgreeQuestion: Q24

YesComments: We see RHI as an opportunity to create a market that would encourage the development of UK supply chain and manufacturing capacity for RH technology. Other business support schemes could be used to help pump-prime this through design innovation and developing manufacturing capability, both for systems and components. Training local installers and service engineers would also make an important contribution to reducing costs.

Question: Q25

AgreeQuestion: Q26

YesComments: We have already commented on the need to ensure that the RHI is compatible with future policies, strategies and associated funding mechanisms (e.g. HEMS, the Warm Homes Standard, the new Energy Supplier Obligation, PAYS). An emergency review would be appropriate where there is evidence that these and future policy changes are not consistent and schemes are not interacting effectively.

Question: Q27

AgreeQuestion: Q28

YesComments: Our comments on how RHI will operate in relation to change of ownership, the need for sufficient registered installers and „selling‟/installation of appropriate technology are all pertinent to ensuring RHI is credible and not abused.

Question: Q29

568 Local Authority Recycling Advisory Committee (LARAC) Local Government / A

22 June 2010 Page 1058 of 1348

I am writing to present the LARAC response to the above consultation, which is given below, and I thank you for the opportunity to respond to the above consultation.

The comments below are sent on behalf of the Local Authority Recycling Advisory Committee (LARAC). LARAC is an association of 90% of the 440 local authorities across England, Scotland Wales and Northern Ireland whose waste management and recycling professionals co-ordinate and operate waste management services. Membership is drawn from all types of authority including statutory Waste Collection (WCA), Waste Disposal (WDA) and Unitary.

We have limited our response to the consultation to those areas that are of concern to local authority recycling and waste management officers, and where we are best placed to offer an expert opinion. This means that we have not responded to a number of the questions.

The RHI is an ambitious measure that encompasses a wide variety of different technologies and scales of application. Because of the resulting complexity unintended consequences and market distortions are bound to occur. As a result of this, we support proposals for early review of the RHI, but not early degression of tariffs on large scale schemes, as these will be essential to de-risk investment in large scale projects. It would not be helpful to develop a partnership, agree on a delivery body, embark on design, carry out environmental assessments, pursue funding options, obtain planning permission, get agreement to an outline business case – and then have the goal posts changed before funding was secured. The larger the scale of the project to be supported, the more important it is for tariffs to be fixed for a long term (or increased, but not reduced).

Our interest is particularly in how the RHI will help to stimulate investment in projects involving biogas (including gas from source-separated solid biowastes) and treatment of mixed wastes (such as Municipal Solid Waste (MSW)) to generate Secondary Recovered Fuels (SRFs) (that are mainly deemed to consist of 50% renewable material under the Renewables Obligation (RO)). The development of Combined Heat & Power (CHP) plant is essential for the (carbon) efficient generation of energy from waste; and the development of networks for distributing heat is essential for establishing CHP. This is essential in turn for developing the “zero waste” or “resource efficient” economy that is needed for the waste management industry, working in partnership with local authorities, to fulfil its obligations under the Waste Framework Directive and the Climate Change Act.

The RHI will be a very important element of funding for these projects. We would urge the Government to look beyond the immediate issue of Renewable Heat tariffs and seek additional ways of enabling public and private sector bodies to borrow large sums (hundreds of millions or billions of pounds) to invest in heating schemes that can compete with established systems based on distributed gas, where the investment has already been made in the distribution infrastructure. A large district heating scheme may only attract a limited subsidy on that part of the heat that is supplied from energy from waste, and then only on 50% of that heat. However the environmental benefits of the more efficient use of heat (including, in some cases, low grade industrial heat) through district heating would far outweigh the value of a renewable heat tariff on the “renewable” part. In contrast, the RO has already stimulated projects to construct very large power stations with CHP that will burn imported wood as biomass, that may not need any further subsidy, and do not contribute to the more sustainable management of waste.


Yes

Comments: Although, in a supplementary Impact Assessment of the RHI, the Government estimates likely costs to energy consumers, and, in the consultation document, proposes a number of financing models, it does not make explicit how funds will be raised for the RHI and therefore what constraints there will be on funding. This is important because delays or limits on the amount of funding available could seriously constrain the operation of the RHI. The consultation document (only) partly acknowledges the challenge of accommodating within the same incentive scheme every level of intervention from small (domestic)-scale heating to large scale district heating (DH) schemes. However it does not deal with possible duplication, for example subsidising solar thermal panels in an area earmarked for district heating.Lessons may be learnt from the operation of the Renewables Obligation (RO) to avoid or mitigate unforeseen or even perverse outcomes. The benefits (as reduced overall CO2e emissions) of providing a significant financial incentive for large scale DH schemes, drawing heat from a number of sources only some of which may be renewable, may greatly outweigh the direct gains from using renewable energy sources. However a large Combined Heat & Power (CHP) scheme using imported wood as “dedicated energy crops” will already receive a very substantial subsidy through the RO. The RO incentivises generation of electricity and hot heat, potentially to overall detriment to the thermodynamic efficiency of conversion of fuel to energy. However the RHI could be an opportunity to subsidise district heating systems as opposed to just the sources of heat that will feed into such systems. (This would require further guidance about the degree or proportion of ownership of a system required for different organizations feeding heat into a DH scheme). This might be achieved by allowing the subsidy to go beyond strictly renewable heat and apply to a system drawing from both renewable and “non-renewable” heat sources. Widening the subsidy to promote more efficient use of non-renewable heat would bring forward large scale projects increasing substantially the percentage of renewable energy generated. Estimates would be then needed of renewable heat to satisfy the monitoring requirements for the Government’s renewable energy targets.

Feed-in Tariffs proposed for Anaerobic Digestion (AD) are higher for electricity production (11.5p/kWh over 20 years) than for heat generated (proposed 5.5p/kWh over 10 years for on-site combustion, and 4p/kWh for biomethane injection). This would encourage electricity generation from AD, which is a less efficient use of biogas than heat production (whether through local distributed heat systems or biomethane injection into grid). AD also offers considerable potential as a transport fuel (arguably providing more environmental benefits than through generation of power though CHP and injection of gas into the grid). The financial incentives developed for AD in particular should reflect the highest/most efficient utilisation of the fuel.

Question: Q01

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Yes

Comments: In order to “de-risk” future investments, a floor value must be established for the value of RHI subsidies to large projects in the medium and long term. The greater certainty the Government can establish for future pricing, the greater the likelihood of timely and substantial investments being made in projects with a long-term (20-50 year) horizon.

Question: Q02

YesComments: However attention should be given to the definition of the “owner” in relation to DH schemes, where a system may be fed by a number of different heat sources, as under Q1 above.

AgreeQuestion: Q03

Yes

Comments: Government should take a pragmatic approach to emissions standards for small scale biomass boilers, and allow for permitted emissions limits to be reviewed (and reduced in the future) in the light of the performance of the best available technology. This would provide an incentive for manufacturers to improve the performance of their equipment.

AgreeQuestion: Q09

Under Q1 above, we pointed out that large-scale biomass CHP will already receive a large subsidy from the RO, so may not need significant additional incentivisation. However getting the capital investment for a large DH scheme that might include biomass CHP as one of a number of heat sources may require a significant subsidy through a RHI.

Question: Q15

We believe the most environmentally advantageous use of biogas is as a road fuel. The Government may, as a separate issue, wish to review the Renewable Transport Fuels Obligation in the light of this. Next to this, direct injection into the grid provides arguably more flexibility for distributed heat than CHP. CHP may be generated from biomethane or syngas from both renewable and non-renewable sources, especially as energy from waste. The same argument applies as above for DH, that the subsidy should be directed to the distribution system as well and not to the generator per se, and that it should be used to incentivise more efficient use of heat generated from non-renewable as well as renewable sources. Probably a ROC subsidy provides most of the incentive needed to develop CHP.

Question: Q16

Co-firing renewable fuel (such as Secondary Recovered Fuel) with fossil fuel is technically feasible and should not be eliminated – even though different emissions monitoring standards may, in practice, reduce the likelihood of this taking place. Although allowing the use of mixed fuel may, on the face of it, make monitoring more difficult, in practice generic assumptions about the proportion of renewables in a given mix may be made, with the onus on the generator to demonstrate that their fuel mix contains more renewable material than assumed. A similar approach is allowed under the RO concerning the proportion of renewable material in residual municipal waste.

Question: Q19

Definitely. Refer to our responses to questions 1, 16 and 19 above

AgreeQuestion: Q20

YesComments: An uplift should be available to all eligible DH networks. The focus should be on environmental gains, not on whether properties are considered to be “hard to treat”. It would be difficult in any event to provide transparent and fair criteria for “hard to treat” in respect of properties, especially of a DH network was proposed to extend (or be designed to allow for extension) over a number of types of properties. There is no reason why networks connecting one or a small number of large external heat users should not be eligible for an uplift, provided that the owner can demonstrate that he has thereby replaced heat that would otherwise have been generated using fossil fuels with heat generated from renewable fuel. Making an uplift available to small numbers of heat users would promote symbiotic developments and increase investment in industry. However there is a strong case for differentiating between schemes that pipe heat (as hot water) to heat commercial and residential premises, that should benefit from the largest possible uplift, and schemes that pipe steam to industrial processes, that might be incentivised by a smaller subsidy.

Question: Q21

Yes and yes, for the reasons given in the consultation document.

Question: Q22

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For (large) projects that have long lead-in times and long time horizons, degression should not be a possibility for a very long time – at least 5-10 years. The risk (of unnecessarily generous subsidy) is far less far-reaching and significant than the risk of projects not going ahead because of insufficient subsidy.

The same does not apply to small projects and domestic-scale schemes, where the rate of subsidy could be adjusted from a first review in the light of better market information.

AgreeQuestion: Q23

Yes.

AgreeQuestion: Q26

Lack of prospective investment in large DH schemes.

Question: Q27

An early and clear cut-off date for projects ineligible for RHI support is helpful. This minimises the time during which projects may be delayed owing to prospective support not yet being available.

Question: Q28

Possibly

Comments: The effect of RHI support on large-scale CHP schemes that already receive a substantial subsidy from the RO will have to be considered and then monitored carefully, as levels of support for long term projects will (rightly) be fixed for the duration of projects. Relying solely on the RO subsidy would tend to make owners operate plant to maximise electricity generation, at overall less thermodynamic (and carbon) efficiency than when heat output is greater. On the whole, a constant heat load throughout the year is preferred by schemes like this, hence the question about incentivising schemes with a small number of large scale heat users. The most important question is how to incentivise district heating systems, which will give for the most efficient possible use of heat, but with a substantial annual variation in heat load, and therefore less than optimal from the point of view of the heat provider. Directing the subsidy to the owner of the distribution system and making it available also for non-renewable heat (with a specified minimum proportion of renewable heat) may be a way of achieving the right balance between incentivising investment and possible abuse of support.

Question: Q29

We are not experts in district heating systems, but we suspect that large projects will need to be dealt with on a case-by-case basis until a body of evidence has been developed that will indicate an appropriate and effective level of subsidy (and, possibly, other market incentives). Our responses above (especially to Q1, 21) refer. In the early stages negotiations could be initiated with owners of DH projects on the basis of indicative levels of support. The level of incentive needed then could be negotiated alongside other Government or EU interventions.

Question: Q30

569 Tees Valley Unlimited NGO

22 June 2010 Page 1061 of 1348

Please find below a response to the above consultation on behalf of Tees Valley Unlimited, a partnership of public, private and community sector bodies serving the Tees Valley Sub-region (including Darlington, Hartlepool, Middlesbrough, Redcar & Cleveland and Stockton-on-Tees Borough Councils). Its remit is to deliver the Tees Valley’s Multi-Area Agreement (MAA) and promote the economic development of the sub-region. Working together with regional agencies including One North East, and the sub-regional climate change partnership, we are managing and developing a number of projects to promote, and stimulate investment in, energy efficiency, renewable energy, district heating and resource management, with potential investments running into hundreds of millions of pounds in low carbon technologies.

The RHI is an ambitious measure that encompasses a wide variety of different technologies and scales of application. Because of this unintended consequences and market distortions are inevitable. Accordingly, we support proposals for early review of the RHI, but not early degression of tariffs on large scale schemes, as these will be essential to de-risk investment in large scale projects. The larger the scale of the project to be supported, the more important it is for tariffs to be fixed for a long term (or increased, but not reduced).

Our interest is particularly in how the RHI will help to stimulate investment in district heating where there is potential to utilise low grade industrial heat (including heat from CHP projects) from a variety of sources. Some of these sources of heat may be renewable, but non-renewable heat may also be made available, still to considerable environmental benefit because of the increased energy (and carbon) efficiency of processes producing this heat.

The RHI will potentially be a very important element of funding for large district heating schemes. We would urge the Government to look beyond the immediate issue of Renewable Heat tariffs and seek additional ways of enabling public and private sector bodies to borrow large sums (hundreds of millions or billions of pounds) to projects investing in heating schemes that can compete with established systems based on distributed gas, where the investment has already been made in the distribution infrastructure.

We are also interested in projects involving biogas (including gas from source-separated solid biowastes) and treatment of mixed wastes (such as Municipal Solid Waste (MSW)) to generate Secondary Recovered Fuels (SRFs) (that are mainly deemed to consist of 50% renewable material under the Renewables Obligation (RO)). This is essential in turn for developing the “zero waste” or “resource efficient” economy that is fundamental to developing the “low carbon economy”.


Although, in a supplementary Impact Assessment of the RHI, the Government estimates likely costs to energy consumers, and, in the consultation document, proposes a number of financing models, it does not make explicit how funds will be raised for the RHI and therefore what constraints there will be on funding. This is important because delays or limits on the amount of funding available could seriously constrain the operation of the RHI. The consultation document (only) partly acknowledges the challenge of accommodating within the same incentive scheme every level of intervention from small (domestic)-scale heating to large scale district heating (DH) schemes. However it does not deal with possible duplication, for example subsidising solar thermal panels in an area earmarked for district heating.

Lessons may be learnt from the operation of the Renewables Obligation (RO) to avoid or mitigate unforeseen or even perverse outcomes. The benefits (as reduced overall CO2e emissions) of providing a significant financial incentive for large scale DH schemes, drawing heat from a number of sources only some of which may be renewable, may greatly outweigh the direct gains from using renewable energy sources. However a large Combined Heat & Power (CHP) scheme using imported wood as “dedicated energy crops” will already receive a very substantial subsidy through the RO. The RO incentivises generation of electricity and not heat, potentially to overall detriment to the thermodynamic efficiency of conversion of fuel to energy. However the RHI could be an opportunity to subsidise district heating systems as opposed to just the sources of heat that will feed into such systems. (This would require further guidance about the degree or proportion of ownership of a system required for different organizations feeding heat into a DH scheme). This might be achieved by allowing the subsidy to go beyond strictly renewable heat and apply to a system drawing from both renewable and “non-renewable” heat sources. Widening the subsidy to promote more efficient use of non-renewable heat would bring forward large scale projects increasing substantially the percentage of renewable energy generated. Estimates would be then needed of renewable heat to satisfy the monitoring requirements for the Government’s renewable energy targets.

Cooling should be supported through the RHI in some circumstances:

•It would help to balance demand for district heating systems (e.g. heat in winter, cooling in summer) and allow cooling (e.g. of data centres) to be part of base load to reduce seasonality of demand•The thermal efficiency of homes and buildings is being progressively improved but less attention has been given for the need for cooling (the Decent Homes Standard does not include cooling) •Heat pumps have significant potential to provide low carbon cooling, especially for vulnerable residents (e.g. in residential homes) and organisations, particularly in relation to anticipated higher Summer temperatures owing to climate change.

The potential to combine financial incentives for renewable technologies (e.g. community owned wind turbines) with heat pumps could further incentivise uptake and reduce emissions associated with heat pumps, particularly for off-gas communities.

Feed-in Tariffs proposed for Anaerobic Digestion (AD) are higher for electricity production (11.5p/kWh over 20 years) than for heat generated (proposed 5.5p/kWh over 10 years for on-site combustion, and 4p/kWh for biomethane injection). This would encourage electricity generation from AD, which is a less efficient use of biogas than heat production (whether through local distributed heat systems or biomethane injection into grid). AD also offers considerable potential as a transport fuel (arguably providing more environmental benefits than through generation of power though CHP and injection of gas into the grid). The financial incentives developed for AD in particular should reflect the highest/most efficient utilisation of the fuel.

Question: Q01

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It is easiest to envisage a pot of money funded through a levy on fossil fuel bills, with disbursements made by publicly accountable bodies with targets, independent moderation and frequent reviews. This levy could automatically exempt those classified as the ‘priority group’ of vulnerable people through CERT and the successor to CERT, therefore avoiding impact on households in fuel poverty. The RHI needs to be designed specifically to reduce the administrative overhead whilst monitoring expenditure and gathering information about the effectiveness of the subsidy.

Any proposed payments in the form of loans to be paid back through future savings in energy costs must take into account the fact that savings may not be easy to identify against future steep increases in energy costs. This may limit the popularity of “Pay as you Save” schemes, unless they can be administered through customer agreement with fossil fuel companies (e.g. no capital cost to households, who would receive savings on their bills – tied to the house and with a fixed price bill protected through a contract from increasing fossil fuel prices – once the technology was paid back?)

In order to “de-risk” future investments, a floor value must be established for the value of RHI subsidies in the medium and long term. The greater certainty the Government can establish for future pricing, the greater the likelihood of timely and substantial investments being made in projects with a long-term (20-50 year) horizon.

Question: Q02

We endorse the general approach. However attention should be given to the definition of the “owner” in relation to DH schemes, where a system may be fed by a number of different heat sources, as under Q1 above.

We support a scheme of accreditation of installers of small scale renewable schemes. Certification would then be understood as official endorsement of installers, raising questions of oversight (of quality of work) and liability. Reverting to a single payment as a subsidy on commissioning would be administratively far less onerous and complicated than the “self-certification” scheme proposed.

A medium-term service contract for, say, 5 years from commissioning could be made a requirement of a subsidy (increasing the likelihood that installers will provide equipment that will not break down or fall into disuse). Then, if necessary, accredited installers could be made responsible for reporting any “leakage”. The number of owners failing to maintain their equipment would be small in relation to the scheme as a whole. It should be subject to audit in any event.

Question: Q03

Yes.

AgreeQuestion: Q04

Yes.

AgreeQuestion: Q05

The proposed approach seems sound, except that cooling should be eligible, and biogas should be incentivised according to efficiency and environmental impact

AgreeQuestion: Q07

The proposed approach on bioliquids seems sound. We are not aware of other bioliquids that are used in domestic heating boilers.

AgreeQuestion: Q08

Government should take a pragmatic approach to emissions standards for small scale biomass boilers, and allow for permitted emissions limits to be reviewed (and reduced in the future) in the light of the performance of the best available technology. This would provide an incentive for manufacturers to improve the performance of their equipment.

Question: Q09

Yes.

Private landlords should be able to claim RHI but this should be absolutely conditional on their properties being insulated to specified high standards (including solid wall insulation). The private rented sector has some of the least energy efficient housing in the UK and the greatest proportion of non-decent homes and there are schemes in place to help landlords improve the condition of their properties e.g. LESA and CERT.

Guidance on improving the energy efficiency of buildings and properties in order to access RHI or FITs should also refer to key measures available to improve the adaptation/resilience of the buildings.


22 June 2010 Page 1063 of 1348

The RHI could be structured to encourage energy efficiency through the tariff structure as indicated, provided that owners also had access to information that would enable them to upgrade their buildings to the required standard. For small installations, this information could be signposted through accredited installers.

In relation to new-build homes, offices and other buildings, the Government could notify at an early stage that, from a certain date, new buildings must comply with specified standards of energy efficiency in order to qualify for a RHI subsidy.

Guidance on improving the energy efficiency of buildings and properties in order to access RHI or FITs should also refer to key measures available to improve the adaptation/resilience of the buildings.

Question: Q11

The proposed approach is pragmatic and not unduly onerous. Metering of medium-sized as well as small installations would be unduly expensive in many cases and could, as indicated, provide a perverse incentive to generate more heat than needed. However there are some problems with the practicalities of deeming, given that most small and medium scale installations will use heat from fossil fuels (usually gas) to supplement the renewable heat source (especially in Winter) and provide cover for down time. The “heat load” will depend heavily on how the building heating system is operated – i.e. user behaviour – and not solely on the design and capacity of the system and the SAP Rating. The smaller the installation the more the Government may need to accept that its estimates of “deemed heat demand” will rely heavily on generic information about types of installation and assumptions about mean behaviour.

Question: Q12

We agree with the approach in principle. However we don’t have practical experience of heat meters, so we are unable to comment on the practicalities. Monitoring a DH system taking heat from both renewable and non-renewable sources would presumably require heat to be measured both at the generator and the user – source and load.

Question: Q14

Under Q1 above, we pointed out that large-scale biomass CHP will already receive a large subsidy from the RO, so may not need significant additional incentivisation. However getting the capital investment for a large DH scheme that might include biomass CHP as one of a number of heat sources may require a significant subsidy through a RHI.

Question: Q15

We believe the most environmentally advantageous use of biogas is as a road fuel. The Government may, as a separate issue, wish to review the Renewable Transport Fuels Obligation in the light of this. Next to this, direct injection into the grid provides arguably more flexibility for distributed heat than CHP. CHP may be generated from biomethane or syngas from both renewable and non-renewable sources, especially as energy from waste. The same argument applies as above for DH, that the subsidy should be directed to the distribution system as well and not to the generator per se, and that it should be used to incentivise more efficient use of heat generated from non-renewable as well as renewable sources. Probably a ROC subsidy provides most of the incentive needed to develop CHP.

Question: Q16

Our responses to Questions 3 (single payments for small-scale schemes) and 13 ( heat load with mixed heat sources) refer.

Cooling should be eligible at the same rate as heating e.g. for heat pumps and district heating systems, and financial incentives for biogas should be incentivised according to efficiency and environmental impact. The RHI tariff and lifetimes should be at least equal to FIT for biogas.

You could also consider re-banding:

•Heat pumps that are combined with renewable electricity generation to reduce overall carbon impact.•Community scale biomass boilers to incentivise more efficient uptake of the technology. Community level biomass boilers have a number of advantages including reducing capital costs and storage space for individual households and reducing transport emissions associated with delivering biomass on a house-by-house basis. Under the current proposal, there would be better incentives for individual households/units to apply for RHIs individually as opposed to supporting improved carbon efficiency through a scaled up system.

Question: Q18

Co-firing renewable fuel (such as Secondary Recovered Fuel) with fossil fuel is technically feasible and should not be eliminated – even though different emissions monitoring standards may, in practice, reduce the likelihood of this taking place. Although allowing the use of mixed fuel may, on the face of it, make monitoring more difficult, in practice generic assumptions about the proportion of renewables in a given mix may be made, with the onus on the generator to demonstrate that their fuel mix contains more renewable material than assumed. A similar approach is allowed under the RO concerning the proportion of renewable material in residual municipal waste.

Question: Q19

Definitely. Refer to our responses to questions 1, 16 and 19 above.

AgreeQuestion: Q20

22 June 2010 Page 1064 of 1348

An uplift should be available to all eligible DH networks. There is no reason why networks connecting one or a small number of large external heat users should not be eligible for an uplift, provided that the owner can demonstrate that he has thereby replaced heat that would otherwise have been generated using fossil fuels with heat generated from renewable fuel. Making an uplift available to small numbers of heat users would promote symbiotic developments and increase investment in industry. However there is a strong case for differentiating between schemes that pipe heat (as hot water) to heat commercial and residential premises, that should benefit from the largest possible uplift, and schemes that pipe steam to industrial processes, that could be incentivised with a smaller subsidy.

Question: Q21

Yes and yes, for the reasons given in the consultation document.

Question: Q22

Yes

AgreeQuestion: Q23

These issues can be dealt with at periodic reviews of the RHI where tariffs may be revised and new tariffs introduced (subject to Q22 above). Reviews will also provide opportunities to address unintended consequences.

Public sector/energy companies (either separately or in partnership) could develop national or regional framework agreements for technologies based on assessment of heat mapping (e.g. the North East region has just put a renewable and low-carbon energy capacity assessment out to tender).

Question: Q24

See response to Q24.

Question: Q25

Yes

AgreeQuestion: Q26

Lack of prospective investment in large DH schemes.

Question: Q27

An early and clear cut-off date for projects ineligible for RHI support is helpful. This minimises the time during which projects may be delayed owing to prospective support not yet being available.

Question: Q28

The effect of RHI support on large-scale CHP schemes that already receive a substantial subsidy from the RO will have to be considered and then monitored carefully, as levels of support for long term projects will (rightly) be fixed for the duration of projects. Relying solely on the RO subsidy would tend to make owners operate plant to maximise electricity generation, at overall less thermodynamic (and carbon) efficiency than when heat output is greater. On the whole, a constant heat load throughout the year is preferred by schemes like this, hence the question about incentivising schemes with a small number of large scale heat users. The most important question is how to incentivise district heating systems, which will give for the most efficient possible use of heat, but with a substantial annual variation in heat load, and therefore less than optimal from the point of view of the heat provider. Including cooling would reduce the annual variation in demand for district heating systems, particularly where there is a constant cooling demand e.g. data centres. Directing the subsidy to the owner of the distribution system and making it available also for non-renewable heat (with a specified minimum proportion of renewable heat) may be a way of achieving the right balance between incentivising investment and possible abuse of support.There is more incentive for individual households/units to apply for RHI individually for biomass boilers as opposed to improving efficiency by scaling up a system to a community scheme. This would have consequences in terms of transport emissions from delivering biomass on a house-by-house basis and would also be more expensive for the scheme than re-banding community level biomass technology support.

Question: Q29

570 Jones Nash Ltd Installer

22 June 2010 Page 1065 of 1348

There should be a facility that will allow companies like ourselves who never needed MCS previously (until the goalposts were moved) a period of grace and allow our installation to be part of the RHI. Installer and product certification can take time. We and our boiler company are going through the process but this ruling basically puts us out of business for no fault of our own, until products and we are certified. We were not aware of the changes from 45kW to 300kW for MCS until the consultation document was published last month, we started the MCS process on learning of this change.We have orders placed, equipment ordered, deposits paid and staff scheduled for work. No customers now will want any installations that won’t qualify for the RHI and will postpone or cancel these orders.A simple way is to allow the installations to come under the RHI, but only if we and the boiler manufacturer become accredited by a certain date in the future.Other companies who in the past have only installed larger systems [will face the same predicament]. It seems we are being penalised due to the changing of the rules which we knew nothing about till last month.

Question: Q05

571 Underfloor Heating Manufacturers Association Trade Association

Renewable energy is perceived by many as accessible only to the rich, whilst initial capital outlay rules out the poor.

UHMA agrees in principle to the RHI proposal, if financially viable for all.

UHMA further believes that potentially, RHI could dramatically increase the number of properties utilising renewable technologies, which at present would not be considered for change.However the fundamental objective to increase efficiency, resulting in reduced fuel usage and decreasing carbon emissions, can be heavily influenced by the emitting element of the heating system.

As experienced in past efficiency schemes such as the replacement of Conventional boilers with Condensing boilers, the room heat emitting system if not designed to maximise potential of the primary heat source, can result in a significant reduction in expectant efficiency i.e. boilers not running in Condensing mode or with Heat pumps operating with a reduction in C.O.P. Underfloor Heating has long been recognised as producing the optimum level of emitter efficiencies, due to the 50-60% Radiant element of heat output producing the same comfort levels at reduced operative air temperatures.

The UFH system characteristics reveal further potential when connected to renewable technologies requiring low flow temperatures such as heat pumps, Underfloor Heating utilises large active surface areas and reduced air temperatures, which in turn requires very low flow temperatures.

Response times can be immediate, as the lower flow temperature preferred by the heat pump provides a more constant input of energy. The small differential between air and emitting surface “self regulates” perceived comfort, as internal air temperatures rise, influenced by numbers of people or solar gain, the output naturally decreases as the differential reduces.

An underfloor heating system designed to suit its renewable heat source, can produce up to 30% gains in efficiency over other heat emitters, and for this reason and its general recognition as in the documents below, UHMA members strongly recommend that underfloor heating systems are included in the RHI scheme, and that the combination of renewable energy sources with underfloor heating attracts a premium financial reward to reflect its increased energy efficiency merits.

SAPEuray EPBD studyprEN 15316-2-1:2005 (E) Table A.1 - Heat emission efficiency, ηem

Question: Q18

572 ZeroC Installer

We note that no such loans seem to be available yet for the feed-in tariff, which has already begun. Is there anything that can be done to encourage an increase in availability of loans? These loans will be vital, as developers will want to avoid tying up their capital for many years (even as little as 8, as suggested). One thing that is required is that developers need to be able to secure loans against RHI payments. Since it appears that there will be a need for ongoing monitoring of the systems to keep receiving the RHI payments, banks may be more happy to give out loans to developers who retain ownership of the equipment, and can therefore guarantee the ongoing payments. This appears to be a strong argument for communal systems, and therefore district heating schemes (see below).

Question: Q02

No specific comment, but we note that it is very hard to get biomass heating to work in London due to its smoke control zones.

Question: Q09

A very pertinent question. Though not relevant to us (we build to high standards), there seems little that can be done to stop developers reducing energy efficiency standards to increase their return on investment on the renewable heat equipment. The maximum allowable element u-values in Part L will provide a minimum performance.

Question: Q11

22 June 2010 Page 1066 of 1348

AgreeQuestion: Q12

Yes, though SAP is not as accurate as proper heat-loss calculations for determining real-world heat loads.

AgreeQuestion: Q13

For new systems, the BS EN 1434 standard suggested seems sensible. We believe that this criterion should be more lenient for installations completed between July 2009 and the date at which the final requirement is published.

Question: Q14

See extra info in email




Seems Sensible.

Question: Q18







Yes.

Question: Q22

Yes. We also feel that allowing the price of heat sold to third parties to be free is a good idea – it will allow us to be flexible in how the added value of biomass heating is passed on to house buyers.

AgreeQuestion: Q23

AgreeQuestion: Q26

Over the last few years, we have taken a lead in the deployment of renewable heat to hit (mostly voluntarily-imposed) high Code for Sustainable Homes levels. In doing so, we have helped to stimulate the market for such systems, and taken risks with non-standard technology. We feel that any reward for doing so would be well-placed, and therefore would support an extension of payments to systems installed before 15th July 2009.

Grants: Although there is no question connected to the issue of grants, we feel that a comment is warranted. It is stated that domestic installations will not be required to pay back any grant money should the RHI be claimed. We would appreciate further clarity on other measures – for example bio-energy grants used by developers to install biomass heating in domestic properties.


573 Consulting With Purpose (CWP) Consultancy

role of suppliers, SAP (deeming)


22 June 2010 Page 1067 of 1348

The scheme is well designed, a welcome move away from fiscal support of the installation to a tariff based scheme supporting operating systems, installed to MCS standards. Protecting customers and supporting well maintained and operating technologies.

While we appreciate that the RHI is designed to enable the uptake of new energy production above and beyond what is already being installed, it is important to emphasise that Suppliers can provide a major contribution, to capitalising the upfront costs of projects – without financial penalties to the end user or landlords (i.e. loss of RHI support) which no other financial stimulus package can achieve. This is important in areas where financing of any scheme reduces the value of the RHI by virtue of requiring a payback, in the form of loans or reduction in the RHI production value.

Installation of technologies, such as biomass district heating or community ground source heat networks, for hard to deliver and priority group buildings fall into this category if there are minimal financial penalties in terms of long term RHI support.

While the issues of state aid are complex and will require negotiation with the commission, it is our opinion that the likes of Supplier obligated saving should fall outside of the state aid rules as they do not single out any specific forms of Carbon Dioxide saving mechanisms from energy production or generation (i.e. electricity). This ensures that the essences of state aid creating market distortions is limited only by the economic and technical viability of the technologies to deliver heat at the specific site.

Ensuring that these remain separate will enable the Suppliers to support heat networks, gain their carbon dioxide savings and create the governments democratised energy culture within fuel poverty communities, which is highlighted on page 18 as being a priority.

CWP have found, through experience of working on a CERT Biomass Community Heating programme with SSE, that the narrow CERT funding window stopped millions of pounds and hundreds of thousands of tonnes of carbon being achieved. It is therefore critical that for Supplier funding to play its part there has to be longer or even open ended time periods for the schemes to be delivered.

Question: Q01

While Bank of England interest rates are very low, other lending rates are not. We believe that the effects of increased and uncertain interest rates over time may cause the uptake of RHI projects to falter if they rely on this kind of financial stimulus. With the RHI rate of return set at 12% (6% for Solar Thermal) over the life of the technology (in relation to the RHI banding), we believe there is little margin for returns on investment and extraction of investment capital for those that are risk adverse. While there may be initially many that might accept a rent-a-roof (or house) scenario as being attractive, it is less clear how that will develop as RHI contribution to the householder or business reduces.

These mechanisms also only favour those that are prepared to take additional financial dept on their building (domestic or commercial). While it is anticipated that the debt will stay with the building it is unclear whether the next incumbent will be prepared to accept the debt and how this would be handled. Would the premise that fossil fuel price increase off set the fears is unanswered at present and would probably be less of an issue over the short term where fuel prices are uncertain.

For those with large commercial buildings the dilapidation clauses in some contracts could cause issues in long term financing of large projects, especially for retrofit where the buildings may already have been in operation for a number of years and the life of the banded technology falls outside the life of the building (typically 25 years).

It is worth noting that the RE-Charge scheme in Kirklees Council is successful, and the methodology could be replicated across ESTACs and Local Authorities (or similar).

RDA’s could also play a role in supporting their regional installer base and fuel supply infrastructures (Biomass). The on-site renewables sector could be a cornerstone of regional green economies, as it plays a much wider role in developing Regional skills and employment opportunities, securing inward & regional investment.

Question: Q02

It is encouraging that all recipients of RHI will be kept on a central database, regardless of size. Currently it is difficult to assess the volume of installations being undertaken across technologies in the UK, which in turn makes it more difficult to assess progress towards national targets (be it carbon reduction or installed capacity). The RHI central register will provide a much clearer national picture of renewable heat installed.

The registration approach across installation scales is very pragmatic and it makes sense that the small-medium sized generators register through the MCS mechanism.

The inclusion of maintenance requirements are particular welcome as this introduces a long term quality assurance element to the RHI. It is a huge move away from previous grant schemes and support mechanisms which only applied up to the commissioning stage. There was no scheme involvement in the on-going operation of the plant. This is considered a great advantage of a tariff based scheme, in that on-going payments are directly linked with the heat technology still operating optimally.

AgreeQuestion: Q03

22 June 2010 Page 1068 of 1348

We applaud the governments support for quality installations and products through the RHI and this should be extended to also cover bioenergy (solid biofuels, liquid and bio-gaseous fuels).

Protecting the consumer and providing credibility to the installed products is vitally important and the government is encouraged to be firm and stand by their original premise of an EN45011 MCS scheme for both products and installers. The MCS requires companies to demonstrate that they can install the equipment to the required installation standards, have a company Quality Management System and that the products are accredited in a robust and verifiable way. The industry is already aware of installations that are not up to scratch and it is a concern that any watering down of the scheme could lead to issues as experienced by the Australian scheme .

MCS is the only scheme that provides customers with performance data for the system prior to the installation. This ensures that customers can monitor whether the installation meets its performance claims. If the system doesn’t then the certification process can review what the issues are and take appropriate actions.

http://www.theaustralian.com.au/news/opinion/bad-likely-to-get-worse-for-minister/story-e6frg6zo-1225833212109

AgreeQuestion: Q04

We would encourage the government to ensure MCS covers the technology kW rating, as a minimum up to the deemed value and possibly higher. This emphasis should be reinforced well in advance of the April 2011 deadline to ensure that transitional arrangements are minimised.

The Industry has to understand that they have to shoulder the responsibility of providing auditable and verifiable products and services. Leaving an organisations certification until the RHI values are announced, as happened with the FIT, creates a lot of unnecessary pressure and confusion.

The 45kW thermal target is relatively low, particularly when looking at the public (including community) and private sector. The MCS provides a robust quality assurance scheme for both the industry and end-users. This assurance is equally crucial for installations above the current 45kW thermal limit.

AgreeQuestion: Q05

MCS has developed the standards and scheme documents using all available British, European and International standards where they are available. At present we only know of one equivalent product scheme and that is Solar Keymark for on-roof solar thermal collectors.

Question 6 should be re-scoped in its question. The question should be - Are there other certification schemes equivalent to the MCS? There is confusion between certification and the underlying standards that the certification scheme verifies itself against.

To ensure that trade barriers are avoided any scheme that is equivalent would need to demonstrate to the RHI that it can be verified as being equivalent and can be operated across borders.

Qualicert a Europe wide FP7 project to establish certification of skills, as required by the REDD. MCS already enables this process through the EN45011 and EN17025 certification routes and is capable of incorporating into the scheme competency requirements to meet the REDD requirements as and when they are finalised.

Having had discussion at great length with both installers, manufacturers, non MCS installers and the likes of NHBC, we are concerned that while some installations are carried out to an exceptionally high standard it cannot be said for all. CWP would therefore support the continued requirement for all installers to be either MCS certificated installer companies or that they work as sub-contractors for an MCS accredited organisation which is responsible to the client.

Having organisations that can commission others work, will in our view leave the client in potential difficulties if the installer company or an individual is not MCS certificated.

Question: Q06

We would suggest that for larger scale cooling plant, that incorporates absorption chillers based on dedicated biomass, should be included in the RHI. It is not always desirable to only use chilling from CHP or trigen as this leads to large amounts of wasted heat / cooling, which is contrary to sustainable resource utilisation. The consultation also looks to avoid the need for CHPQA in the RHI as this could have an adverse affect on resource utilisation.

We take the point that non-dedicated and secondary heating would be difficult to establish the benefits from. However, where a dedicated biomass stove or cooking appliance with a hot water jacket or back boiler can demonstrate it is covering the full heating load, we would suggest that this is acceptable for domestic settings and is deemed. If there is some concern over the amount of use this could be compensated for in the deemed value (see also our response to question 12)

AgreeQuestion: Q07

22 June 2010 Page 1069 of 1348

CWP fully supports the need to manage air quality, but would make the comment that 20MW is a substantial sized plant. Defra have argued in the past that there should be a blanket value for air quality from biomass plant across the whole of England and Wales. It is important that any such emissions limits are appropriate to the area that the systems are being installed and the technologies are available to provide the consumer with choice during the transition. It would be disappointing if there was a reduction in installed capacity in areas with no danger of having air quality issues, as a result of the perceived fears that solid biofuels are going to bring back the days of smog.

We appreciate that there are differences in the methodologies used for measuring dust particles (PM10 and PM2.5) and that a common consensus is unlikely at present through the standards development process. CWP would however urge the government to carefully consider which methodologies are deemed to be appropriate and what the correction factors could look like. It would be unfortunate if the UK where to be far exceeding other European countries requirements for emissions values just because we had a different methodology without justification for doing so.

AgreeQuestion: Q09

Energy efficiency is of prime consideration tops the generation of renewable heat in the energy hierarchy. It is therefore important to encourage it in any Government run scheme. There are already a number of regulations and schemes in place focussed solely on improving the energy efficiency of the UK building stock, be it ESTAC’s, CERT, Building Regulations to the Energy Performance of Buildings Directive. Energy efficiency issues need to be enforced more rigorously under those auspices, rather than putting an additional burden on the RHI to enforce it on behalf of other strategic requirements.

CWP therefore supports the encouragement of energy efficiency through the scheme, providing it does not place an additional administrative burden on the operations of the RHI.


Building control and implementation of Part L requirements need to be more consistently enforced and prosecutions brought against non-compliances. This rarely occurs in the UK at the moment, a cultural shift towards enforcing regulations would be welcome and effective.

Question: Q11

We would suggest that the ability to meter is left flexible for small to medium sized properties and there be a requirement to demonstrate that the property is a main residence of being used for a good proportion of the time, otherwise those that have high heat demands due to property type or residents, such as the elderly could be penalised and conversely for those that install heating systems in the likes of holiday cottages could be claiming deemed RHI without actually using the heat. The latter stimulated grants in Austria for many systems in were rarely used.

It is difficult to provide a compatibility between deeming and over/under-estimation, perhaps an annual declaration could be used to provide reassurance that the systems were being utilised effectively.

AgreeQuestion: Q12

All on-site renewable energy projects being installed by MCS accredited installers are required to provide clients with an estimate of annual energy performance of the technology using the SAP methodology. This estimate is communicated to the client before any contract is awarded and could be used for deeming at no extra cost to the industry, as it already forms a part of the design requirements to the installer.

There could be an alternative way to provide deeming for existing properties and that would be to allow a 3 or 5 year period of energy bills to be used as evidence to deem against. This would allow for properties that do not meet the stereotypical building not to be penalised from using standard values.

Otherwise, In retrofit scenarios our concern would be that SAP and SBEM calculations may prove too complex, time consuming and ultimately off-putting for potential project owners at the small/medium scale.

Whatever variant of these methodologies is employed it should be simplified and standardised in order to provide project owners with a quick and reliable estimate of the RHI tariff payments they can expect to receive and to ensure that the outcome of the calculations is consistent no matter which installer has undertaken them. Again bearing in mind that a SAP performance figure is already supplied to MCS installed projects.

AgreeQuestion: Q13

Metering is the best approach and we would tend to agree that the risk of over generation will be low. A robust auditing system could help to mitigate this.

Question: Q14

No CWP data available

Question: Q15


Question: Q16

22 June 2010 Page 1070 of 1348


Question: Q17

The proposed 12% rate of return for most technologies is a pragmatic approach.

The tariffs around solid biomass assume a level playing field across all fuel stocks when in fact significant price differences exist. Although it would be good to see a higher tariff available for wood pellet fired systems at small/medium scale we accept that this might add an extra level of complexity to the scheme.

The tariff banding for solid biomass heat appears to be a cliff edge between below 500kW and above 500kW. We would suggest a smoother transition in the banding to support the increased use of community and small scale district heating.

Lifetime of Solid Biomass systems

We understand the need to control the lifetime of RHI support, however, solid biomass boilers are already given a 30 year life under CERT and we suggest that support mechanisms are harmonised.

Question: Q18

RHI with back-up fossil fuel systems

We understand that the government are minded to not provide RHI for biomass systems with fixed fossil fuel back-up systems. While we understand the need to avoid installations that do not run on the intended renewable fuel, we would also point out that many of the landlords, such as ALMO, who have vulnerable tenants are unwilling to leave them without an alternative back-up. We would suggest that a temporary alternative such as a container plug and play system could provide reassurance to the landlord while meeting the government’s objectives.

Question: Q19

District heating provides resource savings which are not linear and therefore are of greater benefit than lots of smaller systems. We would also point to the ability to support air quality reductions by providing appropriately sized plant serving larger networks.

AgreeQuestion: Q20

The case-by-case basis for DHN should be used, however, rather than simply looking at the current boiler to be installed, which could limit the opportunities of the network, the support should be viewed in relation to the potential in the area and how that could be achieved. Some networks may start of as waste heat but expand into supporting other infrastructure and developments with renewable technologies because the initial stimulus is in place. The additional support requirements for extensions could then be viewed in light of additional needs.

Question: Q21

Offering fully fixed tariffs will offer project developers’ the degree of certainty they require and prevent the RHI from becoming complex and unwieldy to administer.

Question: Q22

We agree that degression should be built into the scheme, not least to encourage industry to work towards driving technology down.

AgreeQuestion: Q23

In principle this system would work, however, it would also have to include for instance the developments that are coming through for solid biomass small scale systems where there is likely to be heat lead micro CHP (Heat element) available shortly and direct fired water accumulators. These could be included in the solid biomass RHI support streams.

AgreeQuestion: Q24

A review should be held on the cost reduction of products and services in real terms to the pasted on cost savings by the product and installer companies.

Question: Q25

We agree to the proposal to begin the first review in 2013 but not to effect any change until 2014/15.

AgreeQuestion: Q26

A sharp rise in interest rates could have a negative impact on the rate of return for investors in ESCo or ‘Rent-a-Roof’ scenarios. If these companies went into liquidation who would own the asset then?

Question: Q27

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It is unfair to exclude projects installed prior to 15 July 2009 from the RHI.In spite of having received grants to fund their installations there is no way that these early adopters can expect to see the sort of return on their investment that will be experienced by those eligible for the RHI.

This is a slap in the face for innovation and trail-blazing and the government should seek to build a stronger evidence base before ruling these projects out of the RHI.The impact of the RHI on biomass fuel prices should also be considered. Rising fuel prices would leave early adopters at a significant disadvantage.

Question: Q28

The scope for abuse of RHI support is very limited and we agree that there is little likelihood of project developers installing and then not using their renewable heat plant. A system of signed declarations is a good approach and we would suggest that for smaller generators, proof of annual maintenance checks or fuel supply invoices are also submitted as evidence. Although it makes sense to appoint Ofgem as the administrator for the scheme. We would hope that the systems for monitoring, auditing and complying with the RHI and the accompanying written guidance are suitably pitched for small generators who will be very different from the large scale heat and power generators and energy professionals that Ofgem is used to dealing with.

Question: Q29

574 National Grid Private Company

Biomethane to grid


1.National Grid welcomes the Government’s proposals to support the development of renewable heat by the introduction of a Renewable Heat Incentive, and believe this is a very positive step toward addressing climate change. We have focused our response on issues relating to biomethane injection, however we agree with DECC that there is no single solution, and that all technologies that can effectively and efficiently contribute to meeting the challenge should be supported. In this context we believe that the level of the subsidies should take some account of the relative impact that the technology will have on the government’s targets for renewable energy. 2.When compared to the use of biogas to generate electricity, biomethane injection into the gas grid represents a more efficient use of the biomass resource; it can make more than twice the contribution to renewable energy targets than creating electricity alone, and through the utilisation of an existing world class energy infrastructure, we believe that it can provide the best long term economic efficiency and greatest contribution to carbon abatement. Further, biomethane production and injection has the least impact on the consumer and the least reliance on consumer actions. 3.However, we believe that the current proposed RHI tariff level is not sufficient to stimulate the development of the biomethane injection opportunity. From our analysis we believe the figure needs to be in the order of 5p/kWh for large plant up to 9.5p/kWh for small plant. We would welcome the opportunity to continue to engage with DECC as it further develops its proposals for biomethane injection.


Yes to deeming, No to minimum energy efficiency standards as a condition for benefiting from RHI support

Comments: See main response, pages 3 and 4

Deeming, additional infoQuestion: Q10

See attached documents.


See main response, pp4ff


Yes

Comments: We believe that it is essential that the RHI tariff for biomethane injection is fully fixed (plus inflation) to provide the necessary assurance to project developers who will be looking for certainty in relation to project income before committing to invest. For the same reason, we believe that the biomethane tariff should be calculated taking account of current wholesale gas prices rather than (by definition uncertain) estimates of future wholesale gas prices.


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Yes

Comments: We agree with DECC that, at least initially, the significant uncertainties in costs and take-up of renewable heat technologies would mean that the application of degression would risk the successful launch of the RHI, particularly in view of the challenging renewable energy targets for 2020 and the scale of annual growth in renewable heat that is required.

Question: Q23

Yes

Comments: Please see our comments on thermal gasification on p10 of our main response. In addition, we believe that thermal gasification will be a key enabling technology in relation to the further development of biomethane production (and biofuels production in general), and so consideration should be given to providing capital grants for development and demonstration of gasification projects.

Agree, additional infoQuestion: Q24

Yes

AgreeQuestion: Q26

An emergency review might be justifiable if it becomes clear that the capital or operating costs, revenues or other assumptions on which a particular tariff has been set are so far from being correct that there is no or very limited take-up of the renewable heat technology, such that not to have an emergency review would result in wasting the three years prior to the normal initial review.

Question: Q27

575 Kensa Engineering Ltd Manufacturer

It seems unfair to exclude the early adopters of renewable heat technology who had the foresight to install systems prior to July 15 2009. One of the challenges for the RHI is promoting the scheme to potential recipients and this community of pioneers would be best-placed to publicise the advantages of their installations. The cost of including these additional sites would be modest. Without a policy change, it is likely that many of these early installations will be removed and replaced, thereby qualifying for an RHI payment.


If metering is to be discounted for smaller installations for the reasons quoted in the Consultation Document, some theoretical methodology is required. Relying on SAP is not recommended since the process is too imprecise and there will be an inevitable pressure on assessors to deliver the highest possible energy consumption figure. Further, it will penalise anybody who insulates beyond base requirements. Instead, a look-up table should be employed . The example table included in Annex 2 needs to be revised to reflect a wider selection of house types (particularly larger properties) and a more sophisticated assumption for domestic hot water consumption (it is too crude to assume consumption is consistent across all house types). In addition, a separate table is required for new build properties; otherwise, their actual performance will be far better than the deemed figure and the RHI recipient will receive an excessive payment.


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Disagree.

It is critical that the installed cost assumptions are accurate and the subsequent calculation methodology is robust enough to produce sensible tariffs. It is essential that the RHI does not favour any technology particularly since the proposal to delay administering any revisions until 2013 could result in unfortunate consequences.For heat pumps, the Capital Cost ranges included in the UK Renewable Heat Supply Curve (July 2009) document appear reasonable even if the source material appears somewhat incomplete. It is recommended that DECC source authoritative data from both the Energy Savings Trust and BRE who, having administered the LCBP, have a substantial volume of cost information for all technologies for installations up to 45kw. In addition, they will have data for a limited number of larger installations since the upper output threshold for LCBP2 application was raised in mid-2009.the cost of supplying an air source or ground source heat pump should be very similar. As a consequence, it is clear that the total cost of the ground source installation, including the ground array, will always be higher. In some instances, for examples projects featuring boreholes and low output heat pumps, the ground array cost will exceed the cost of the appliance. [Examples provided.]for ground source heat pumps, there will be a disparity in cost between appliances linked to Slinkies (installed in a horizontal trench) and probes (installed in a borehole). Where space is available, Slinkies are a far more economic solution; that said, for the vast majority of installations, boreholes are the only choice. For this reason, it is recommended that the tariffs are refined to provide a separate figure for each of the two ground array options. The precise differential should be used after studying data received from EST/BRE. Most LCBP2 projects will feature boreholes although many will reflect discounted costs given installations will be performed in neighbouring properties.the air source heat pump industry has never been able to claim that their technology is more efficient, more durable, or less obtrusive and their major selling point has been the lower cost. This does not appear to have been reflected in the RHI tariffs. Right now, the Capital Cost figure for air source heat pumps appears very high. [Example provided.]

[See consultation response for extract from CLG's 'Code for Sustainable Homes: A Cost Review' (March 2010), showing installed cost info for ASHPs.]

The use of a single point – the 50th percentile – to determine the assumed capital cost appears somewhat crude particularly given the weak quality of the source data.The influence of the assumed efficiency of the heat pump on the tariff also means that a consistent approach should be adopted. Right now, in SAP2009, GSHP’s are given an assumed efficiency of 320% in space heating mode if linked to underfloor heating. There are efficiency adjustments (reductions) if the heat pump is to be used with radiators or if it also provides domestic hot water (to reflect the higher output temperatures). ASHP’s are treated in a similar fashion with an initial assumed efficiency of 250% in space heating mode (with UFH). Ignoring the apparent absurdity of rewarding less efficient technologies with a higher tariff (to prompt demand when the running cost savings against gas are modest), it is important that the efficiencies used in the ‘Tariff Calculator’ are established using a consistent approach, with reference to the figures used in SAP. Right now, that is not the case; the GSHP efficiency at 375% for small domestic installations is too high.


Agree.

Question: Q22

The market will set the price for the technology. The trick is for DECC to develop a monitoring system which recognises any price fluctuations and reflects them swiftly in an amended RHI tariff.

Question: Q25

If the proposed tariffs are not amended to be ‘fair’ to all technologies, the market will quickly identify those technologies which are considered more financially attractive. An early opportunity to correct this slanting of the market should be available. If uncorrected, the current tariffs for small domestic ASHP/GSHP installations will favour the ASHP technology and the GSHP industry in the UK will effectively shut-down until the error is resolved.


It seems unfair to exclude the early adopters of renewable heat technology who had the foresight to install systems prior to July 15 2009. One of the challenges for the RHI is promoting the scheme to potential recipients and this community of pioneers would be best-placed to publicise the advantages of their installations. The cost of including these additional sites would be modest. Without a policy change, it is likely that many of these early installations will be removed and replaced, thereby qualifying for an RHI payment.


576 Friends of the Earth NGO

Mixed Fuels


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Friends of the Earth recognises the importance of the heat sector in our efforts to achieve national targets for emissions reductions and renewable energy. Friends of the Earth played a leading role in campaigning for the legislation contained in the Energy act 2008 to establish a renewable heat incentive. This response covers important issues around biomass sustainability and energy from waste. The absence of comment on other aspects of the scheme (such as tariff levels, proposals for deeming, or energy efficiency standards) should not be taken as an implied positive or negative comment on these proposals, but reflects temporary resource constraints within Friends of the Earth at this time which prevent us responding more fully to these proposals.

We have a number of concerns regarding current ambitions on the potential for bioenergy, and would encourage their recognition when developing policy with regard to the heat sector. The UK biomass resource is highly limited, and aspirations for bioenergy must go hand in hand with more sustainable policy on both food production and waste treatment. Current assessments of domestic bioenergy resource do not take into account the need to re-orient our system of food production which is currently a major source of greenhouse gas emissions. An emphasis on greater domestic food production, a reduction in livestock farming (but with more extensive grazing and an increase in home-grown animal feeds) and reduced energy-intensive inputs is required, which as a consequence significantly restricts the UK land area available for bioenergy. Nor should we regard biomass imports as the solution - these are likely to be highly damaging as sustainability cannot be guaranteed, especially when taking into account indirect impacts – and our aspiration should be to reduce UK’s consumption of imported biomass for all uses.

Biomass availability in the waste stream is also highly limited. Friends of the Earth supports the use of anaerobic digestion of food waste, slurries and sewage, and utilisation of clean waste wood. However, we oppose incineration, as higher greenhouse gas savings and greater resource efficiency are achievable through re-use and recycling.

Question: Q01

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Friends of the Earth is concerned about the wider sustainability implications of an increase in the area of land under cultivation for bioenergy. If energy crops are to play a significant role in meeting our heating needs this will have knock-on implications on other major land uses, notably food production. Existing and potential future incentives to bring land under energy crop production must therefore undertake a rigorous review of implications on capacity for food production and both UK and global food security.

Previous claims that bioenergy targets can be met without affecting food production appear to be based on the assumption that energy crops will be planted only on former set-aside land. However, much of former set-aside has already gone back into production since the abolishment of the set aside scheme in 2008, and because energy crops have become more economically attractive to farmers it is certainly possible that they could compete with more marginal food production such as extensive grazing, thereby increasing our dependence on imported meat and animal feeds. The market for energy crops was recognized by the European Commission when it withdrew support for energy crops, noting the “strong demand for such products on international markets” (http://europa.eu/bulletin/en/200901/p119003.htm) . Even when incentives for planting energy crops are removed it is possible that agricultural land will be used for energy crops.

Using land for energy crops, which could be otherwise used to grow food or animal feed crops could increase our reliance on overseas land, drive deforestation, and contribute significant GHG emissions. The UK requires a huge amount of overseas land to feed our own consumption, including soy to feed UK livestock. Deforestation to clear land for soy production is a significant source of GHG emissions so it does not make sense to plant energy crops if this increases our dependence on imported feeds. A more strategic approach to land use needs to be taken including a careful assessment of GHG emissions, biodiversity and food supply.

Bioliquids from crops should not be counted as sustainable renewable energy and must not be supported under the Renewable Heat Incentive. There is now a wealth of evidence that shows that biodiesel (FAME) made from crops does not meet minimum standards for ghg emissions savings and can even lead to an overall increase in ghg emissions once emissions from indirect land use change (ILUC) is taken into account. Furthermore the increase in demand for biodiesel crops leads (directly or indirectly) to deforestation as well as to negative impacts on food prices for the world’s poorest.

EU sustainability standards (as part of the Renewable Energy Directive) do not address these indirect effects and fail to ensure sustainability. The UK government is explicitly banned by EU law from passing sustainability legislation that goes beyond what is in the Renewable Energy Directive.

We disagree that any incentive should be given to the combustion of municipal waste, no matter what the ‘renewable’ content.

1.Incineration or “energy recovery” is second from bottom of the Waste Hierarchy now enshrined in EU law through the Waste Framework Directive. As such the priority for waste processing must be to move waste as far up the hierarchy as possible. Any payment that rewards the incineration of waste would contravene the principle of that law.

2.Numerous studies confirm that on a full life cycle analysis greater CO2 savings are attainable through maximisation of re-use and recycling rather than incineration, thus support for incineration under the RHI contradicts the aim of RES sustainability criteria to “prevent perverse outcomes”. See Eunomia (Consultants for Friends of the Earth), 2006, A changing climate for energy from waste?, http://www.foe.co.uk/resource/reports/changing_climate.pdf

3.It is unlikely in practice that the renewable to non-renewable content ratio of waste could be reliably and accurately predicted. Waste streams vary by season, specific date (e.g. Christmas), location and so on. Further, the quality of waste streams will evolve to increasingly fossil based as home composting and food and green waste collections and paper and card recycling rates increase. It is likely then that were energy from waste plants to be granted the 50% RHI at the outset of the scheme, they would soon be burning waste of a fossil:renewable ratio of questionable or unjustifiable eligibility for the incentive. This would inevitably lead to complications, confusion and controversy as the purveyors of the RHI had to negotiate the removal of the RHI from plant operators no longer eligible for the incentive.

4.RHI for incineration of municipal waste, even and especially if predicated on a minimum criterion for its renewable component, would provide a direct incentive to competition with anaerobic digestion by creating a rival demand for the renewable component of municipal waste. Incentive should be restricted to genuinely sustainable waste treatment, such as anaerobic digestion is, and incineration is not.

5.Even a 50% RHI on municipal waste with 50% or less fossil component should be considered as a subsidy to the combustion of the remaining fossil component, given the incentive will of course be awarded to the same plant operating company. As such it is unjustifiable as it contravenes the very intention of the RHI as well as other sustainability principles such as that behind the Waste Hierarchy (see point 1).


There is now a wealth of evidence that shows that biodiesel (FAME) made from crops does not meet minimum standards for ghg emissions savings and can even lead to an overall increase in ghg emissions once emissions from indirect land use change (ILUC) is taken into account. Furthermore the increase in demand for biodiesel crops leads (directly or indirectly) to deforestation as well as to negative impacts on food prices for the world’s poorest.

EU sustainability standards (as part of the Renewable Energy Directive) do not address these indirect effects and fail to ensure sustainability. The UK government is explicitly banned by EU law from passing sustainability legislation that goes beyond what is in the Renewable Energy Directive.Bioliquids from crops should therefore not be counted as sustainable renewable energy and must not be supported under the Renewable Heat incentive.

The above applies to biodiesel made from crops. However Friends of the Earth would support the option Lord Hunt recently suggested in a letter to Humphrey Malins MP that support from the RHI could be limited to bioliquids made from used cooking oil.


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Before the right level of incentive for large scale biomass can be determined urgent research is needed into the limits of sustainable UK biomass supply. This must include a rigorous assessment of the implications on food security of diverting agricultural land from food and feed production to the cultivation of energy crops. Otherwise there is a danger that over-incentivising the increase of biomass use will lead to serious environmental and social impacts in the UK and abroad.

Question: Q15

No. We disagree that any incentive should be given to the combustion of municipal waste, no matter what the ‘renewable’ content.

1.Incineration or “energy recovery” is second from bottom of the Waste Hierarchy now enshrined in EU law through the Waste Framework Directive. As such the priority for waste processing must be to move waste as far up the hierarchy as possible. Any payment that rewards the incineration of waste would contravene the principle of that law.

2.It is unlikely in practice that the renewable to non-renewable content ratio of waste could be reliably and accurately predicted. Waste streams vary by season, specific date (e.g. Christmas), location and so on. Further, the quality of waste streams will evolve to increasingly fossil based as home composting and food and green waste collections and paper and card recycling rates increase. It is likely then that were energy from waste plants to be granted the 50% RHI at the outset of the scheme, they would soon be burning waste of a fossil:renewable ratio of questionable or unjustifiable eligibility for the incentive. This would inevitably lead to complications, confusion and controversy as the purveyors of the RHI had to negotiate the removal of the RHI from plant operators no longer eligible for the incentive.

3.RHI for incineration of municipal waste, even and especially if predicated on a minimum criterion for its renewable component, would provide a direct incentive to competition with anaerobic digestion by creating a rival demand for the renewable component of municipal waste. Incentive should be restricted to genuinely sustainable waste treatment, such as anaerobic digestion is, and incineration is not.

4.Even a 50% RHI on municipal waste with 50% or less fossil component should be considered as a subsidy to the combustion of the remaining fossil component, given the incentive will of course be awarded to the same plant operating company. As such it is unjustifiable as it contravenes the very intention of the RHI as well as other sustainability principles such as that behind the Waste Hierarchy (see point 1).

Question: Q19

There is an ongoing scientific discussion regarding what forms of bioenergy can be regarded as sustainable, the size of the available sustainable resource, and assessment of their full ghg emission-balance.

In the absence of conclusive answers to these questions bio-energy should not be grandfathered. It must remain possible to revisit RHI tariffs in the light of new scientific evidence and in response to unpredicted changes in the sustainability of the demand on various forms of bioenergy.

Question: Q22

577 Scottish Government OGD / Statutory Agenc

Fuel poverty, Building standards


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State Aids and grant support•Clarification on interaction with grant funding.•If SG does continue grant support what impact would this have on the eligibility for RHI support?•What is the legal basis for asking for grants to be repaid as part of the eligibility criteria for the RHI?•We are being pressed on the above points from a wide range of stakeholders looking to access grant funding from various schemes which support renewable energy projects.

Interaction with other policies•The interaction with a range of policies, in particularly CERT, is not clear and would welcome further clarification.On energy efficiency there is a suggestion around RHI eligibility requiring some form of minimum energy efficiency standards. We need to ensure that if this happened then it fits our purposes.

Deeming methodologyDetails on how this will be carried out have still to be decided. From a Scottish perspective, we need to ensure that climatic conditions, and housing type, should be taken into account in the assessment process, both of which are markedly different in Scotland.

Impact in rural areas•The RHI should have a positive impact in rural areas, especially those in off gas grid areas. There is a commitment in the document to work with Devolved Administrations to ensure rural issues are considered as an integral part of the policy. DECC to clarify how this will happen.

Local Authorities borrowing powers•The document states that the “Government will examine scope for local authorities to borrow against RHI and FITS, to support further investment in low carbon technologies”. This statement was included in the Pre-budget report announcement. We need clarification on how this will happen in Scotland and what action we may have to undertake separately to ensure parity with LAs south of the border.It is essential that we are aware at an early stage if secondary legislation is required to allow LAs to borrow against future revenue streams.

Fuel PovertyThere is a commitment by UK government to consult later this year on measures to help low-income households take advantage of the RHI. We require further details on what is proposed and the likely impact for Scotland.

Paying for the RHIThere is a need to ensure that Scotland is not disadvantaged in how the levy may be raised. Scotland has a higher proportion of areas off gas grid and therefore is more reliant on fossil fuel to heat homes and businesses. The suppliers of these fuels could be adversely impacted, many of which are small scale.


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FUEL POVERTY – The consultation states: “Switching to renewable technologies for heating can help to significantly reduce bills and shield vulnerable consumers from large increases in fossil fuel prices.”

Suggest you need to consider:a)high levels of insulation are needed for the cost effective operation low temperature distribution systems (as for heat pumps), but many homes in Scotland are very hard and expensive to treat to limit heat loss (solid wall, uninsulated / slightly insulated timber frame, room in the roof, flat roof, homes in conservation areas); simply switching to an ASHP or GSHP can increase fuel bills and waste energy in poorly insulated buildings.b)is the RHI a sufficient level of compensation for the running costs of heat pumps? Since heat pumps run continuously, they have periods of peak electricity use and the substantial reduction in energy demand (compared to other fuels) does not correlate to a similar reduction in energy bills – which is the primary consideration for fuel poor households. Need some modelling of this – can’t find what assumption has been made about tariff ahead of RHI.c)cost of biomass is poorly established because it is not a mainstream fuel – high costs could create fuel poverty, just like fossil fuels – also need to consider ease of use as an individual technology because of handling issues by older or disabled people, a large % of whom are fuel poor.

LOCAL GOVERNMENT – Take-up of additional RH infrastructure in domestic properties could affect valuation of domestic properties for council tax banding purposes. Although alterations to property are not assessed for banding until the point of sale, this could have an effect on subsequent property owners. Nonetheless we expect this would be of marginal importance in considering purchase of property and so would likely have marginal effects on saleability and on future local taxation revenues.

On the powers to borrow at the top of page 21 it is not clear whether the intent is for local authorities to borrow capital or revenue. Currently local authorities can only borrow for capital.

ENERGY ECONOMIST – Yes – Clarification of exactly how the scheme will be funded, this was not announced at the 2010 budget as previously stated.

A levy that places the burden entirely on fossil fuels could disproportionately impact on the rural and off gas grid areas of Scotland that are more reliant on fossil fuels for heating. Caution must be taken to avoid disproportionate impact and price distortion of small scale suppliers of fossil fuels in Scotland.

RURAL – Yes•In rural Scotland, household heating (from the Scottish House Condition Survey) is 39% gas; 28% oil; 21% electricity; 8% solid fuel and 4% LPG. This data shows that the majority of rural households are off the gas grid and that there are grounds for considering rural Scotland as a special case for the purposes of the RHI scheme. Another relevant issue is the rate of fuel poverty in rural Scotland - currently 44% of remote rural Scotland households are fuel poor and only 15% of households were classified has having good energy efficiency http://www.scotland.gov.uk/Publications/2009/09/24095407/3. Therefore we suggest that the RHI scheme’s methodology be constructed in such a way as to provide a specific incentive for uptake by the rural fuel poor. •More generally, we would also like the scheme administrators to ensure as far as possible, that the spread of payments is geographically equitable, so that all parts of the UK – especially rural Scotland - benefit equally from the scheme. We are aware that other heating schemes ( e.g. Carbon Emissions Reduction Target and The Community Energy Savings Programme) have in reality ended up being largely delivered in urban areas, and we do not wish rural Scotland to miss out again. Therefore we would like DECC to consider more closely how it can ensure rural Scotland is not disadvantaged. • We were pleased to note the provision of RHI for consumers of blended heating oil. However, the uptake of RHI by oil users will depend on the availability of the blended fuel, and to date the suppliers have not confirmed when this will happen in the North of Scotland and at what cost.

SKILLS- number of skills issues need to be addressed including the need to ensure the installation capacity and capability is in place. This will, in the main, require a major up skilling requirement for existing Gas Heat engineers, plumbers. It is already proving difficult to convince companies to invest in upskilling activity and some form of incentive made be required to ensure it happens.

WASTE- supporting gas injection into the gas grid seems sensible and will offer a further incentive to AD. From a waste perspective, the preference would be if the RHI was only offered to clean AD, thereby incentivising better practice in the waste management industry and is consistent with Scottish Government’s policy on zero waste.

GENERAL – Suggest there needs to be more detail in the application of the RHI in the commercial and industrial sector. The section says almost nothing as to the use of process heat. .Whilst agriculture is mentioned it is not clear if this included horticulture. Some definitions of horticulture define it as small scale agriculture yet there is a very clear trend to large scale horticultural facilities which are clearly agricultural in scale and output.

The dual pressures of decarbonising agriculture and improving food security will provide a very significant opportunity for the large scale use of waste heat in a rapidly expanding industry in the UK. Horticultural facilities are increasingly high tech energy saving, carbon using, solar trapping devices which to maximise their production potential require all heating at key points in the year (mainly October – March). It would be useful to clarify if such industrial scale facilities would qualify for the RHI. Under planning terms they are recognised as buildings requiring, as fixed structures (as opposed to poly tunnels), planning permission. They should be permissible for the RHI for the extra heat requirement above the natural solar heat trapping. They should also qualify only when an agreed standard of energy efficiency is met. Given the pre-eminence of the Dutch agri/horticulture industry the issue of energy efficiency is gaining increasing research and development there. The setting of minimum energy efficiency standards would therefore be a simple enough matter. Missing this opportunity would be a real loss to mixed use eco-park developments and would miss an opportunity for cross policy integration (decarbonising agriculture and increasing food security) with the RHI.

Question: Q01

22 June 2010 Page 1079 of 1348

LOCAL GOVERNMENT – For non-domestic (business) properties renewable energy micro generation is exempt from business rates, but if a company invests in renewable energy above those micro generation thresholds they may be penalised through increased business rates-in effect a business may be penalised through increased taxation for investing in renewable energy.RURAL – Yes – We are pleased to note that the considerable upfront cost of the equipment has been recognised and we note that a number of possible models for funding have been set out. We would like to see DECC pursue the development of these models before implementing the RHI. In rural areas, the cost of installing renewable technology can be particularly high and without some form of help with the upfront capital costs, a number of rural households would be unable to take part in the RHI scheme.

Question: Q02

Yes

AgreeQuestion: Q03

MICROGENERATION Yes. It is vital as this industry develops that products and installations meet agreed standards to protect both the industry and consumers.It is important that any accreditation system recognises and prioritises the existence of unique Scottish Building Regulations, Scottish Government targets for renewables, and Scottish training and skill standards.RURAL – Yes – One of the key factors in the scheme being successfully rolled out is the availability of accredited equipment and installers. Remote rural areas can find if difficult to find an accredited installer and this should not debar this from getting the RHI. We would therefore ask for some flexibility in this regard.

Question: Q04

BUILDING STANDARDS – (General comments on MCS) Certification schemes in Scotland differ from MCS in that certification of design or construction is optional and only work that requires building warrant approval may be certified. Certification of construction is currently available for micro-renewables but this service is not joined up in terms of design, product and installer. However, certification should be viewed as complimentary to MCS in the same way as the association between MCS and the Competent Person Schemes in England and Wales. Certification of construction is not a direct equivalent to MCS but it does dovetail neatly with the overall aims of recognising competent installers and providing consumer protection through insurance for every certified installation.

MICROGENERATION – Certified products and installers should be used across the board. Where standards do not exist or are yet to be finalised, a certification process must be put in place to ensure there are no unnecessary delays to take up of RHI.

Question: Q05

MICROGENERATION – Any product or installer certification scheme that demonstrably meet EN 45011 should be eligible for RHI. This should increase the number of suppliers on the UK market leading to greater uptake of RHI and reduced cost to the consumer.

Question: Q06

FUEL POVERTY – No mention of micro CHP (only larger scale CHP)? Baxi’s sterling engine boiler is now available – (we’re discussing a pilot LPG installation to assess whether the saving due to electricity generation is worthwhile off-grid) – presume it will struggle if not included in RHI.

For AD can you confirm if the heat produced is used, for example, to supply heat to a district heating network or to another customer, that this element will be eligible for the RHI?

Question: Q07

AIR QUALITY - Would have preferred the original proposed emissions standards to be retained, but accept that these would be very challenging for many appliances. The revised standards are still considered acceptable, but would not support any further relaxation should this become an option following the consultation.

Question: Q09

ENERGY EFFICIENCY – the housing stock in Scotland is different to the rest of the UK and many of the most cost effective measures such as cavity wall and loft insulation cannot be cheaply and practically installed. Therefore energy efficiency should not be encouraged through the tariff structure but should be required where practical.

Question: Q10

BUILDING STANDARDS AND ENERGY EFFICIENCY - We would suggest that this concern can be addressed by continuing to ensure than building regulations applicable to new buildings require robust standards for the performance of building fabric and for the minimum efficiency of installed equipment. However, we look forward, with interest, to any consultation responses to this question.The scheme will need to take account of the Building Regulations in place in Devolved Administrations and any differences should not put Scotland at a disadvantage to the rest of the UK.

Question: Q11

22 June 2010 Page 1080 of 1348

ENERGY ECONOMIST– Yes

Agree with the methodology and the proposed approach that for small scale and medium scale installations these will be assessed and incentivised by deeming and for large scale and process heating installations - RHI payments will be based on actual meter readings.

The approach described above is supportive of the Scottish Government energy efficiency ambitions, by not encouraging the excess production of surplus heat. These proposals are also appropriate given the levels of data monitoring and administrative support any other approach would require.

From an emission reduction perspective it is only important to reduce the usage of carbon intensive fossil fuel heating, large scale penetration of renewable heat that does not meet this objective is not advantageous, particularly as the funding for this incentive will be passed on to consumers and is likely to affect those in fuel poverty the most.

AgreeQuestion: Q12

Key issues are the need to take into account of climatic condition and housing stock in Scotland which are notably different to the rest of the UK.

ENERGY ECONOMIST Broadly agree with the approach, however need to work closely with DECC to clarify the exact criteria being developed and ensure that Scotland will not be disadvantaged by this approach, some potential areas for consideration:

•Climate differences•Housing type•Fuel sources•Ability to install ‘reasonable energy efficiency measures’ in Scottish property

BUILDING STANDARDS: Deeming / SAP & SBEMGeneral point - any proposals to base ‘deeming’ on values derived from current National methodologies (SAP & SBEM/NCM) should be taken forward with a clear understanding of what these methodologies deliver, recognising the need to maintain current policy use underpinning both building regulations within each administration (for new buildings) and EPC delivery (for all buildings).

Energy Performance CertificatesNoted that statements on ‘actual’ energy use would suggest reference to operational ratings (e.g. through Display Energy Certificates - DECs - these only apply to large public buildings in E&W) which are not part of EPC legislation in Scotland.

Question: Q13

Agree that the risk of metering resulting in a perverse incentive to over-generate is low. At the large scale the cost of a metering and monitoring will be a small element of the overall cost.

Question: Q14

Need to reach a position where large-scale biomass CHP is the norm and that developers are incentivised at an appropriate level to ensure that happens. However, recognise that adoption of CHP is not that widespread in the UK and more needs to be done to raise awareness and increase take-up.

Question: Q15

ENERGY ECONOMIST– Yes

Agree simply because a better alternative is not readily available. However one concern would be that the blanket tariff approach may deliver the best response in terms of uptake of renewable heat, however there will be large variances between the costs of emission abatement per tCO2 between the different technologies and installations.

It would potentially address the wider climate change concerns in a more appropriate manner if these variances were factored into the incentive payments. This could also potentially act as a driver to incentivise the most efficient renewable heat technologies providing the best value for consumers’ money.

[Same argument could be considered for the locational aspect of the installation – i.e. the renewable installation could be offsetting carbon intensive off gas grid fuels however it would currently receive the same payment as an installation that replaces relatively lower emission intensive gas grid fuels]

RURAL – We would like to see the methodology make allowance for the Scottish climate – especially in remote and island communities where the winters are generally longer and harsher than in other parts of the UK i.e. where heating systems need to be on for longer. This scenario would affect the setting of the amount of “deemed” output

Question: Q18

22 June 2010 Page 1081 of 1348

Yes. The uplift should take account for the increased costs and logistical issues involved in developing the network.

ENERGY ECONOMIST - Yes agree with this objective. There are a large number of tower blocks and hard-to-treat properties in Scotland. This would provide an incentive to encourage the uptake of renewable and more efficiency heating systems than currently exist.

RURAL – Yes – We would like to see these schemes incentivised. A number of successful district heating installations are already in operation in rural Scotland and we welcome further promotion.

WASTE- a key barrier to the utilisation of heat from EfW plants is the costs associated with developing the heating infrastructure. These additional costs should be considered as part of the RHI uplift.

AgreeQuestion: Q20

Yes. The uplift should be open to all to encourage the take-up of district heating. Setting parameters around which projects to support will be too complex as each project will present a unique set of circumstances. Simplicity and clear messages on eligibility are a key factor in the successful uptake of the technology.

Question: Q21

ENERGY ECONOMIST – The RHI needs to maintain a balance between the complexity of the scheme and the objective to cover the difference between renewable technologies and fossil fuel heat. Grandfathering – provides a simple and transparent approach, but loses the ability to revise the RHI payments to account for fluctuations in the prices of bio fuels and also the relative prices of fossil fuels.

Question: Q22

ENERGY ECONOMIST – Yes – Technology costs are significantly high and supply chains are not established that this should be considered in the first iteration of the scheme, however as the technologies are incentivised and installation rates pick-up, price degression should be considered, potentially these market changes may occur in time for the first review but there is no certainty. However any review should consider the impact of the price changes across all the regions in the UK and should consult devolved administrations before such a change is implemented.

AgreeQuestion: Q23

Yes seems a sensible approach.

AgreeQuestion: Q24

ENERGY ECONOMIST – With the use of deeming the links between performance and reward that are the basis of the Feed-in-tariffs do not exist. For example in the FIT a solar PV will be incentivised based on the amount of electricity generated, under the RHI solar thermal will only be incentivised based on a set tariff for a deemed output. Therefore there is no benefit for efficiency, innovation or cost reductions.

Question: Q25

Yes

AgreeQuestion: Q26

ENERGY ECONOMIST – Although main aim of the RHI is to incentivise new renewable heat installations in the UK and Scotland, the introduction of the scheme may give rise to the potential requirement for a review of projects on an individual basis that will experience significant cost increases as a result of the RHIs impact on the heat markets.Potential example – RHI increases demand for biomass installations and results in bottlenecks in the supply chain for bio-fuels, the fuel costs would therefore increase for all new installations and also existing installations installed before July 2009. This would provide some suggestion that there should be assessment criteria for the existing installations to determine the impact on costs as a result of the RHI.

Question: Q28

ENERGY ECONOMIST – Better direction and clarification required on the interaction with other incentive mechanisms offered both at a UK level and by Devolved Administrations.

Examples being the current overlaps with the CERT scheme and the potential implications for the Scottish Government to continue to offer grant support to certain schemes.

Question: Q29

ENERGY ECONOMIST – Support district heating irrespective of fuel source (i.e. get infrastructure and can worry about move to renewable sources at a later stage) as per Sustainable Development Commission recommendation

WASTE- a key barrier to the utilisation of heat from EfW plants is the costs associated with developing the heating infrastructure. These additional costs should be considered as part of the RHI uplift.

Question: Q30

578 Broag-Remeha Ltd Manufacturer

22 June 2010 Page 1082 of 1348

Not that I can see

Question: Q01

None apparent to me

Question: Q02

MCS should be kept to Domestic schemes, but not expanded into commercial. Payment should be quarterly to all.

Question: Q03

Yes

Question: Q04

No

Question: Q05

No, above 45kw project should be overseen by Low Carbon CIBSE engineer

Question: Q06

Yes

Question: Q07

Yes

Question: Q08

No, standard should be banded, eg up to 2mw, 2 – 5mw, 5-20mw, larger projects will support the technology required.

Question: Q09

Yes

Question: Q10

Not qualified to answer

Question: Q11

There needs to be leeway for hours of operation, Primary School v Elderly Peoples Home for example.

Question: Q12

Yes

Question: Q13

No experience in this field.

Question: Q14

3.5 – 4.5p

Question: Q15

No experience in this field

Question: Q16

No

Question: Q17

22 June 2010 Page 1083 of 1348

In general

Question: Q18

No experience in this field

Question: Q19

Yes

Question: Q20

Available to all.

Question: Q21

Yes

Question: Q22

Yes

Question: Q23

Yes

Question: Q24

No

Question: Q25

Yes

Question: Q26

No

Question: Q27

Yes

Question: Q28

Not that I can see, but time will tell.

Question: Q29

Not enough experience in this field to advise

Question: Q30

579 Asif Din (individual)

1.the costs associated with approved suppliers and installers compaired to open market rates.Incentivising easy technologies such as solar thermal in a similar way that china has done. Hidden fees and costs in the system, the cost of heat meters and driving down those costs. Reducing the amount of fuel used in assessing demand for especially large installations. operations of systems with pumps and cylinders required for heat storage.

Question: Q01

2.Public sector financing will be scarce with proposed budget cuts. Pave as you save requires financial insitution support in the form of energy morgages. Fossil fuel suppliers are currently unhappy with insulation regulations and this may increase lobbying against the scheme. Developers will see this as another regulation hoop unless they have a long term concern in the development i.e freeholder but if are just sold they will lobby against this as percieved risk on price escalation to the end user.

Question: Q02

22 June 2010 Page 1084 of 1348

3.All payments should be made quarterly as this will help eople with cash flow. registration should be free of charge otherwise the end user will have the burden of an inflated cost on equipment. Maybe fixed cost on time and cost of size of installation. As with other framework agreements there is no incentive to be competitive or keep the costs down across the industry.

Question: Q03

4.Yes but no on costs for equipment or services as highlighted above

AgreeQuestion: Q04

5.Yes as there is more likely if the system goes wrong the end user is without heat. A all or nothing system

AgreeQuestion: Q05

6.No

Question: Q06

7.There seems to be a mismatch in what is catogorised as renewable energy. Heat pumps require electricity (the only way hey can be renewable is if they come from renewable sources fitted by the end user directly but this is beyound the scope of this document) as with Gas CHP in FIT it may be more efficient but is not a renewable source and should be excluded from the current scheme. There seems to be lobbists at work with a vested interest in this technology as all other technologies are bonafide renewable technologies.


8.This should be policed at the tanker delivery stage with the onus on the supplier for the correct eligiable blend. This goes back to a quarterly payment as otherwise a subsequent delivery may not be eligiable for the scheme

Question: Q08

9.Yes but boilers will need to be specified/approved for clean air act with clean burn cycles to stop mismatch with planning authorities

Question: Q09

10.Yes

Question: Q10

11.There needs to be a limit on biomass on a per population or sq m supplied basis. This would have a sliding scale on the incentive recieved so that high standard homes that are supplied get the maximum amount of credits

Question: Q11

12.Meters on all installations will allow the distribution losses to be monitored and drive down the costs of the meters themselves. Meters can be installed by certified people in the same way that import export meters for electricity are installed

Question: Q12

13.This needs to be done with a moderate uplift to incentivise fabric upgrades otherwise too much renewable heat will be going straight to atmosphere and using higher that the fair share biomass quota per population (approx 250 odkg/person)

Question: Q13

14.Still believe that there is a risk of overgeneration for medium/large schemes as machines perfer full loadings rather than partial ones and/or switching. There needs to be a mechanism to address how many units or processes any one plant is feeding. Meters should be made to BS standard which could address transmission losses.

Question: Q14

15.Scale on small installtions is a mismatch as solar thermal can only supply 6 homes while other technologies can supply up to 15 homes. This needs to be addressed perhaps using a 6 home terrace as a template. Incentives could also be raised on no duty on biomass or bioliquids

Question: Q15

16.Not in a position to judge/insufficient data

Question: Q16

17.No

Question: Q17

22 June 2010 Page 1085 of 1348

18.All technologies should have the same timescales with costs the variable. The tarrifs should be based as a incentive compared with business as usual. Again the on costs of certification needs to be addressed

Question: Q18

19.Yes. Follow existing regulations on RO

Question: Q19

20.Yes but with short runs incentivised as lower pump costs. Also approved pipes with correct insulation and leak detection needs to be included

AgreeQuestion: Q20

21.This should be dependant on users and type classes. Not applicable for industrial uses as they tend to be close by. The other points have been made in other answers

Question: Q21

22.Fuel and non-fuel components should be separate. This should be based on wholesale prices and linked to a delivery/ customer price index. If this is not a corralation then this will be a matter for OFGEN and energy companies on profiteering. Energy to third parties should be open book approach.

Question: Q22

23.Yes in 3 years or in line with building regs and/or FIT review

AgreeQuestion: Q23

24.Technologies should be added in the review proceedure dates

Question: Q24

25.Incentivising willdrive down the cost of solar thermal, as in China where solar thermal installation is law,system design of tanks, stratificationand pumps is required as a ssytem design rather than just the panel itself.

Question: Q25

26.Yes

AgreeQuestion: Q26

27.Only dramatic increases in pricing on an annual basis

Question: Q27

28.Questions regarding july datea otherwise fine

Question: Q28

29.Smart metering with remote access should be used. The calculations should be simplified and made public in spreadsheet format rather than employing the installer/consulatant for technologies

Question: Q29

30.No. Yes. Agree the quality of infrastructure installed needs scutiny insulation values of pipework, losses and pump powers with resistive bends, storage capability and leak detection

Question: Q30

580 David Blackburn (individual) Potential generator

VAT, eligible technology


Overall opinion of the RHI Scheme seems positive, although difficult to tell because it was a very short response with only two comments: (1) VAT level and (2) exclusion of Mechanical Ventilation and Heat Recovery Unit (MVHR).


22 June 2010 Page 1086 of 1348

As a householder of a 1930’s semi it has concerned me for some time that a lack of emphasis has been placed by government on upgrading the countries existing housing stock (a vast majority which will remain such compared to new build). The Renewable Heat Incentive proposals appeared to be at last a positive way forward.

Some months ago I initiated an extension to my property with the aim of incorporating as much insulation and renewables as possible, despite the disincentive placed in my way by government in the form of full VAT being payable on the majority of the work (excluding solar panels).

Question: Q01

Some months ago I initiated an extension to my property with the aim of incorporating as much insulation and renewables as possible, despite the disincentive placed in my way by government in the form of full VAT being payable on the majority of the work (excluding solar panels).

The solution recommended to me for heating and hot water was a Mechanical Ventilation and Heat Recovery Unit (MVHR) however I now find that this type of renewable heating has been omitted from the proposals for the RHI. This appears totally illogical as surely MVHR systems save carbon as they are reducing demand on traditional power sources by recycling air from inside the house, in my case from a specifically built solar collector. The system also takes air from kitchen and bathroom and recycles this which would not be the case for an air source heat pump (which is included in the scheme).

Looking forward to seeing the final proposals that do include MVHR as an incentive to more people to invest in the future of renewable


581 Ofgem OGD / Statutory Agenc

Administration


22 June 2010 Page 1087 of 1348

Key issue 1: cost-effectiveness2.1. We support an incentive to encourage uptake of renewable heat as a cost-effective way of meeting the 2020 renewable energy target. The lifetime cost-effectiveness of the RHI scheme is £57/tCO2 in the traded sector, and £75/tCO2 in the non-traded sector3. This compares favourably with the overall cost-effectiveness of the FIT for renewable electricity (£460/tCO2)4. The current abatement cost of the Renewables Obligation is £101/tCO2, down from £110/tCO2 last year5. Compared to other renewable financial incentives, the RHI appears to be relatively cost-effective, with the lower end of the RHI abatement cost range being in the same range as the non-traded price. That said, the abatement cost of all three renewable energy schemes are currently more than the traded price (£22 in 2010, £25 in 2020) and non-traded price (£52 in 2010, £60 in 2020)6. While Government policy has wider aims than least-cost carbon abatement, including ensuring secure energy supplies and developing renewables for the long term, it is still important to consider the cost-effectiveness of schemes funded by energy consumers.2.2. Over time we would expect the cost of the RHI to decline through learning and scaling up of industry, whilst the traded and non-traded cost of carbon will rise. We would recommend that Government undertakes regular reviews to adjust the support levels available to new RHI claimants in line with changes to renewable heat capital costs and commodity and carbon prices. The Government should publish its criteria for the reviews to provide policy certainty to investors in renewable heat technologies, particularly larger generators with plants that could take several years to develop.

Key issue 2: paying for the RHI2.3. The enabling legislation for the RHI in the Energy Act 2008 provides for a levy on suppliers of fossil heating fuels. However, because it applies at the point of sale to the end consumer, it could be disproportionately expensive and difficult to collect from the very wide range of small non-gas suppliers, which can include independent petrol stations and small-scale coal merchants. However, excluding these non-gas consumers from contributing towards the RHI levy would lead to costs falling disproportionately on gas consumers, who consume the least carbon-intensive fossil fuel for heat. Given that renewable technologies are often most viable and cost-effective in off-gas areas, it is also gas consumers who stand to benefit least from the RHI. We strongly endorse the principle that all fossil fuel consumers should pay for the RHI; gas consumers should not pay more than their fair share given that gas is the least carbon-intensive of the fossil fuels in question.2.4. The Government announced in the RHI consultation that it would consider the most effective way to fund the RHI, including the possibility of reviewing the RHI provisions in the Energy Act 2008. We would encourage the Government to investigate the option of recovering the levy from coal, oil and LPG consumers and to take the earliest opportunity to resolve this.

Key issue 3: who pays and who benefits2.5. If the RHI is funded through a levy on fossil fuel sales, lower income consumers will pay a higher proportion of their income than higher income consumers as fuel costs account for a higher proportion of their income. In addition, without a robust policy to help lower income consumers to access RHI support, it will be higher income consumers – who can draw on savings or arrange funding to meet the upfront costs of renewable heat devices – who will benefit from the scheme. There is a risk (as there is with the FIT) that the RHI could prove to be a subsidy for higher income households paid for by all energy consumers.2.6. The consultation outlines how social/council tenants, low income and vulnerable consumers, and rural communities stand to benefit from the RHI. However, we would like to see more in terms of explicit strategies to ensure the RHI is accessible by low income households. We welcome the work that DECC is undertaking through the Household Energy Management Strategy (HEMS7), such as the pay-as-you-save (PAYS) financing package. PAYS has the potential to overcome some of the financial barriers associated with upfront costs though such schemes may be of less help to lower income households who may be wary of taking on debt of find it difficult to access credit. Local authorities will have an important role to play. Consumers in other sectors such as mobile phones and cars are used to the concept of paying over a number of years in lieu of an upfront charge, and this could be a solution for investments in renewable heat. However, there needs to be a strategy to enfranchise households that may struggle to access finance, such as via leasing arrangements.2.7. We note the Government‟s commitment in the Pre-Budget Report 2009 to consult on measures to help low income households to take advantage of „clean energy cash-back‟ schemes like the FIT and the RHI, and would welcome working with DECC on this issue8. We also recognise that DECC‟s fuel poverty strategy will be aiming to address these issues, including those arising from the costs of the RHI being passed on to customers who are already struggling to pay their energy bills.

Key issue 4: time structure of subsidies2.8. The RHI is one of a number of Government environmental programmes being paid for through energy consumer levies. Funding schemes in this way is a more challenging way of kick-starting innovation than other methods such as grants, and can lead to distributional impacts due to the regressive nature of levy collection, as outlined above. However, the design of environmental programmes can have a substantial effect on environmental, social and economic outcomes.2.9. The consultation states the Government‟s minded-to position that the incentive will be paid over the lifetime of the equipment, which ranges from 10 to 23 years. However, the RHI Impact Assessment (IA) states that the total cost of the subsidy would be reduced by £9 billion (from around £49 billion to £40 billion) by compressing the payments into ten years9. Reducing the payback period could also help to make the scheme more attractive to households with short-term investment horizons, and reduce the administrative work and risks.2.10. However, compressing the duration of payments would alter the cost burden on existing and future consumers compared with the preferred policy scenario, placing a greater cost burden on consumers in the earlier years of the scheme. The RHI IA states that costs in the earlier years would increase by around 20 percent, even if costs fall in the long term. There is a trade-off here between the medium-term impact on consumers‟ bills, and long-term cost-efficiency.2.11. Although the compressed scenario improves long-term cost efficiency it may not be fair to consumers in the near and medium term who will finance the low carbon transition. This is particularly important in the wider context of high and growing numbers of households in fuel poverty, and Ofgem‟s Project Discovery analysis of the impact on consumer bills in the second half of the decade. These are difficult trade-offs and we would encourage Government to keep this issue under review. We consider this issue further in our response to Q18 in the next chapter.


22 June 2010 Page 1088 of 1348

Other policy issuesRollout strategy2.12. In addition to financial incentives, the Government and industry need to include mechanisms and strategies to help to deliver renewable heat on the scale envisaged in the consultation document. It will be important to assign responsibility for developing a customer-facing strategy, and independent information and advice for customers. This would include addressing non-financial barriers such as the lack of consumer information on different technologies. It would also include strategies for informing, persuading and/or requiring consumers to consider renewable heat at various stages, such as boiler breakdown, refurbishment or construction. Lessonscould also be drawn from the recent boiler and car scrappage schemes, which have offered help to consumers with the upfront cost of replacement. We welcome the Government‟s Household Energy Management Strategy, which outlines plans to encourage consumers to change the way they produce and use energy, and would welcome the opportunity to work with the Government on this work area.Networks issues2.13. DECC predicts that around ¾ million heat pumps will connect to electricity distribution networks, many of which could connect in rural areas with limited spare network capacity. Electricity distribution network operators (DNOs) will have to consider how best to overcome capacity and voltage quality issues where there are multiple connections.2.14. Ofgem‟s recent thinking in RPI-X@2010 has called for DNOs to better anticipate future demand through forward planning. We have recently consulted on our emerging thinking on a new regulatory framework to prompt DNOs to consider how best to plan for this as they are for other potential drivers of demand, such as electric cars. In addition, the new electricity distribution price control review (DPCR5, which runs from 2010-15) includes the £500 million Low Carbon Networks Fund (LCNF). The LCNF provides opportunities for DNOs to trial innovative techniques, technologies and commercial arrangements to prepare for the transition to a low carbon economy.2.15. In the shorter term, the new governance arrangements have been designed to allow use of system charges to evolve more rapidly than in the past to deal with new technologies, and to allow others to raise changes if they are dissatisfied with extant arrangements11. In addition we have created a single national approach to the use of system charging which expedites change processes. Ofgem can also determine on connection charging disputes if issues arise with connecting renewable heat technologies. We expect that DNOs will put in place a largely common charging methodology for connection charges before the RHI is introduced next year, and plan to issue a consultation imminently on proposals we have received from the DNOs. In addition, we are working to ensure that the smart meter roll-out facilitates the development of a smart grid. The development of smart meters and smart grids may assist DNOs in their network planning.2.16. Government and industry should consider how best to overcome network issues with heat pumps. This could include encouraging the use of heat pumps to be designed with soft-start technology to deal with the effects of start-up currents from heat pumps, which adds to the cost of the heat pump but could reduce the costs associated with network upgrades.

Maintenance costs2.17. Owners will be required to keep their heat equipment well maintained, and may be required to demonstrate that this has been carried out in order to collect payments. This could represent a considerable administration burden for each renewable heat generator, and for Ofgem E-Serve. Consumer protection may be needed to prevent consumers being exploited by being charged a high price for maintenance that they have to carry out in order to receive the RHI payment. The RHI IA states that operation and maintenance costs have been included in the RHI tariffs, and we would hope that maintenance costs would be subject to ongoing review as part of the overall scheme.

Timescales2.26. The legislative timetable is extremely tight; any slip in this process or ambiguity in legislation could threaten Ofgem E-Serve‟s ability to deliver a legally robust scheme by the proposed start date of April 2011. Inadequate notice or surety for industry will affect its ability to prepare fully for go-live, in terms of the guidance that Ofgem can provide and the supply chain for renewable heating technologies.

As stated in the previous chapter, we think that all fossil fuel heat consumers should pay for the RHI. We do not think that gas consumers should pay more than their proportion of the RHI levy.

Question: Q01

We support the proposal for a „catch all‟ portal for small and medium generators where consumers can register and obtain advice on the scheme. This customer-facing portal should offer independent, integrated and trusted advice and technical expertise on all potential measures to enhance energy efficiency and encourage renewable energy production.3.3. We agree that a certified installer (MCS or equivalent) should be required to install the equipment and send a certificate/certification number to Ofgem.3.4. We would recommend using a standardised, easily replicable approach such as SAP for deeming; this model of assessment would fit with other schemes and work well with a whole-house approach. A more complex, bespoke deeming methodology could add significant complexity and cost to the administration of the RHI.Payments3.5. We agree with the proposed payments process. We would stress that the legal definition of the „owner‟ and implications of contractual agreements/‟assigned rights‟ need to be clarified to minimise any potential for fraud.

Question: Q03

22 June 2010 Page 1089 of 1348

We agree that a form of certification is required to provide assurance at the smaller scale. We will work closely with DECC and others to ensure that the interface at the small scale provides the least burden to consumers whilst ensuring an effective and efficient accreditation process.

Accreditation and certification2.25. The number of MCS certified installers and their capacity to deliver the benefits of the RHI to small scale generators throughout Great Britain, including hard to reach areas, will be critical to the success of the scheme. Ensuring an effective and efficient process for certifying renewable heating technologies in time for April 2011 also presents a significant challenge. Ofgem will work closely with DECC to assist where it can.

AgreeQuestion: Q04

Extending the scope of MCS to assess larger installations would reduce the administrative burden on Ofgem.

Question: Q05

We support the principle of undertaking minimum energy efficiency measures to reduce consumption and avoid oversizing renewable heat technologies. However, calculating RHI payments on the assumption that loft and cavity wall insulation have been installed will not in itself necessarily lead householders to install these measures. Critically, householders will need to be presented with clear and accessible information outlining the reason for this assumption. With the Government planning to insulate all lofts and cavity walls by 2015, this should be presented as an opportunity not only to receive a sufficient RHI payment, but also a simple and cost-effective way to do both jobs at the same time, to reduce the hassle of extra future visits from installers.

Question: Q10

We are concerned about the potential for inaccuracy and fraud in the deeming process. If the vendor of the equipment is also responsible for determining the subsidy level there would be a temptation to exaggerate the property‟s heat requirement to make the deal more attractive. For this reason, an independent assessment based on SAP or SBEM should be used to size units correctly. We agree that this type of process should ensure that units are sized correctly for the level of service required, and remove the incentive to put in a bigger unit to get a higher deemed output and higher payment13.3.10. In addition, where multiple heat sources are installed, judgements about the proportion of output from each source could be tweaked to maximise RHI payment levels. One option could be to introduce a condition that any vendor installing units inappropriately would lose the right to operate on the scheme. This would provide an incentive to size renewable heating units appropriately.

Question: Q13

As discussed in the previous chapter under key issue 4: time structure of payments, we think that that there are pros and cons to altering the time structure of RHI support, for example by moving away from the lead scenario where payments are made over the lifetime of generation equipment. Reducing the duration of payments can reduce overall costs substantially, and make the scheme more appealing to consumers, however the costs to consumers in the short-medium term would rise substantially, shifting the burden from future consumers to present/near term consumers. In deciding the appropriate time structure of payments, the Government should have regard to the economic, social and environmental consequences. It may be appropriate to change the duration of payments depending on the maturity of the heat market.

Question: Q18

We agree that, as a minimum, renewable heat generators connected to district heat networks should be able to access RHI support. Renewable heat should be able to access funding in the same way regardless of where the heat is used. We also recognise that there are a number of barriers to increasing deployment of heat networks, which we agree has the potential to provide carbon and cost savings in the right circumstances. Any additional support should be based on evidence of additional benefits to consumers.

We are concerned that this support for district heat, if funded by a levy on energy consumers, could replace the type of grant funding that the Government has recently provided (e.g. the recent £25 million HCA funding) which is funded more progressively through general taxation.3.14. It will be important for Government to continue to develop its focus on tackling the barriers common to all heat networks (like how to fund high-cost infrastructure, image problems and the challenges of partnership working). A central focus should be the work currently being taken forward through the Enabling Framework for District Heating and Cooling, part of the Government‟s Household Energy Management Strategy14. We would welcome the opportunity to continue working with Government on this.

Question: Q20

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The consultation indicates the Government‟s proposal to include an uplift for renewable heat generators connecting to district heat network where properties are classified as „hard to treat‟. „Hard to treat‟ would benefit from a better definition and could be difficult to enforce. In this context it appears to apply to sites that would struggle to accommodate individual renewable technologies (like tower blocks). However, tower blocks already tend to be a good match for heat networks, being a high-density heat load and often part of a district with high heat demand; this may have more of a bearing on project economics than an uplift.3.16. The consultation states that the uplift would be calculated on the basis of one or more „reference networks‟. In its Powering Ahead15 report, London First described three scales of schemes:- single site schemes- multi-site, mixed-use schemes- area-wide heat transmission projects3.17. Each of these scales of heat network involve different types of investment and project economics. For example, single site schemes are unlikely to require significant investment in underground pipe networks, whereas multi-site schemes often involve digging up roads and area-wide transmission projects will certainly be large infrastructure projects. Therefore a uniform p/kWh uplift is unlikely to capture the diverse range of existing and future network models, and could result in over-rewarding. In addition, if a single rate is set for all types of network, the more complex ones are unlikely to be built because there is insufficient subsidy. The net impact is that most schemes that get built will be over-rewarded. If the Government introduces an uplift for district heating, it could begin by considering these reference networks.

Question: Q21

Regular reviews should consider costs of input fuels for bioenergy, given that bio-matter availability could become restricted and push up prices as it will contribute not only to renewable heat, but also renewable electricity and transport energy targets. We agree that splitting the bio-energy tariffs, with a grandfathered non-fuel component, and a fuel component that could be subject to review, could address this issue and would be more consistent with the RO.

Question: Q22

Given that the first review will take place just two years after the launch of the RHI scheme, and the low expected uptake in the first two years, it is unlikely that lack of degression from the outset will be a significant problem. However, we would encourage the Government to carefully consider this issue at the first review in order to protect energy consumers from the unnecessary cost of over-supporting renewable heat.

Question: Q23

Reducing the support for solar thermal heat through degression could help the industry to focus efforts to lower costs to maintain profitability. The rate of degression could be decided at the first review, and adjusted at subsequent reviews to maintain a sufficient but not excessive subsidy rate.

Question: Q25

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An effective relationship with the MCS (or equivalent) auditing team is essential to ensure suspected cases of non-compliance are captured by the Ofgem central IT system so that appropriate action can be taken. It will be important for MCS to carry out audits of their installers.3.22. There is a risk surrounding deemed installations. Depending on the type of technology and its use, the effectiveness and efficiency of the installation may vary, leading to the projected carbon savings for the scheme not being delivered. Post-installation usage instructions are required for generators (especially at the small scale) as the effectiveness of some technologies is highly dependent on changes in lifestyle and/or energy usage.3.23. Also, there may be different incentives depending on whether the renewable heat generator is a primary or secondary heating source. If the consumer‟s house is wholly dependent on the renewable heating technology they will have an incentive to get it fixed. However, if they have a secondary system (i.e. solar thermal) that supports the primary system, there is less urgency needed to have it fixed as they will still have a heating source.

Administration of the scheme2.18. Ofgem E-Serve is undertaking preparatory work to fulfil the role of RHI scheme administrator, including a feasibility study. Our key administrative issues are outlined below, and in response to relevant questions in the next chapter.2.19. As set out in our Corporate Plan Ofgem is committed to identifying the most robust, consumer-focused, responsive and cost-effective systems, processes and resources (both internal and third party) when delivering environmental programmes such as the RHI12. We are seeking a strong two-way relationship with our customers in Government and to building public and industry confidence that initiatives are implemented in ways that deliver the targets and also provide value for money.Ofgem E-Serve competencies2.20. Ofgem E-Serve has a strong track record of successfully delivering a number of different environmental schemes for the Government. This has provided Ofgem E-serve with broad experience that will be put to use in management of the RHI scheme. Exploiting these synergies will assist in driving down the overall cost of administering the scheme whilst maintaining a high quality of service to generators.2.21. The administration of the RHI scheme will present significant challenges that Ofgem E-Serve has identified and will look to overcome in a number of ways. Both the customer-facing nature of the scheme (for example, we will be responsible for providing a contact centre service for up to two million generators by 2020) and making payments will require a combination of internal experience and external technical input.2.22. Where there is no direct in-house experience, or external bodies can provide a more cost effective and higher quality service, Ofgem E-Serve will look to tender for the best solution. Ofgem E-Serve‟s role will be to design and administer the RHIscheme effectively and it will actively look at outsourcing as a means to fulfil various functions that fall under its remit.Cost recovery2.23. It is important to have a long-term commitment to funding the administration of the scheme. We are working with Government to develop the processes for drawing down appropriate levels of funding to administer the scheme effectively and make payments to generators promptly. A broad mechanism has been agreed to facilitate this and provide certainty over future funding.

Fraud and compliance2.24. We are considering potential fraud and compliance issues, in partnership with Government. Ofgem will require sufficient legal power to be provided in order to properly enforce the scheme; the existing primary legislation may not be sufficient. Furthermore, given the short timeframes for delivery the Government will need to take care that the secondary legislation is developed in a way that guarantees scheme enforceability. In response to Q18 we set out some of the risks around the deeming process, and offer some suggestions to manage these risks.

Question: Q29

582 McCarthy and Stone Potential generator

Penalising of communal solutions (block of flats)


McCarthy and Stone (property developer) are generally supportive of the RHI Scheme, but are concerned that communal solutions (block of flats) will be penalised and would like to see higher tariff for solar thermal because costs associated with communal solutions are higher.


How does it calculate the amount of renewable heat – all or an amount as an improvement over a base point?

Question: Q01

Yes. How will individuals or even developers be vetted against such finance schemes? Households on low and very low incomes may be considered a high financial risk. Where an ESCo is not used would the pay back of funding be the responsibility of high risk cases or could another option be available where theenergy provider, such as a generator is empowered to pay back the saving to the lender direct. Will developers or individuals, who may be seen as “wealthy” be penalised against using supported finance schemes because “they can afford alternatives or to fund it themselves”. Self financing/borrowing may decrease the benefit of the RHI to the point where the renewable heat energy provision is not implemented and an up-front cheaper but more carbon intense heat provision is used instead. A mCHP heating solution we recently installed at a 26 unit flatted scheme cost us £480,000 more than an electric direct heating solution. This extra cost would be very difficult to balance under the RHI without supported financial arrangements.

Question: Q02

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Yes. Subject to the comment on Q2 re high risk owners where a third party may need to be involved.

Question: Q03

No. We agree with the principle of accreditation under MCS or equivalent but cannot agree on the current kW installation limit. This will penalise communal solutions where say ASHP’s may be used to supply renewable heat to an apartment block of up to 100 or more apartments. Our 41 unit scheme has 3 ASHP’s of 28 kW each and would therefore fall outside the current limit preventing us from the opportunity to bring this development into the RHI. On schemes of 100 or more flats, even allowing for improved fabric efficiencies, we anticipate installation of 80 kW and more. The MCS and RHI need to allow for much larger communal solutions using heat pumps. CHP for example has a much larger allowance by comparison. We would likely use a combination of ASHP’s, solar thermal, PV and mCHP as a total solution, all providing heating and hot water communally, so in total the kW would far exceed the 45 kW limit of the MCS.Could the limit be achieved through splitting the total across all the apartments? But if so how would the RHI work?

Why are HP’s at 45 – 350 kW and above being penalised in the proposed tariffs for this level? This will seriously affect the provision of communal HP’s used in flatted developments and does not reflect the increase cost attributable to such systems over individual systems. The infrastructure cost of the primary circuit alone is prohibitive, unlike individual HP’s where the connecting pipework is fairly short with communal systems you need to have a very expensive high performing pipework distribution system to get the heated water to each flat. This extra cost will always be incurred with communal solutions yet you are proposing penalising the very solutions that can be the most beneficial both to the user and to the reduction of carbon through more efficient communal solutions. Additionally there is the cost of locating communal HP’s, this can often need external works again not attributable within the cost impact for this range of output. We would propose the same tariff should apply to all levels of HP output because where small systems may be at the lower cost band the communal solutions that would fall within the higher output bands would incur extra cost not accounted for. The tariff seems to work against this and although we agree with encouraging the lower bands which will pick up more individual properties we also feel the mid band range and even the top band should not be penalised. Communal solutions have a massive advantage over individual. Planning conditions will often restrict the fitting of large numbers of smaller ASHP’s which would be mounted on the external walls of flatted developments, do you really prefer seeing large blocks of flats with vast numbers of ASHP’s bolted on the outside? Communal solutions can be discreetly placed in a scheme so that they are not an eye sore.


Yes. See Q4.

Question: Q05

Heat pumps tested and approved under the well established EHPA-Quality scheme must be eligible as an equivalent standard.

Question: Q06

We note the comment on heat pumps and RED and MCS but do you refer to the Turmes formula or another for HP CoP efficiencies or the same approach in SAP 2009 where the CoP’s are determined through the Appendix Q system? Do these three methods all tie up now? The house building industry would not wish for 3 different approaches where you get one measure of efficiency under RHI but a different efficiency under SAP and the CfSH.

We have looked at cooling and can say unless it is designed for in the very first instant and is applicable to single properties it is not a feasible solution with heat pumps. It could never be successfully used in a communal facility because of the amount of extra piping necessary for distributing warmed and cold supplies separately. Additionally if an owner was to switch from a cold to a warm supply it would disrupt the warm supply management systems as it received this sudden burst of cold water.

Question: Q07

We have no experience with FAME.

However, this fuel type if proven renewable should still be allowed under the scheme but due to this fuel type’s very unreliable source the system it is applied under the RHI should be able to demonstrate that when the FAME fuels are not available an alternative robust source of equivalent renewable fuel is available.

It would make no sense for FAME fuels to be replaced by say diesel when FAME is not available. We would consider a variable FAME/Diesel solution would be difficult to manage under the RHI. We would propose under the RHI that FAME fuels can only qualify where the secondary/replacement fuel is of equal or better renewable weighting.

Question: Q08

Yes. However, why can’t the existing IPPC legislation be expanded to cover installations below 20 MW?

What about 20 to 50 MW?

What about SEPA expanding to cover up to 50 MW?

Question: Q09

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Yes. Deeming reduces the initial infrastructure costs to existing buildings. [A set of minimum insulation standards should be provided as one solution to demonstrate compliance].

Yes, minimum fabric energy efficiency standards should be implied.

You actually need three base positions for the RHI:

1. Energy Efficiency Measures encouraged by the RHI and defined as; a, static element improvements, as stated – minimum 125 mm loft insulation (will you define a minimum performance value for the In assulants used? 125 mm glasswool will not be as thermally efficientsay 125 mm PIR. Should recycled materials also be encouraged?). B, energy efficient measures should be tradable so where you have double or triple glazing this could balance the areas such as walls where improving the wall might be difficult in practice.

Will you rate these according to highest heat loss zones first?

A table of maximum works well for households where comparisons are simple tocarry out and expensive consultants are then not needed thus reducing the initialcost to the household to carry out a cost exercise

2. Refurbishment – as defined in Part L1B.

3. New build – as defined in Part L1A.

Question: Q10

Existing regulation

Why would they?

Existing standards for SAP and Regulations already provide certainty ofperformance of a suitable requirement.

If we take the example of the 125 mm minimum loft insulation in the document and assume this is glasswool (the most common form of loft insulation used for both new build and existing upgrades). In a typical roof this would provide a u-value of 0.32 W/m²K. Part L1A 2006 requires a minimum 0.25 W/m²K area weighted average u-value (equivalent to 160 mm glasswool) with a 0.35 W/m²K as the limiting u-value for roofs.

As such then, to comply with Part L1A 2006 you would be exceeding the example minimum insulation levels you have prescribed in the RHI document.

There is a possibility that some developments may still be being qualified under Part L1A 2006 when the RHI kicks in but surely the majority would then be Part L1A 2010 which we assume will have higher minimum limiting u-values for each heat loss element area.

Therefore existing building regulations already provide the necessary energy efficiency fabric levels necessary for the RHI to be applied with robustness.

Taking this further, to use an ASHP and to gain SAP 2005 compliance you would already need u-value in roofs in the order of 0.15 W/m²K, walls 0.25 W/m²K and floors 0.20 W/m²K so again well in excess of the RHI requirements stated.

Only bio-fuel boilers and mCHP units currently provide the opportunity to reduce u-values below the intended levels but still not less than the minimum backstops in Part L1A.

Question: Q11

Yes, but how would you differentiate between a typical house and a block of flats where the flats are measured using SAP but the heating would be provided by a communal provision? We agree SAP could be used in this situation as it provides the necessary heat demands. SBEM would provide the heat demands for the communals.

We do not agree however with your determination for the RHI Tariff for solar thermal. The consultation assumes minimal maintenance with a panel located at a typical 5 m roof level (2 storeys). However on flatted developments panels will be at much higher position and require special access requirements to comply with the “work at height” safety regulations. As such we have on our schemes where we have incorporated solar thermal panes on roofs in excess of 10 m determined a maintenance regime, risk assessment and determined costs relative to the height of the roof location. Following the guidelines of the manufacturers for maintenance, allowing for scaffolding or “cherry-pickers” for safe access we have determined a maintenance cost of £100 per 2 panel array per annum. The extra cost would not therefore need to be factored into the RHI such that tall buildings are not penalised under solar thermal provisions.

We propose the RHI Tariff for solar thermal is reviewed to take account of different location, heights, of panels and health and safety measures necessary on less accessible locations for which the RIA has not considered the much greater cost.

Question: Q12

22 June 2010 Page 1094 of 1348

DEC’s and EPC’s can be used for existing and new.

All new buildings will have an EPC. It can be made part of the RHI that an EPC is the first stage of the preparation for application. This would then provide the data for establishing the current position of the properties performance levels. A SAP, SBEM or RdSAP can then be produced demonstrating the proposed improvement if required. A Post Installation EPC is not required until such time as the next point of sale when an EPC will be required for the HIP.

Question: Q13

No. How do you differentiate between the heating and waste heat on such large scale. However, appropriate metering could be used to measure heating energy separate from other energy streams.

Question: Q14

First problem is separating heating energy fro generation of waste heat energy. There will be a risk that CHP units will be run when demand for generation aloe is the major requirements thus generating potential waste heat yet gaining RHIfunding.

At this scale you are looking at higher infrastructure costs so these would need to be mitigated. The tariff proposed does not balance this but instead appears to work against larger scale solutions.

Question: Q15

We have no experience at this scale.

Question: Q16

No.

Question: Q17

It would appear reasonable but why do you think the solar would produce 60% of the hot water demand? Generally hot water is required in the morning when the panels are generating no heat and again in the evening when the panels are not generating much heat. Although the hot water store baked from the daytime charged from the solar panel will supply the evening hot water demand it will generally be depleted by the morning, the greater demand time, therefore more would be required from the boiler at this time.

We understand this relationship of solar thermal provision is under review and would suggest the new revised for the true useable outputs from solar panels are used in the final RHI consideration. Orientation is not mentioned but this also plays a major part and depletes the useable heat levels from the panels. Existing properties cannot be re-orientated therefore a lesser factor should be applied.

Question: Q18

We have no experience of this however at this scale a dedicated boiler would seem appropriate.

Question: Q19

This would have to occur in order to balance the enormous infrastructure costs involved.

Question: Q20

Surely the uplift should be based on the balance of renewable benefit; as such it would seem greater numbers of receivers would be required to justify this. Therefore Case by Case.

Question: Q21

Yes. Certainty is necessary for future planning of RHI qualifying solutions. It’s also necessary for secure funding.

Question: Q22

Yes

Question: Q23

Yes

Question: Q24

22 June 2010 Page 1095 of 1348

Are you suggesting the RHI will encourage the reduction in cost of renewable technologies as it encourages more take-up? This has been suggested in other areas but has yet to be seen as a robust method to justify cost reductions in the RHI tariff. There has been some reduction n cost of solar thermal panels, photo-voltaic panels, heat pumps etc but much of this has been more to do with thecurrent financial climate where specifiers simply force the prices down.

We believe the RHI may ell encourage investment in renewable technologies that may in time reduce the cost of said technologies but the industry has to be sure this is a real benefit before the RHI should be reviewed.

Should the RHI encourage any specific technology over another simply because it is a lower cost? What about overall efficiencies and life spans of the technologies. ASHP’s although at a higher cost premium per carbon free KW can be more cost effective in the long run as they are easier and cheaper to maintain and have a long life span. PV are becoming better but are restricted by the lower lifespan of the inverters necessary to convert DC to AC. These generally only last 5 years or so before needing replacing. New micro inverters are now becoming available which are more robust and have a longer life span.

In the end, design is what will determine the renewable technologies to be used.

The RH should encourage the most robust and long lived elements of the renewable heat reduction process, obviously starting with the fabric.

Perhaps there should be an increase in the RHI Tariff where additional reduction in heat loss from the fabric has been chosen. At the moment to go further with heat reduction through the fabric improvement will actually reduce the Tariff being offered and will or may therefore discourage super insulated homes/buildings from being developed where the heat demand becomes almost negligible.

It would be encouraging to have a tariff adjustment for such super insulated buildings such that this encourages them as it is known the fabric thermal benefit far outlasts any technology benefit.

Surely the fabric is the most effective heat reducing “technology” that could be applied to heat reduction in buildings so, why not encourage the development of fabric improvement over and above normal compliance levels? If you get a higher tariff for demonstrating greater reduced heat loss through the fabric then this would also assuage those who are sceptical about developers providing underperforming fabric levels such that they have to produce more heat through technology and therefore gain more from the RHI. Reward for both technology and fabric heat loss improvements measureable in the RHI.

Question: Q25

Yes but how do they work with the zero carbon timelines?

Question: Q26

A major decrease in the price of fossil fuels which could discourage take up of renewable heat technologies.

Global warming caused by carbon dioxide increase is determined to be unfounded. (however, whether the planet is warming up or cooling down either way we will need far more energy efficient homes than now to either decrease carbon production or stave off the cold in the event of global colding – S. FredSinger, Heartland Institute report, March 2008, Nature, Not Human Activity, Rules the Climate).

A major reduction in the provision of outsourced energy sources such as EDF leading to a need to speed up the carbon reduction program.

Question: Q27

Yes.

No.

Question: Q28

No. We do not believe the building industry could abuse the RHI tariff system by incorporating poor thermal envelopes to deliberately increase heating requirements and increase funding from the RHI even if they so desired. As stated earlier this is because regulations will prevent this. Additionally, developers of a size who would be able to carry out this has or will have sustainable policy drivers that would prevent this within their own organisations. Even unscrupulous individual builders wearing large Stetsons still have to comply with legislation. It is also within the powers of the review of this consultation and implementation of the RHI for there to be provision added that will encourage greater thermal efficiencies not lesser.

Important to the overall performance of the RHI is clear and transparent reporting and monitoring. We assume there will be a robust certification process following the initial MCS certification and monitoring process that will ensure as far as practicable that the RHI is not intentionally or unintentionally misused.

Building Control can provide “as built” reports easily and without too much additional administration cost and could even certify compliance with the RHI regimes/standards especially those outside the current remit of the MCS. Perhaps this should be incorporated within the scheme from the outset.

Question: Q29

22 June 2010 Page 1096 of 1348

We generally agree with the overall approach except where we have commented otherwise within this consultation.

We do have serious concern about the infrastructure cost of large scale heat networks especially where this may need to be as a retrofit solution. The RHI should however encourage systems and solutions through design to be incorporative of the connection to a heat network as and when a network could become viable. This should mean only the design covers this and not physical construction on sites unless a network was imminent. Schemes by design should only allow for such network connections and should not be forced either through the RHI or the Merton Rule application by Planners to oversize by design, solutions that may then be connectable to a heat network unless said heat network was included in the authorities planning strategies and an implementation date that would enable connection before the end of the specific RHI tariff commitment.

The RHI should consider alternative measures for hard-to-reach properties such as the envelope improvements we suggested are included. Simpler and more effective local heat reducing activities must be sought first in these locations before the application of a major connection. This could also be by way of funding the cost of renewable fuels delivery costs. The rate must be flexible, is this possible with a single reference position? As there will be many solutions in design there should be many references to measure these by that correctly weigh their potential.

Question: Q30

583 Martin Dixon (individual) Existing generator

SAP/SBEM


I have recently installed an Ice Energy Ground Source Heat Pump to supply hot water and heat for my house. Ice Energy recommended that I read and respond to the renewable heat incentive consultation on the proposed RHI financial support scheme. I therefore, forward you my response below, and would like to be considered for the RHI scheme when it starts, also I wish to receive any further information


No

Question: Q01

No

Question: Q02

Yes

AgreeQuestion: Q03

Yes

AgreeQuestion: Q04

Yes. To stop D.I.Y.

AgreeQuestion: Q05

No

Question: Q06

Yes

Question: Q07

Yes.Baised on % inclusion of bioliquids & fuel.

AgreeQuestion: Q08

Yes.

AgreeQuestion: Q09

No.Difficult in older houses and would be penalised for investing in insulation.

Question: Q10

22 June 2010 Page 1097 of 1348

Present building regs.

Question: Q11

No. new houses less RHI payment even with similar investment to others.


No. Quanity of people occupying house and quanity of hot water requirement should be included.


Yes.

Question: Q14

No.

Question: Q17

Yes.

Question: Q18

Yes.

Question: Q19

No.


No.

Question: Q21

Yes.

Question: Q22

Yes.

Question: Q23

Yes.

Question: Q24

Futher RHI baised on unit cost.

Question: Q25

Yes.

Question: Q26

lack of take up.

Question: Q27

RHI all after 15 July 2009, heat pumps toal before that date high capital cost & high running cost.

Question: Q28

No.

Question: Q29

No information.

Question: Q30

22 June 2010 Page 1098 of 1348

584 Action with Communities in Rural England NGO

Access to RHI for Village Hall Trusts/housing in rural areas, deeming


ACREAction with Communities in Rural England is the national umbrella body for the Rural Community Action Network (RCAN), which operates at national, regional and local level in support of rural communities across the country.

RCAN members are charitable local development agencies that provide a unique mix of services tailored to the specific needs of rural communities and exert strategic influence on their behalf with relevant county and regional stakeholders. RCAN members provide traditional infrastructure support. However, they also use a community development approach within rural communities to help tackle a wide range of local issues which include affordable housing, transport and community planning as well as community buildings.

ACRE co-ordinates the national village hall advice service that is delivered through RCAN members and are also a member of Defra’s Rural Community Buildings Network.

The RHI and Village Halls and similar community buildings in rural areasIn relation to the Renewable Heat Incentive consultation it is extremely important to be aware that the principle form of community buildings in rural areas are charitable village hall trusts. A survey by ACRE of 2,355 of approximately 10,000 community buildings in rural areas showed that 90% are charities run by local volunteer trustees. They are not incorporated, which means that trustees are very reluctant to take loan finance because they could either incur personal liability if a loan were not repaid or saddle the charity with a burden that might prejudice the future viability of the charity. There are also Charity Act restrictions on mortgaging charity property.

There is no mention at all of charities, let alone charitable community buildings, in the consultation at all. This is becoming all too familiar because they have previously been excluded or overlooked in energy efficiency and renewable schemes: eg the exclusion of community buildings from energy efficiency schemes for public buildings, the Oil boiler grant scheme and grants available for insulation of domestic property. Schemes for which they have been eligible are limited to the Low Carbon Buildings Programme Phase 2 (and its predecessor Clear Skies) and the lottery funded Community Sustainable Energy programme (CSEP) which closes in Dec 2010. Some have obtained grants from energy company schemes. Further financial support is essential in order for these and similar community organisations (sports clubs, churches etc.) to engage in renewables.

The 2009 National Village Halls Survey showed that investment in energy efficiency was extremely patchy and that less than 2% of respondents had renewable energy installations (and this is probably high as any bias in response will be towards committees that are more active in improving their facilities). 56% of respondent halls are over 60 years old, 33% over 90 years old. Many of these older halls are typical of “hard to treat” rural homes, with solid walls, high ceilings (for badminton). 19% of respondents are heated by oil, 37% by electricity and 38% by mains gas.

Heating is one of their major costs, unlike domestic buildings. Providing facilities for vulnerable elderly residents (eg lunch clubs) and pre-schools it is essential that they are warm otherwise those at risk will not leave their homes to attend activities designed for them owing to risk of hypothermia, leading to isolation. The escalation in energy costs has been a major problem because the costs cannot always be passed in full onto small local voluntary groups, who are the major users, leading to greater reliance on fundraising. Only 46% regularly make a surplus from hire charges, the remainder relying on fundraising and parish grants to make ends meet.

Housing in rural areasThe strong reliance on oil, coal and electricity for domestic heating in rural areas is acknowledged in the consultation and we welcome the intention to work with the Commission for Rural Communities in developing the RHI. Social Housing Schemes tend to be smaller than urban schemes (where CHP plants are suitable) and are particularly suitable for installation of renewable heating, but being smaller and located in areas of high house and land prices financial support is crucial to enable such opportunities to be taken.

[Extra information is (1) a copy of the ACRE Village Halls Information Sheet "How Green is Your Hall?" which is currently being revised (many of the grant sources no longer being available). This may provide more insight into the factors which need to be considered by trustees in investing in renewable technology and the guidance we can provide and (2) National Survey of Village Halls to which the response refers. Please note, the information sheet is attached to the first e-mail, the survey to the second e-mail sent by the respondent]


The unincorporated nature of village hall trusts, with volunteer trustees regularly changing, and consequence risk aversion makes loan finance an option which is unlikely to be taken up. Up front grant aid is an essential part of any funding package, though loan finance might be a minor part of funding. Many volunteer trustees are elderly and the complexity of the tariff arrangements proposed, with the long pay back periods, are unlikely to prove attractive. A clear financial package, supporting by technical advice and improvement to the charity’s long term running costs would be needed for charity trustees to engage with the RHI. Repayment of Government grants is already proving a problem for a small number of halls which have installed solar PV or wind generation under LCBP Phase 2 grants, which have been caught in the short window where payback has been required, with devastating effect on their business plan.

Question: Q02

22 June 2010 Page 1099 of 1348

The method of deeming for both community buildings and housing in rural areas needs to take account of the fact that they are used and occupied (especially in the case of social housing) by many elderly, disabled and infirm people who need higher levels of heating than the average family.

Question: Q13

585 Food and Drink Federation Trade Association

22 June 2010 Page 1100 of 1348

We have used this section to raise a number of general points and points not linked to specific questions.

Key Points

•Need early indications of how the Governmant intends to finance the RHI.

•To minimise costs of delivering the RHI there should be greater reference and focus on energy efficiency.

•To minimise costs and to facilitate more rapid adoption, allow RHI support for conversions of existing combustion plant and allow duel fuel firing.

Introduction

The Food and Drink Federation (FDF) represents the food and drink manufacturing industry, the largest manufacturing sector in the UK, employing around 440,000 people. The industry has an annual turnover of £70bn accounting for 15% of the total manufacturing sector. Exports amount to almost £10bn of which 64% goes to EU members. The Industry buys two-thirds of all UK’s agricultural produce.FDF Use of Heat

The food and drink manufacturing sector uses around 32TWh of heat per annum. Of this around 70% is through boiler and CHP systems providing steam and hot water to manufacturing processes such as cooking, evaporation, drying, space heating etc. and 30% into direct fired applications such as bread ovens and fryers. FDF and its members recognise the large potential that renewable heat has within the sector.

Initial reaction to the RHI has been favourable. Whether individual FDF members will take advantage of the RHI depend on other factors such as the regulatory landscape (EU Emissions Trading Scheme and future Climate Change Agreement targets), their views on energy and carbon prices, availability of capital (inhouse/3rd party), their views on the benefits provided by other support schemes such as the Renewables Obligation, Feed in Tariffs (for <5MW renewable electricity) and the assessment of CHP potential – both conventional and renewable. Non financial factors such as planning applications and the permitting regime also need to be factored into any decision on new investment in renewables.

Funding the RHI

The consultation does not detail how the RHI will be paid for and noted that a further announcement will be made in the March 2010 Budget. However, no further details were announced in the March Budget.

If by 2020 12% of heat comes from renewable sources the tariffs will be paid for by the users of the other 88% of the heat market who, presumably, remain using fossil fuels.

Initially in 2011, when the RHI will be introduced, we recognise that the impact on gas bills will be low as the uptake of the RHI will be low. However, as the uptake rises to an anticipated 12% by 2020 the cost impact on gas prices will rise.

The Regulatory Impact Assessment (Section H) provides DECC views on the cost of the RHI and the impact on gas bills. We note with concern the anticipated increase in industrial gas bills is around 4% by 2015 and 20% by 2020 with an average increase over the period 2011-2020 of 13% per annum. This will add around £100m per annum to FDF member’s gas bills.

At the earliest opportunity, Government must come forward with proposals on how it plans to fund the RHI, it must undertake further discussions and consultation with all affected parties to ensure its introduction is conducted in the most cost efficient and transparent manner. Government should also assess the cost of the RHI within the context of the wider and cumulative impact climate change and energy policies have on energy prices.

Energy Efficiency

Other than references to minimum level of energy efficiency standards in the domestic sector (loft insulation, double glazing etc.) there is no reference to energy efficiency in the consultation document.

FDF believes this is a major omission. Heat demand needs to be addressed ahead of low carbon heat supply. Any financial incentive to promote the uptake of renewable heat must be based on a comprehensive programme and awareness campaign to ensure that any heat produced is used in as an efficient a manner as possible and to minimise wastage. Heat loading and demand, and options such as heat recovery, also need to be assessed by operators. To do otherwise will have the inevitable consequence if increasing the cost of funding the RHI and future rises in gas bills will be higher than necessary for the same amount of benefit in terms of emissions reduction.

The CCAs provide a useful mechanism to reinforce the benefits of energy efficiency in the industrial sector and similarly the CRC in the commercial and public sectors. The Carbon Trust and the Energy Saving Trust will have a major role to play here and Government funding must be made available to ensure they can perform this particular role.

Policy

“The Low Carbon Transition Plan” launched in July 2009 introduced a series of mechanisms to help deliver the UK’s 80% GHG reduction target by 2050. Two proposals in particular are of interest to FDF members. Firstly, Feed in Tariffs for renewable electricity and, secondly, the proposed Renewable Heat Incentive (RHI).

We further note that the FITs will be introduced in April 2010 and the RHI 12 months later in 2011.

Question: Q01

22 June 2010 Page 1101 of 1348

Both FITs and the RHI would impact the financial appraisal of new renewable energy capacity. However, food and drink manufacturers are currently uncertain as to whether they should be appraising and targeting new renewable electricity or heat – or both. These conflicting policy messages, the absence of details on the RHI and the 12 month disconnect between them are most unhelpful for organisations trying to formulate future investment plans and will result in decisions being deferred until the policy and financial landscape are clearer. This uncertainty is further compounded when looking at planned investment in new Combined Heat and Power (CHP) particularly in the light of the planned reappraisal of CHP under the new CCAs – for which there are no specific proposals at present.

Government urgently need to present a final ‘joined–up’ set of climate change, energy, renewable energy and CHP policies and incentives. Having only part of the picture at present will only compound uncertainty and delay any action to actually start building and operating new on site low carbon energy supply sources.

Climate Change Agreements

There is no mention of CCAs in the consultation document (Chapter 5). We find this a strange omission given it is one of the major climate change policy instruments aimed at reducing Greenhouse emissions in the manufacturing sector.

In the food and drink manufacturing sector in house energy supply projects such as CHP or renewable energy are usually financed by the organisation or via a 3rd party such as an Energy Services Company. No particular leasing or financing legislation issues have been raised by FDF members.

Question: Q02

The proposals appear to a pragmatic way forward

AgreeQuestion: Q03

Typically, in the food and drink manufacturing sector, fuel combustion equipment such as boilers may have life cycle of up to 40 years although retrofits such as new burners, economisers, control devices, variable speed drives etc. are not uncommon. Restricting the RHI to new equipment would result in renewable energy only being considered viable when the existing equipment is at the end of its useful life – both operationally and financially. This replacement would be at a rate much slower than the Government plans for the introduction of renewable heat.

There are circumstances where existing equipment could be upgraded to use renewable heat energy sources which we believe should be supported by the RHI. Example would be conversion of coal fired boilers to solid biomass and gas fired boilers to burn biogas. In the latter example a site could generate biogas for injection into the grid or for use in on site boilers to replace natural gas. The former would be supported under the RHI whilst the latter would not. This difference in treatment is not logical and could constrain the uptake of renewable heat in our sector. Burning biogas in existing boilers will usually incur some capital costs such as new burners and control systems though clearly this would not be as large as for a completely new combustion plant.

We therefore urge DECC to change its intention not to allow the RHI for conversions. RHI tariffs should be proposed to reflect circumstances where existing plant can ne be upgraded to use renewable heat energy sources. FDF believes this will offer greater opportunities for uptake of the RHI than the current proposals. FDF, and its members, would be pleased to work with DECC to explore this further.

Please also see our response to Q19.

Cooling

FDF believes the issue of RHI support for cooling needs to be revisited for certain circumstances. Specifically, in circumstances where low grade heat is produced as a consequence of main heat/CHP energy production this heat, which otherwise could be wasted, could be used for adsorption cooling.

The logic is thus: If low grade heat, which would usually be in the form of hot water, is used for heating it would be supported by the RHI. If it were used for cooling, it would not, even though in both cases you are utilising the renewable generated energy in the hot water to replace alternative sources of that energy – namely fossil fuels.


DECC need to carefully consider the impact of allowing <20MW biomass boilers different emissions limits for particulates and NOx than for 20-50MW. Whilst it would no doubt facilitate the uptake of <20MW biomass plant, how this matter is judged alongside air quality standards and local environmental impacts is an issue where DECC needs to issue clear guidance to potential new operators. In particular, the EA permitting requirements, need to offer clear guidance to operators and should not prejudice or overly complicate the delivery of such projects.

If DECC do propose specific air quality standards they must stand for the lifetime of the plant (i.e. for the duration of the RHI support period). Retrospectively tightening standards would incur considerable compliance costs for operators and could make the operation of the plant technically and financially unviable.

Question: Q09

Yes – though this section only addresses the domestic sector. Please see Q1 for FDF comments on energy efficiency.

Question: Q10

22 June 2010 Page 1102 of 1348

Agree that metering is appropriate for large scale applications

AgreeQuestion: Q12

Agree. The driver of heat demand in a food and drink manufacturing process is decided by production schedules and meeting order deadlines. When you factor in energy costs and the need to comply with climate change policy instrumants such as Climate Change Agreements the risk of a perverse incentive to over generate is, for practical purpose, non existent in the food and drink manufacturing sector.

Ref page 45 under ‘Practicalities of heat metering’ and the proposal to have no outlet valves sited after the heat meter that could be used for heat dumping: Such devices as relief valves are often built into stream distribution systems for safety reasons. DECC should consult with relevant experts to obtain further guidance on this issue. We also question the practicality of this and how it would be assessed and enforced.

Question: Q14

The food and drink manufacturing sector is a significant user of CHP with around 500MWe installed capacity. It is recognised that there is significant further potential though relatively few new installations have come on stream in recent years largely due to poor payback periods and uncertainty surrounding the regulatory framework.

CHP is recognised as delivering efficiency and emissions benefits over and above heat or electricity only plant. Given these benefits FDF believes a separate and higher tariff for renewable CHP compared to renewable heat only is justifiable to overcome the, typically, higher capital and operational costs of CHP plant

Question: Q15

With reference to comments provided to Q7 and Q19 FDF believes there is an opportunity to introduce a RHI tariff for biogas combustion in converted and/or dual fuel combustion plant including CHP. We believe that the option to utilise existing plant will lead to an easier and quicker uptake of biogas renewable heat than would be the case than if uptake was predicated only on new plant being financed and built.

Question: Q16

FROM Q1 - Initial reaction to the proposed tariffs levels has been favourable. Whether individual FDF members find this attractive will depend on other factors such as other planned low carbon investment, EUETS and CCA targets, their views on energy and carbon prices, availability of capital (inhouse/3rd party), their views on the benefits provided by other support schemes such as the Renewables Obligation, Feed in Tariffs (for <5MW renewable electricity) and the assessment of CHP potential – both conventional and renewable. Non financial factors such as planning applications and the permitting regime also need to be factored into any decision on new investment in renewables.

We are not in a position to comment on individual tariff rates etc.

Question: Q18

No. The uptake of renewable heat will be greater in our sector if conversions and/or dual fuel firing are supported under the RHI.

Manufacturing sites with bio-gas production have the opportunity of firing this gas in existing or new combustion plant that could also burn natural gas. In these circumstances the RHI should be available to support the bio-gas component of the fuel input. Operators should not be required to install separate, dedicated plant to burn the biogas as this increases costs if you need two separate systems (particularly if bio-gas can only supply part of the site heat demand) and also compromises combustion plant efficiency if you have separate plant running on part load (combustion plant runs most efficiently on high load).

Separate metering of the bio-gas and natural gas fuel inputs could easily be used to determine the renewable heat component of a dual fuel system.

DECC should therefore allow RHI payments for bio-gas components of dual fuel systems and propose RHI tariffs for this type of operation.

This issue is closely linked to the point raised under Q7 regarding conversions.

Question: Q19

Yes. Yes, tariffs should be fully fixed for the duration of the project. Any risk that they would change could undermine investment confidence resulting in projects not being taken forward.

Question: Q22

Yes, we support the proposal and concur with DECC’s view that at present there is still a lot of uncertainly surrounding costs and RHI take up.

AgreeQuestion: Q23

Agree – with reference to our comments on the policy landscape under Q1 the proposal to align the review of the RHI with that of the RO is sensible.

AgreeQuestion: Q26

22 June 2010 Page 1103 of 1348

An emergency review should be conducted if the RHI impact on energy bills is larger than expected or is seen to impact the competitivity of UK manufacturing industry.

Question: Q27

AgreeQuestion: Q28

The proposals appear to be a sensible and pragmatic approach. DECC should avoid the temptation to include further detailed rules and requirements without first assessing the impact that added complexity has on participating organisations.

Question: Q29

586 Andrew Lock (individual)

1.If the government is only going to support future installations of carbon reduction systems then there will never be any encouragement for those individuals who “dip their toe in the water” so to speak and install the likes of biomass boilers off their own back.2.If this approach is adopted then the implementation of any new carbon reduction solutions will only happen on the back of government incentives which as we know often take many years to be put into place. This whole approach disincentives those innovators and industry champions who carry out the demonstration projects at their own risk. 3.The government established the Low Carbon Buildings Programme to ensure suitable technologies were installed professionally and supported by grants towards the capital cost. It is my opinion that all systems installed under this programme should be rewarded with the heat incentives proposed4.I purchased an old property that was heated by a coal fired Rayburn and it would have been very easy for me to simply switch to oil or calor gas. I didn’t, I chose a wood pellet boiler under the LCBP and at great additional expense to myself. I also installed solar thermal hot water but receive no heat incentive for that either.5.I also installed a rainwater harvesting system and approached my local water authority about any sort of grant towards the capital cost, but this was declined. My only benefit now being that I have a metered supply and pay much less on my water bill.6.It seems that anyone who has an interest in reducing carbon emissions and who doesn’t wait until someone lays it on a plate for them will always be penalised and lose out on such retrospective incentives.7.As we know, the cost of biomass fuels is not the cheapest at present, currently on a par with oil and calor gas and yet there is no reward for being environmentally friendly.8.The new feed-in tariffs that came into effect on 1st April for electricity generation support previous installation such that those people who installed PV and wind turbines before such incentives were even talked about will be rewarded accordingly. The same should apply to heat generation. I would point out that I work in the construction industry, trained as an architectural technologist and now work for a construction company building affordable housing and care homes. I provide extensive advice and support to many of our clients on sustainability issues and feel that the government should be consistent in their approach to such incentives and encourage innovators wherever possible to preserve our environment for future generations.


587 Redrow Homes Potential generator

Yes

Comments: 1. Consideration of specific application and impacts for phased, large scale development projects where construction takes place over a period of years, and district heating/CHP is currently the most likely solution proposed. Infrastructure ie: heat distribution pipework is likely to be incrementally constructed and energy centre construction may not be viable for some years into the development. Special measures may prove necessary to support the marketing of early phases to encourage ownership and to ensure that the scheme as a whole, is not inadvertently excluded from RHI, or that early occupants are not disadvantaged.

2. Consideration of special incentives for older owner occupiers who, as a result of their age are sceptical about payback periods and the benefit of take up.

Question: Q01

Yes

In respect of developers proposals, legal arrangement of payment of RHI and provision of enforcement measures for non-compliance may add to cost burden.

Question: Q02

22 June 2010 Page 1104 of 1348

NoComments: Principles set out seem acceptable, but do not adequately explain developer situation and require further explanation.Would the developer send proof of certified installation to Ofgem to enable preparation of registration and purchaser then makes full registration submission?

Question: Q03

No

Comments: MCS certification does not qualify installer to undertake SAP assessment. They will need to be qualified as Domestic Energy Assessors.

Support needs to be provided to ensure that adequate MCS training facilities are available to provide sufficient numbers of installers.


Yes

Question: Q05

Comments: Insufficient knowledge to comment

Question: Q06

NoComments: It seems strange that wood fuelled only, range/backboiler installations appear to be excluded, particularly if they are the primary heating source for the property.


Yes. No knowledge of other bioliquids

AgreeQuestion: Q08

Comments: Insufficient knowledge to comment

Question: Q09

Attainment of a minimum building fabric performance should be a prerequisite of RHI, but in setting the standard care will be needed to capture a wide range of basic building construction methods.

Question: Q10

Comments: The text in the document does not recognise the tremendous increase in building fabric energy performance of new build property as a result of the introduction of more stringent, building regulations. New homes significantly outperform older stock and it will prove to be costly, if not impossible to retrospectively raise the level of performance of the majority of existing stock to the levels achieved by 2006 Part L, let alone the proposals for 2010 Part L or the standards which will be applied in 2013 and 2016. Introduction of additional eligibility constraints for new build, which are out of step with requirements for existing stock risks further compromise of the viability of new build homes versus existing stock. We would suggest that you carefully consider the impact before applying additional eligibilty criteria.

Question: Q11

Yes

Question: Q12

No

Comments: SAP/SBEM should not be modified for use by MCS installers.Both are complex tools and assessment should only be undertaken by Domestic Energy Assessors. Effective “dumbing down” of the calculations may lead to unfair advantage in favour of old stock.


YesComments: However,more accurate measurement of actually used heat on large scale developments could be achieved by smart metering customers rather than installation output. We do not have sufficient knowledge of the heat meter market to comment on cost, availability or reliability.Ownership of meters on large scale developments needs to be clearly established.

Question: Q14

22 June 2010 Page 1105 of 1348

Comments: Tariff lifetime for large scale biomass seems short and a potential disincentive, given the the initial capital investment and commitment involved and the likelihood that the equipment will be properly maintained.

Question: Q15

Insufficient knowledge to comment

Question: Q16

No

Question: Q17

No

Comments: See comment in Q15.

Question: Q18

Yes

Question: Q19

Yes

AgreeQuestion: Q20

Yes

Comments: District heating/chp currently represents the only practically and commercially viable method of achieving the higher levels of the Code for Sustainable Homes for large scale developments. Defining of “hard to treat”properties will be therefore be problematic.

As previously referred to, care is also required with the proposal to only make uplift available where the network is built simultaneously with the boiler installation. This is not a practical view for large scale development .

Small scale rural developments could conceivably constitute around 5 units.

Question: Q21

Yes

Question: Q22

Yes

AgreeQuestion: Q23

Yes

AgreeQuestion: Q24

Comments: With respect to solar thermal, wider take up of application to space heating and hot water might be incentivised by increasing tariff payments for this type of installation. Increasing volumes should in turn, result in reduced cost.

Question: Q25

Yes

AgreeQuestion: Q26

Comments:1.Issues which come to light during operation of the scheme which clearly result in unintended consequences ie: exclusions, disproportionate take up of one technology over others, disincentivisation of some technologies.2. Catastrophic disruption of grid energy systems.

Question: Q27

Yes, subject to SAP assessments being undertaken by properly qualified personnel.We have no evidence in respect of the second half of the question.

Question: Q28

22 June 2010 Page 1106 of 1348

Yes

Comments: There appears to be ample opportunity within the “deemed”sector for collusion between fraudulent installers and end customers, particularly where unscrupulous landlords might be involved. It is either accepted that this is a risk and that limited audit work by Ofgem may pick up some, but not the majority of abuse, or that a check system is established with some encumbent cost. It would be possible to reserve the right to undertake regular installation checks, perhaps by nominated MCS installers. If a high proportion of checking is carried out in the introductory phases of RHI, the knowledge that these checks are being undertaken may be sufficient deterrent to enable checking to be diminished in due course.

Question: Q29

Comments: We currently have no useful data.

Question: Q30

588 Energy Innovations (UK) Ltd

Biomass, abuse


We are installers of biomass heating systems ranging from 10kW up to 2MW. As such we see our response as being relevant only to small and medium scale biomass systems. We have deliberately not offered comments on issues relating to other technologies.It should be assumed that all comments we have made are in relation to the use of biomass heat only technology only. Where there is a distinction between small and medium scale technology we have made this clear.

We feel this will be a great incentive scheme for this industry. We hope are comments are helpful and would be very happy to meet with you to discuss any of these issues further. We have spent a great deal of time looking at the effects of tariff levels and support structure and feel this is a key issue to get right at this stage.

We have attached some graphs and calculations carried out in Excel. It may be that you would like further explanation of our calculations and assumptions made. Please feel free to contact us by phone or e-mail if this is the case. Again, we would be happy to meet and discuss these c alculations in person if required.

No

Question: Q01

It is most important that the level of RHI attributed to a particular installation is fixed forthe 15 years. We appreciate this is in line with your proposal, but would like to re-iteratethe importance of this in allowing operators to secure finance against the background ofthe RHI. It is also important that payment timings and schedules for approval and issue ofpayments are not allowed to slip. As such, this requires the approval process to beextremely well organised in order that operators can be sure budgetary constraints can bemet.

Question: Q02

22 June 2010 Page 1107 of 1348

Yes

We agree with a central database but given the concerns expressed previously to DECCabout Ofgem’s performance on other schemes we would seek assurances for amechanism to be in place for A N Other to be able to replace Ofgem if at the first review the consensus is that they are not delivering the services expected.

In the statement ‘requiring the installer … to install appropriate technology for the site’there needs to be an intrinsic understanding that the optimum CO2 saving for a given siteand the optimum economic return on investment will not always be the same. Ofgem, orany other administrative body, must not become an arbiter in this area. If it needs to bereviewed it should be done at the following review.

RHI entitlement should start from the time the plant is signed off by the installer not thedate when Ofgem have completed the registration process.

Payments: If a commercial landlord installs a district heating main across a site to a centralpoint and then purchases contract heat supplied by a company who own and operate, forexample, a modular containerised biomass plant on a 10year deal there should be amechanism for the district heat uplift to be obtained by either the landlord or the ownerof the biomass plant even though ownership may be split.

Self certification: If the owner of plant is receiving deemed payments there must be anannual return confirming that the plant is being operated. A simple hour meter built into aboiler control system confirming the annual running hours is possible and may be anappropriate figure to have included on the annual return if the RHI is to be paid.Maintenance: The annual return should state by whom and when the annual service wascarried out.

AgreeQuestion: Q03

Installer Approval

MCS can be made to work, but needs a bit of re-organisation:It is our view that installers should be approved under MCS or equivalent. There is some question as to whether the current Micro-generation Certification Scheme (MCS) is limited in its ability to properly cater for the range of installers operating and likely to be operating in this country. The scheme will need to cater both “one man bands”, as well as large commercial companies with upwards of 200 employees. Having said this it is obviously not the case that a smaller company should be working to different standards to a larger company, but the accreditation scheme allows for this range. There are clearly elements of the MCS organisation which are not working, but this does not mean that the accreditation scheme cannot be made to work. There may need to be a change to how the organisation is funded and operated. At the moment it seems possible that the scheme will restrict the ability to get new entrants into the market place and so restrict the roll out of the RHI.

Whilst any issues are being addressed, we need to be careful not to penalise those whohave already gone through MCS Installer Accreditation, which is obviously a costlyprocess.

There needs to be one product approval scheme only. We currently have to work with:

• Clean Air Act Exempt Appliance List• Energy Technology List• Micro-generation Certification Scheme (which is by far and away the most expensive list as for most companies who install a range of both domestic and industrial boilers, the costs would be in the region of £20,000, if current cost levels remain)

It would seem sensible to have one scheme to cover the items covered by these various schemes. This should incorporate:• Emissions Testing (NOX, PM) use type tests – similar to EN303-5• Efficiency Testing• CE Mark, EN303-5 < 300kW

The current Energy Technology List approval process is already achieving these goals, alongside a rigorous program of boiler testing (carried out by Gastech Ltd) and could be relatively easily extended and it may want to add to current requirements:• Incorporate Clean Air Act requirements

If needs be could this, or a similar scheme, be managed by AEA Technology? They already work in the field and are very effective at what they do.

It should not be necessary to test every boiler from every range as this has obvious cost implications to the installers / manufacturers and ultimately the end-users. Also market forces for determining the superior quality ranges will come into play regardless of the tests undertaken.

If the MCS scheme is the chosen scheme, but any of the above changes are implemented, there will be a need to be careful not to penalise those who have already gone through existing product accreditation.

Question: Q04

22 June 2010 Page 1108 of 1348

Installer Approval

We feel that installers operating beyond this limit should be approved. It is hard to identify a sensible alternative to the current MCS scheme at the current time and as such, we feel, once developed as discussed earlier the scheme caters for these larger installations. Any duplication of scheme as a result of needing a different approval to install above or below 45kW will simply add unnecessarily cost burdens to the installers and complicate matters further. There do not seem to be any reasons why the MCScertification should be limited to this range.

Product Approval

Again, we agree that only certified equipment ought to be eligible for the RHI, however, as outlined in the response to question 4, we are not convinced that this should be in the form of MCS accreditation. However there does need to be one product approval scheme only. We currently have to work with:• Clean Air Act• Energy Technology List• Micro-generation Certification Scheme

Again, it would seem sensible to modify slightly one of the existing schemes scheme to cover the items covered by these various schemes. This should incorporate:• Emissions Testing (NOX, PM) use type tests – similar to EN303-5 up to 1MW or onsite testing if necessary.• Efficiency Testing• CE Mark, EN303-5 < 300kW• Incorporate Clean Air Act requirements• Be subject to periodic boiler testing in the UK

As discussed above, the Energy Technology List is probably the best candidate to take this on.

If the ETL were extended to incorporate these items, there would be no need for separatelists for differently sized boilers.

Question: Q05

Installer Accreditation

We cannot think of any equivalent installer accreditation standards and think that with certain amendments, the MCS scheme is comprehensive enough to stand alone, whilst being achievable for all suitable installers.

Product Accreditation

As discussed above:Energy Technology ListClean Air Act Exempt Appliance ListCE MarkingEN303-5 (for up to 300kW)

Recognising these standards for the RHI should be very simple, as it would just be that any boiler not listed on the chosen list would not be eligible for support.

Question: Q06

New Repaired and Converted Equipment

It is understood that making payments to boilers installed pre 15 July 2009 will not directly lead to additional CO2 reductions, but it can be argued that many of these operators will be penalised for doing the “right thing” in installing pioneering technology. It is also a fact that the increased demand for wood fuel will cause fuel costs to rise, further penalising these early adopters.

Cooling

We feel that cooling, where it is derived from renewable heat, for example absorption chilling, should be eligible for the RHI.

Question: Q07

None


YesThe biomass boilers we use comply with these requirements.

AgreeQuestion: Q09

22 June 2010 9 of 1348

Biomass heating systems offer an opportunity for properties with insulation levels lower than current modern standards. For reasons such as listed building controls, it is not always possible to install energy saving measures such as double glazing and cavity insulation to modern extents. As such biomass heating allows these properties to make use of a low carbon technology, at least dramatically reducing the carbon impact of these properties. If these properties are excluded from the RHI as a result of their inability toinstall energy saving measures to given standards, this will simply result in these properties continuing to burn fossil fuels. We agree that energy saving measures should be adopted where possible and should certainly be encouraged where practical and legally possible. We also agree that through the use of deeming, energy efficiency will be encouraged through cost management.

Please see Appendices 1 & 2: RHI Support Levels and the use of Deeming


None

Question: Q11

Yes.

We agree that deeming should be used up to 500kW, with metering only used by thoseoperators who feel they are operating above the deemed level. At this point we feelthese operators should be paid on a fuel only basis.

Please see Appendices 1 & 2: RHI Support Levels and the use of Deeming.


We agree with the principal of making use of existing methodology rather than creating something new. There is currently no better system. There is however scope to adapt and approve these methodologies. One suggestion would be to make improvements to the software, or new software, to facilitate extraction of the relevant data such as required boiler output.

AgreeQuestion: Q13

Metering will have to be used at these levels. The risk of a perverse incentive to over generate will have to be mitigated. Simple mechanical measures such as those proposed, together with some level of auditing should be sufficient. The actual level of incentive should also be a factor.

We see no issues with meters meeting the requirements of EN1434. This is the standard currently in place across Europe where, in certain areas, heat metering is much more commonplace. The availability of heat meters should not be a problem with the UK representing a small market to the major manufacturers. Reliability will not be a problem as long as good quality meters are used. Meter verification might be worth considering, but legislation is in place to cover this. The cost of heat meters on these systems shouldnot be seen as an issue, where costs should be considered over a system life-time. As such the additional cost of a good quality meter will be better value over this longer period of time.

Question: Q14



None

Question: Q16

None

Question: Q17



Yes.

Question: Q19

22 June 2010 0 of 1348

Yes.

If renewable heat is to be appropriately incentivised for schemes where individual fossil fuel boilers would otherwise be installed the additional investment required to install district mains needs to be recognised. We also believe that due to the larger physical volume of biomass boilers and the associated fuel stores even when heat is being supplied to a single property the cost of a district main is frequently relevant and to limit any uplift to a multiple of properties may cause some otherwise viable projects not to proceed. An example of this would be a block of flats / office block where the total energy use is significant but space in / immediately adjacent to the building is very limited and a single main is required to allow the biomass plant to be located in a viable location.

AgreeQuestion: Q20

We do not believe in a case by case assessment as this will cause additional bureaucracy and elements of opinion and subjectiveness. We have modelled a number of scenarios to give a fair and appropriate uplift regardless of the size of scheme. We believe the fairest scheme would be one based on the recorded kWh used at each property and the distance of main used to link each property to the central plant room. Itis already accepted that heat meters will be used and registering the distance of main installed at the time each project is registered need not be an overly complicated process.

Appendix 3 shows what we believe to be a fair and appropriate solution.


Yes.

We agree with fixing the tariffs for the duration of the projects eligibility period. Asdiscussed under question 2, in relation to our points relating to the securing of finance.We also agree that the “fuel part” of the bio-energy tariffs should be included in this fixedlevel, otherwise the scheme will be too complicated. However when adjusting to correctfor inflation the fuel element of the payment structure should not be linked to the RPI orother standard inflation measures as it is probable that fuel costs will increase at a fasterrate. This would have a very significant effect on larger heat users.

Question: Q22

Yes.

It is important to limit the level of uncertainty associated with the scheme to allow peopleto make long term decisions effectively. The maximum % degression allowed for eachreview period should be detailed from the outset.

AgreeQuestion: Q23

Yes.

None

AgreeQuestion: Q24

None

Question: Q25

No

We feel the review is too soon. If it is necessary to have a review, digression should beexcluded from this review. Again, any uncertainty will reduce the roll out of thesetechnologies. The process of planning, designing and developing large biomass heatingschemes are such that operators may already be looking at a commissioning date beyondthe review date. This will cause large project to be “put on hold”


It is understood that making payments to boilers installed pre 15 July 2009 will not directly lead to additional CO2 reductions, but it can be argued that many of these operators will be penalised for doing the “right thing” in installing pioneering technology. It is also a fact that the increased demand for wood fuel will cause fuel costs to rise, further penalising these early adopters.

Question: Q28

22 June 2010 Page 1111 of 1348

We feel the current bands of RHI support levels linked to boiler size will cause operators to seek to install boilers just below or close to the upper limit of each band. It is necessary for a number of reasons to allow back up boilers to be installed. These can easily be operated as top up boilers, as such reducing the size of biomass boiler installed in order to draw down a higher tariff. Regardless of any levels of legislation and control incorporated into the scheme it will be very difficult and costly to police this. The support levels are currently such that the annual income received from the RHI support will be considerably greater for a boiler below 500kW over a boiler which is over 500kW. We feel it is very important that the levels of support should be such that they do not manipulate to size of boiler installed on different sites regardless of the actual heat load.

Please see Appendix 1: RHI Support Levels and the use of Deeming.


Please see Appendix 3: District Heat Main Uplift


589 TESCO Private Company

Technologies


We are already investing in renewable heat production in the absence of any Government subsidy: we have trialled and rolled-out a wide variety of technologies including solar, heat pumps and renewably-fuelled combined heat and power (CHP) plants. Nevertheless, the Renewable Heat Incentive (RHI) could considerably strengthen the business case for further investment and wider deployment.

However, we feel that there are some features of the proposals that would lessen the effectiveness of the RHI, particularly in relation to the treatment of bioliquids. We also believe that more detailed consideration should be given to the RHI’s position in the broader policy landscape and to its overall costs.

The broader policy landscape

The RHI is one of a broad range of different policies designed to tackle climate change and improve energy security, many of which are overlapping. The policy landscape is increasingly complex and this leads to uncertainty and reduced business confidence. A certain amount of complexity can be necessary to meet different sectoral objectives. However, we urge the Government to take stock regularly of the overall policy landscape and consider how it might be streamlined and simplified.

We also note that the costs of the RHI are likely to be high - the proposed tariff would appear to carry a cost of several hundred pounds per tonne of carbon saved - with consequent effects on the future price of natural gas. This highlights the importance of policy makers ensuring, in designing interventions such as the RHI, that costs are kept to the minimum level required to provide the necessary incentive to deliver the carbon savings and security of supply we need.


Administration and payment approach (Answers Q3, 10, 12-14)

We broadly support the proposed role of Ofgem in the administration of the RHI, although every effort should be made to keep the administrative burden to a minimum.

It is essential that the RHI is designed in such a way that it does not incentivise the production of renewable heat at the expense of more cost-effective efficiency improvements or (as mentioned above) waste heat recovery. We therefore support the proposal to base small and medium-scale payments on ‘deemed’ heat requirement rather than actual metered heat production, to prevent the RHI acting as a perverse incentive to produce excess, unnecessary heat. However, regular review will be required to ensure that the deemed outputs remain defensible. Furthermore, we have some concerns about the use of the Simplified Building Energy Model (SBEM) to deem heat requirement for non-domestic buildings. Our experience suggests that this tends to result in an underestimate.

Question: Q03

Other technologies

We would also recommend that consideration be given to the inclusion of some other technologies in the RHI. In particular, while not strictly renewable, waste heat recovery from refrigeration can significantly reduce the overall heat demand from our stores and RHI support would help to improve the business case for this technology. Large scale energy from waste and inter-seasonal heat transfer also have significant potential for use in our stores and other buildings, and we would be happy to discuss with you how they might be included in the scheme.

Question: Q07

22 June 2010 Page 1112 of 1348

Eligibility of bioliquids

We have significant concerns about the proposed exclusion of bioliquids from the RHI. The argument that biomass is more cost-effective should not be a consideration as, if true, the market will favour biomass. But Tesco has chosen to install bioliquid CHP plants in 13 of our stores. In many cases this was the only feasible technology for renewable electricity generation on the sites in question, without which we would have been unable to meet planning requirements.

A number of our stores currently burn heating oil as they are off the gas grid and could reduce emissions significantly through the use of bioliquids. The proposal to support bioliquid use for homes in this situation should therefore be extended to non-domestic buildings.

Furthermore, while our existing plants will continue to benefit from the 0.5 ROC uplift to support renewable CHP, the proposal to remove this uplift for new installations built from 2013 will seriously threaten our bioliquid generation programme and endanger the future development of the bioliquid market.

We therefore strongly recommend that bioliquids are included within the RHI. We recognise concerns about the scarcity of supply of bioliquids, but suggest that the sustainability standards under the Renewables Directive should address these. However, further conditions, such as a limit on the total volume that can receive support, could be considered if necessary.


The proposed rate of return and tariff levels seem broadly appropriate. We agree that tariffs should be fixed for the duration of a project’s entitlement to support, but this should not apply to the fuel component of bio-energy tariffs. Tesco’s view is that the fuel component should change with the fuel price so as to continue to provide the necessary level of support to the technology when costs fluctuate.

Question: Q18

590 Chesney’s Ltd Manufacturer

As a leading UK based wood stove manufacturer we read with interest your document on the proposed RHI financial support scheme. Today’s generation of wood burning stoves are generally far ‘cleaner’ than those manufactured in the past. Current technology which incorporates clean burn air wash systems ensures that many stoves create a very limited level of emissions as well as achieving extremely high efficiency ratings. However there are a still a great many stoves is use and a number being manufactured, which produce unhealthy levels of wood smoke and are far from efficient. Encouraging the use of wood as a renewable heat source is of course desirable but would it not be sensible to link this to a scheme which encourages the public to consider the performance of an existing stove or one that they are considering purchasing and rewards a responsible choice in terms of emissions and efficiency with some type of financial incentive. You will no doubt be aware of the wood stove ‘changeout’ scheme which is being implemented in an increasing number of states in the USA. The US Environmental Protection Agency state that a stove certified in accordance with their current testing criteria will emit 70% less particle pollution and be approximately 50% more energy efficient than a stove manufactured before 1990. As a consequence significant financial incentives are now being offered in a number of States to those wishing to change old stoves for efficient clean new products.

Would it not be sensible to consider a scheme along similar lines for the UK ? Also, we wonder whether any consideration been given to a scheme similar to that in France whereby a tax credit is given of up to 50% of the cost of a new and efficient stove ? These are the type of immediate incentives that will be far more likely to encourage the public to take action that will have the dual benefit of maximising use of a renewable energy source and contribute to a cleaner environment and the reduction of Co2 levels.

Question: Q01

591 Brunner Mond Manufacturer

Large scale technologies


As regards to the consultation we are fully supportive of the RHI concept. The following are a couple of key observations: 1. Large scale CHP EfW plants linked to industrial processes can play a major part in delivering the Government strategy on renewable energy. As large installations they can deliver a lot but are expensive to install. We suggest that the compensation level for these technologies should be enhanced either through lengthening the period over which RHI is paid or increasing the payments. This is because financing of such projects in particular after the credit crunch has become a lot more difficult and banks are looking at more guarantees and higher returns than the 12% used in this document.

2. The definition of waste derived fuel needs to include all types of waste including municipal waste, commercial and industrial waste or sorted biomass waste


22 June 2010 Page 1113 of 1348

1 While we appreciate that this consultation has to cover a wide range of sizes, technologies and applications it is surprisingly brief on large industrial applications, particularly CHP, especially considering the significant contribution that renewable and sustainable energy can make replacing fossil fuel derived heat.

2 We find it very disappointing that the funding mechanisms for RHI are totally absent from this consultation, which implies “we know what we want to do but we don’t know how to fund it!” To this point we are concerned that particularly gas fired CHP will remain a cornerstone of Government strategy on the route map to a low carbon economy and will be probably the last technology to be successfully replaced by other carbon neutral technologies.

Fossil fuel CHP remains as a main stream contributor to the government’s strategy on climate change and overall reduction in CO2 emissions. In the Feb 2009 consultation document on “Heat and Energy Saving Strategy” DECC provided a whole chapter on the importance of existing and future fossil fuel CHP stressing the importance of this sector in achieving high levels of overall energy efficiency. Even taking a long term view out to 2050 the government recognised that as long as fossil fuel continues to be used for electricity generation then CHP has a vital role in delivering maximum efficiency for electricity and useful heat generation.

In this consultation document DECC asked two of the key questions:

“Q25: Will the ETS and other policies, such as the Carbon Reduction Commitment and support for renewable combined heat and power, send a strong enough signal to encourage the development of CHP schemes and more efficient use of surplus heat? If not what measures do you believe would provide sufficient stimulus to accelerate new CHP capacity build? Can you provide evidence to support your view?”

To which Brunner Mond replied

“No. Energy recovery schemes are expensive although potentially cheaper than new buildfor renewable energy and existing incentive alone have proved to be so variable that they are insufficient to support proper investment decisions. The introduction of a RHI incentive to cover recovered as well as renewable heat could remove this barrier.”

“Q26: As electricity generation overall becomes much less carbon intensive than today, the advantages of CHP powered by fossil fuel in reducing carbon emissions will diminish, although it will continue to be a cost-effective energy efficiency measure. When do you think CHP powered by fossil fuels will no longer help to reduce emissions because the alternatives are less carbon intensive? “

To which Brunner Mond replied:

“CHP will continue to have a long term future in the UK energy mix and should be the last of the fossil fuel technologies to be replaced given its remarkably high operating efficiency (80 – 90%). The Key to the continued success of CHP is to provide proper incentives to existing and new CHP through both EUETS and Recovered Heat Incentives together with effective matching of available heat with heat demand.”

Industry is now faced with the fact that not only is the Government declining to give sufficient support to promote CHP it is actively pursuing a policy which will penalise good quality CHP and rather than maximise the efficient use of energy will drive CHP operators to generate just enough heat to satisfy the minimum QI requirements to maintain their good quality status. This could result in as much as a 10% reduction in recovered heat. More importantly it is yet another factor which will deter potential investors from investing in CHP schemes.

The real sinners in this game are the generators who throw the heat away and the users who just use fossil fuel to generate heat and either can’t or choose not to generate any electricity.There has to be a very strong case for the exemption of good quality CHP from the RHI levy on fuel at least in the medium term subject to review based on viable alternative low carbon energy sources.

Question: Q01

Yes. The major financing barrier relates to the risk of the rules being changed especially for large industrial scale processes. Planning, financing, design construction and commissioning of plant of this scale can take 5 or more years. The financial case for the installations has to be based on some certainty. What is not clear is the exact point at which the level of RHI for a particular installation will be fixed. It is pointless if the fix is at commissioning as this could be at a point of one or two reviews downstream. We would suggest the fix should be at financial close for a project when the case will be judged by the institutions which will provide funding.

Question: Q02

For industrial applications your proposal is that RHI payments can only be made to the “owner” of the plant used or intended to be used for the renewable generation of heat. We appreciate the objective here but it is the down stream user who decides how to use that heat. By the very nature of complex industrial processes there will be occasions when renewable heat is not effectively used. While we appreciate such heat should not attract the levy it will put a heavy load on the heat generator to monitor how his customer uses the heat. This is an area which requires further thought and discussion.


22 June 2010 Page 1114 of 1348

No – See also the response to Q19

There is a complete absence of information here on the position of waste as a source of renewable energy. The European Renewable Energy Directive clearly defines ‘Biomass’ in relation to renewable energy as follows:

“‘biomass’ means the biodegradable fraction of products, waste and residues from biological origin from agriculture (including vegetal and animal substances), forestry and related industries including fisheries and aquaculture, as well as the biodegradable fraction of industrial and municipal waste;”

The consultation document is confusing and imprecise on this issue.On page 21 the document refers to “solid recovered fuel” - a recognised source of energy with a biomass content.

Page 40 refers to “large biomass installations either in the form of dedicated heat plants or the heat outputs of combined heat and power plants” which should include CHP fired with waste derived fuels where the biomass fraction is taken into account.

Page 51 clearly talks about mixed fuel loads indicating the RHI should only be applied to the renewable fraction of the fuel …. Including “energy from waste”.

And finally also on page 51 the document seems to define an exception for municipal waste, requiring all other forms of biomass to be used in separate boilers.

This overall mix as portrayed will lead to considerable confusion.

We believe that:1 RHI should be payable on the biomass fraction of waste derived fuel regardless of its origin. i.e. Municipal waste, Commercial and Industrial non hazardous waste, or sorted biomass waste.2 Municipal waste should not be an exception3 The definition of biomass that qualifies for RHI should be consistent with the EU Renewable Energy Directive.


In relation to air quality standards your definition of particulate matter is totally undefined as just PM. What do you mean by this? Is it PM10 the common measure for particulates (the thoracic fraction) PM2.5 (respirable fraction) or PM1? I can not believe that a simgle undefined particulate matter standard would be acceptable to the Environment Agency.


There is a fundamental issue between generators and users in relation to large industrial installations. Considerable further thought needs to be given to the appropriate type of monitoring and bearing in mind it is the generator who will use biomass to generate heat but it is the downstream user who will decide how it is used. This will introduce a serious cross border issue of metering and who pays for it

Question: Q14

Large scale biomass is poorly defined hear as per the comments already made to Q7. Either CHP based on EfW should be separately defined or the note on Large scale biomass should explicitly include energy from the biomass fraction in waste.

Large scale biomass and EfW plant can play a major part in Government strategy. As big installations they can deliver a lot but are very expensive to install. We would suggest that the compensation level for these technologies should be enhance either through lengthening the period over which the RHI is paid to 20 or 25 years and by setting the actual level of RHI payable at financial close of a project rather than at commissioning – to provide an additional degree of investment certainty.

Question: Q15

There is significant potential for the on-site use of biogas as a source of heating above 200 kW other than for CHP. In particular this can provide high grade heat not available from other renewable sources and is vital to high temperature heat intensive industries as an alternative to fossil fuels. The investment in large biogas plants will be high and will require a suitable level of financial support to make them viable. The exact level of the financial support will require further discussion and we would be happy to take part in such discussions.

Question: Q16

No. See also the response to Q7

We note that your own Q19 adds to the conflicts already highlighted.We agree with the exemption if it is applied to EfW but not if it is only applied to Municipal waste derived fuel.

EfW must include all non hazardous waste derived fuels and in particular must allow the co-combustion of Municipal and commercial and Industrial non hazardous waste in boiler plant. It would be a nonsense to have to segregate C&I waste into a biomass fraction and then burn it in a dedicated boiler line.

Question: Q19

22 June 2010 Page 1115 of 1348

There is currently a total lack of interest in the development of district heating schemes whether they are powered by renewable or recovered heat. There should be a suitable financial incentive to encourage district heating schemes and this should not be limited to renewable energy schemes only and should also be applicable to recovered waste energy as well.

AgreeQuestion: Q20

See comments to Q20 above

Question: Q21

Yes. Grandfathering commitments are vital for large scale projects to provide the degree of certainty required for the large financial investment required.

Question: Q22

We have already made the point that long lead time projects need a degree of certainty at financial close given the implementation time to install and commission the plant. Not only should the RHI be fixed at financial close it must not be exposed to adjustment at a later date by some degression process.

AgreeQuestion: Q23

If you want to encourage heat technologies to be installed the first review should be at least 5 years or more after introduction of the RHI.


See previous comments on the unacceptable difference indicated between Municipal and other forms of waste derived fuel.

Question: Q29

592 British Gas Supplier

British Gas welcomes the ambition that the Government has for this sector, and believes that the RHI, if well designed, could help renewable heating become mainstream. However, there are many challenges to address if this is to become a reality. Renewable heating is currently a niche activity, such that most heat users have no experience of using renewables. Renewable technologies are typically more expensive and capital intensive than their conventional fossil fuelled alternatives. Access to finance is difficult, and although many of the technologies have been proven elsewhere around the world, in the UK there is currently no significant supply chain to support delivery. These barriers must be addressed for the RHI to be a success.

To ensure customers have faith in renewable heat technologies and installers there must be a credible, well publicised accreditation scheme. We therefore welcome the proposal to use the Microgeneration Certification Scheme (MCS) to accredit installations onto the scheme, as this will build confidence in the quality of the product and installer. However, we believe that the MCS needs to be properly funded, streamline its accreditation processes, and be subject to improved governance arrangements. Trusted advice will be necessary to inform potential customers of their options, requiring training in renewable products for existing installers. Achieving the aspirations of the RHI will require a massive ramp up of the supply chain. This will be a great opportunity to create green jobs. However, accreditation of new products and installers must keep pace with the growth of the market.

British Gas believes that injecting biomethane into the grid could significantly contribute towards meeting renewable energy targets in the UK. This could play to the UK’s strengths by making use of existing infrastructure such as our widespread gas distribution network, which reaches over 80% of Britain’s homes. It would also allow householders to keep their existing gas boilers and heating systems and make use of the existing installation supply chain. Industry believes that the proposed tariff level for biomethane injection to grid is an excellent initiative, but has been set too low to drive deployment, and we urge Government to reconsider the tariff level in light of evidence provided.


Funding of the RHI:The consultation document does not spell out how the RHI is to be funded, and there was no update on this as expected at the Budget. We believe that the monies to fund the RHI should be levied in an equitable way, and that the burden should be shared equally over all users of fossil fuelled heat.The Energy Act 2008 should be redrafted to allow Government greater flexibility to levy contributions at a higher level of the supply chain where required to make this easier.

We think it would be unfair to only levy gas customers since gas is the cleanest and least carbon intensive of the various heating fuels. We also believe that to provide exemptions to certain sectors on contributing towards the cost of the RHI would be unfair on those who would have to pay even more to make up the difference.

We would urge Government to announce how the RHI is to be funded at the earliest opportunity. The renewable heating industry requires certainty that the RHI will start in April 2011 as expected, and if the RHI is to be funded through energy bills, energy suppliers will require early notice in order to be prepared. Such changes may have important (and potentially costly) implications for billing systems and processes in particular, so early engagement on these issues is essential.

Question: Q01

22 June 2010 Page 1116 of 1348

British Gas supports Government’s proposals to provide RHI support on an ongoing basis rather than as an upfront payment. Ongoing support encourages continuing servicing and use of the equipment, and will better guard against fraud. It will also spread the costs of the RHI scheme over time, as the renewable energy is generated, rather than burdening only the customers of today. We firmly believe that if the RHI is structured correctly with regard to enabling the development of financing schemes, then the market will deliver a variety of innovative solutions for households, social landlords and the business sector.

Key to this will be offering rates of return that will allow commercial financing. We believe that the proposals in this document deliver this in the main, but the lower rate of return proposed for solar thermal technologies will limit the prospect for financed solutions in this sector. Increasing the rate of return enjoyed by solar thermal to at least 8% would enable social landlords to finance the installation of solar thermal panels on their property, allowing their tenant the benefits of renewable energy, and lower energy bills.

Currently, it is proposed that RHI payments can only be made to the owner of the equipment. If RHI payments could be permanently assigned to a third party such as a financier, this could provide greater security to the provider of the finance. This approach has been taken in the design of the Feed-in Tariffs for electricity microgenerators. However, to improve on the situation with FITs, this assignment should be permanent, or at least require the consent of the existing payee before a nominated payee can be changed.

The ability to permanently assign RHI payments would increase financeability, and lower credit risk, allowing greater access of finance to all sectors of society, and would also decrease interest rates.

British Gas believes that financing linked to the property, such as the Government funded Pay as You Save (PAYS) scheme that we are trialling, could be a good mechanism to help Britain’s households access the benefits of an more energy efficient and greener fuelled home. This will also help ensure that all households, and not just the most affluent, to be able to benefit from this new incentive. Allowing RHI payments to be assigned to a financier would allow PAYS schemes to access lower costs of finance. If energy suppliers are to collect repayments for PAYS, and to make payments for Feed-in Tariffs (FIT), then it would also make sense for suppliers to collect and pass on RHI payments allowing savings, repayments and FIT and RHI payments to be shown on the same bill. Therefore, the RHI payments system must allow for this possibility.

We believe that there are some additional barriers outside the RHI that must be addressed.Capital allowances cannot currently be claimed on equipment installed in a dwelling house and this acts as a barrier to leasing or hire purchase arrangements being used as a source of finance for microgeneration equipment.

We welcome the confirmation in the Budget that RHI payments to households will not be subject to income tax. It is also important that the treatment of microgeneration with respect to other taxes be clarified. DECC must co-ordinate with other Government departments to ensure that FIT payments do not lead to higher business rates for companies that have installed microgeneration, which would lead to a lower rate of return for the investor. For domestic properties the value of installations must be excluded from the assessment of property values for council tax valuation purposes.

Question: Q02

22 June 2010 Page 1117 of 1348

For the RHI to be a success in 2020, 1.7 million homes will need to have converted from their tried and tested fossil fuel heating system to an unfamiliar renewable choice. Change on this scale will require renewables to be a rational, economic choice, which can be delivered by appropriate tariff levels. It will also require a step change in the delivery of products and the training of installers. But most importantly, the RHI support must be simple and hassle free for householders to access and to receive their ongoing payments over a number of years.

We agree that the Microgeneration Certification Scheme (MCS) or similar agencies should play a key role in ensuring that only suitably accredited products installed by accredited installers benefit from the RHI. We also agree that the installer creating an MCS certificate that allows entry into the RHI scheme is a simple, hassle free way to allow installations to access the benefits of the RHI support whilst also ensuring that prospective customers have faith in the quality of their system and installation.

We also agree that Ofgem should have a key responsibility in the overall running and administration of the RHI – they already play a similar role in the administration of the Renewables Obligation (RO) and in Feed-in Tariffs for electricity microgenerators. However, we do not believe that asking Ofgem to register customers for the RHI would be the most efficient approach for customers. Ofgem undertook this role in the context of the RO, and this resulted in a process for applying for accreditation for ROCs that was complex and unwieldy. It was also expensive – Ofgem said in its Annual Report on the Renewables Obligation in 2009 that they spent a disproportionate amount of their budget dealing with microgenerators that generated less than 0.1% of total renewable energy issued. This issue was initially resolved by allowing agents to perform an intermediary role between customers and Ofgem, and under the Feed-in Tariff energy suppliers perform the role of registering microgenerators (below 50kW), and of administering payments.

Ofgem also have no experience of developing or managing systems or processes capable of delivering a large-volume consumer facing service, nor do they have the experience of managing a billing and payments system that could run to millions of customers. To ensure effective delivery and value for money for consumers, this part of the process must therefore be performed by an agent that has customer service and billing as a core competence. Government should therefore ask energy suppliers to perform this activity instead. Energy suppliers already have the necessary customer service and billing expertise and handle millions of transactions every year. We are already handling this function for Feed in Tariffs for electricity microgenerators, and can build on the processes and systems developed for this activity, allowing solutions to be developed quicker. In the Government’s Home Energy Management strategy, the increased use of whole house energy solutions including energy efficiency and microgeneration is being advocated, paid for by long term loans repaid through the energy bill. Requiring energy suppliers to make RHI payments would allow RHI payments and loan repayments to be netted off. Furthermore, the Government already has powers in the Energy Act 2008 to enable energy suppliers to make the payments.

If the Government does not choose energy suppliers as the agents to make RHI payments to customers, then the system must still allow for agents to act as an interface between Ofgem and the end customer, which could help the development of innovative financing propositions such as Pay as you Save.

Ofgem do have experience in registering and dealing with larger scale installations under the RO, and therefore for consistency it would appropriate for them to register and make payments to large installations in the RHI.

As referred to in our response to Q2, we believe that the ability to permanently assign RHI payments to a third party could enhance the financeability of microgeneration installations. However, finance repayments may be required more often than annually, so we propose that RHI payments be made quarterly to all scales of installations. This would also help customers meet their ongoing input fuel bills (in the case of biomass and heat pumps) which could be higher than the counterfactual fuel. This increased interaction with customers would provider greater emphasis to the need for an organisation with great customer service skills to make RHI payments. Larger installations may require monthly payments.

Since payments are going to be made on a deemed process, it is sensible to ensure that there is ongoing use of the equipment, and that it is maintained to a sufficient level. This should, however, be designed to be light touch for the customer. Any maintenance requirements should be in line with that recommended for the product, so that customers are not required to incur additional expense solely to comply with the RHI scheme requirements. We agree that customers should self certify compliance with declarations, backed up by spot checks rather than there be a bureaucratic requirement to complete paperwork on a regular basis.

Question: Q03

British Gas firmly believes that consumer confidence in products and installations will be key to the success of the RHI. This is a new and immature market, and all of the technologies are unfamiliar to UK consumers. Customers will therefore require faith in their new heating system and in the installer fitting this. We therefore support the presence of strong accreditation schemes for products and installers.We do, however, have some concerns about the Microgeneration Certification Scheme, and consider improvements are required for the RHI to be a success. Firstly, the MCS must be properly funded by Government, to allow it to operate effectively. Currently many key roles are performed on a part time basis by industry members, and funding by Government would allow these to be performed on a full time basis.

The scheme should be able to rely on product standards developed in other countries. International standards should be acceptable unless there is a clear reason why they should not apply. The scheme administrator should publish a list of qualifying international standards, rather than enshrining the list in any form of secondary legislation, so there is flexibility to update the list.

The governance arrangements of the MCS should be improved including clear terms of reference and a constitution. To improve accountability there should be a steering committee including representatives from Government, installers and consumers. A well functioning MCS should be an asset for industry without providing too onerous a burden.

Finally, the MCS installations database must be linked to the central registry of RHI installations to allow for data integrity, and ease of registration.

Question: Q04

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Subject to the MCS being improved as advocated in our response to Q4, we agree that MCS could be extended. Whilst there is a lesser need for consumer protection, streamlined registration into the RHI would help the industry. However, it will not be a simple matter as there will be a much greater design element required for larger commercial systems, which may be performed by a separate company from the installer. There could be separate certification for companies that assess and design renewable heating solutions from those that install and service the systems.

We also consider that there is a requirement for a process to certify emissions from biomass boilers larger than 45kW. The AEA could combine and enhance two existing schemes – the Energy Technology List and Clean Air Act exemption, but limited to emissions assessments only.

Question: Q05

EN 303-5 certification should be used to support MCS or ETL certification.

Question: Q06

We agree with the approach proposed that the RHI is focussed towards commercially available technologies. Government should consider how they will support emerging technologies so that they reach a level of maturity to allow them to fully benefit from the RHI. This could be done in the form of grant funding outside the RHI to help develop technologies until the next appropriate review of the RHI when they can be included.

Existing biomass sites installed before 15th July 2009 will require some support from the RHI to cover ongoing fuel costs otherwise the operator may stop using their boiler and revert to fossil fuels. This would not require the full level of RHI support, but a smaller amount to cover the premium of wood fuel prices over gas.

AgreeQuestion: Q07

Where possible, the treatment should be consistent with other support mechanisms such as the RO, FIT and RTFO.

AgreeQuestion: Q08

We support the revised emission standards, subject to existing test type being acceptable. We note that the proposed PM limit of 30 mg/MJ is tight compared to the reproducibility of the tests and of test results of good quality commercial boilers burning wood chip.

AgreeQuestion: Q09

Yes. We agree that it is sensible to deem renewable heat output at a scale where the expense of heat metering is not justified. We also agree that using deemed compensation also avoids giving generators the perverse incentive to ‘overgenerate’ in order to gain more income.

British Gas is a big supporter of energy efficiency and a leading provider of energy efficiency measures into Britain’s homes. However, we believe it would be wrong to mandate a minimum energy efficiency standard in order to receive RHI payments, as this would place unnecessary additional barriers to the growth of renewable heating solutions. Many heating systems will be installed as ‘distress purchases’, therefore a requirement to install energy efficiency first would lead to customers pragmatically choosing a fossil boiler. The solution proposed by Government is a pragmatic solution that supports the conservation of energy, without creating additional barriers to renewable heating. It is important that this level of basic minimum level of energy efficiency is not stretched to cover the more expensive measures required for hard to treat properties.

We firmly believe that energy efficiency should be promoted with microgeneration, and that a whole house energy efficiency audit could be offered with the installation of microgeneration technologies. We note that the uptake of this will increase through the Government’s Household Energy Management programme. Installing microgeneration technologies will engage householders about their energy use and will likely make them take interest in installing additional measures that will help them to reduce their energy use.

Question: Q10

This should be addressed through building regulations rather than through the RHI.

Question: Q11

We agree that paying the RHI on deemed generation rather than metered output for small and medium scale insulations avoids the perverse incentive of an installation ‘overgenerating’ just to receive RHI payments. We also think that to require heat metering at this scale would be overly burdensome and costly.

We also think that an additional band should be created for biomass boilers up to 1MW in capacity. The output of these boilers should also be deemed.

AgreeQuestion: Q12

We agree that processes based on SAP/SBEM/EPCs are appropriate for establishing the deemed heat load of a building. The process for doing so should not be excessively time consuming nor costly, and the results should be consistent between different assessors. Existing fuel bills, or simple look-up tables such as that shown in the consultation document, could be used to simplify the process.

AgreeQuestion: Q13

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We agree that at the larger scale and in process heating, the incentive to overgenerate is low. As a further check, Ofgem could compare actual heat generated against the estimated heat demand for the site. We do not believe there are practical or economic difficulties concerning the use of heat meters at this scale.

Question: Q14

British Gas believes that there needs to be another band between 500kW and 1000kW. At the moment there is a very large step between the 6.5p/kWh tariff for installations below 500kW, and 1.6 – 2.5 p/kWh for those larger than 500kW. Otherwise customers will be obliged to choose a 500kW boiler, when a slightly larger system may be more appropriate. The tariff level for this band should be calculated by reference to a 12% IRR on investment over the counterfactual case, rather than by reference to the 0.5 ROC uplift available to biomass CHP plant.

Question: Q15

British Gas strongly supports the general approach that Government has taken in setting tariff levels. We agree that tariffs should provide compensation for the additional costs of renewable heat over conventional systems by taking into account the additional capital and ongoing costs incurred. We agree that compensation is provided for some non financial barriers to overcome the ‘hassle factor’ of trying an unfamiliar technology. We welcome the decision to allow an investment return of 12% for renewable technologies, and that this will provide the incentive for customers to choose renewable technologies over their tried and tested heating systems.

We advocate that the tariffs should provide the desired returns, and that Government should ensure this by taking on board information provided by the industry on the actual cost base faced.We disagree that solar thermal technologies should only enjoy a rate of return of 6%, as this would prevent the development of financing solutions in this sector. The benefits of this relatively simple technology, which is the most widespread of all renewable technologies in the UK today, would be restricted to those that have the capital available to fund an outright purchase. Increasing the rate of return enjoyed by solar thermal to at least 8% would enable social landlords to finance the installation of solar thermal panels on their properties, allowing their tenants the benefits of renewable energy, and lower energy bills.

As referred to in our response to Q15, we believe there is a requirement for an additional biomass band to avoid the cliff edge in support levels between installations below and above 500kW.

We also believe that the tariff for biomethane injection should be reviewed. Returns for projects should be set with reference to a 12% IRR over the cost base faced by the industry. Government should also ensure that biomethane injection projects enjoy a return at least as good as Anaerobic Digestion power generation projects under the Feed-in Tariff and Renewables Obligation. Power generation is better understood, and an easier option for project developers. However, biomethane injection is a more efficient use of biogas than in the production of electricity, and therefore would make a larger contribution to meeting the UK’s 2020 renewable energy targets. This should be reflected in the incentive offered for developers taking the riskier option of cleaning up the gas and injecting it into the grid. We also believe that the cost base used by Government does not include the costs incurred for clean-up and injection of biomethane into the grid. We believe that a tariff level of 5p/kWh would be appropriate. A higher tariff of 7p/kWh would be appropriate for smaller scale installations. Please also refer to our Annex A for a more detailed analysis of the issues facing the biomethane to grid injection industry.


British Gas has no comments on this issue.

Question: Q19

We believe that the RHI should provide an uplift for renewable district heating schemes. It could be more efficient to deliver heat from one central installation to multiple units rather than installing and operating a large number of individual installations. A district heating system could also help meet the needs of properties where it may not be possible to install individual renewable heat systems. There are cost implications to providing the additional infrastructure required, which would include adding controls, heat exchangers and meters to each premise and the additional cost of the heating main. We feel that it is right that the RHI should be used to meet the additional costs, where appropriate.

AgreeQuestion: Q20

District heating networks could have particular benefits for hard to treat properties, or for those in fuel poverty. However, we feel it would be wrong to restrict the benefits of district heating to a defined subset of situations, and that any uplift should be equally available to all eligible district heating networks.

We agree that there should be a minimum number of customers served by the network to be eligible for the uplift, and agree that a minimum of 10 customers appears appropriate.

It will be difficult to develop a robust approach to setting an uplift (or uplifts) to support the additional infrastructure cost of building a network to support the delivery of renewable heat. It is therefore unlikely that a “reference” based approach would deliver an efficient outcome. Given the range of possible costs, customer/building type mixes that any approach would be required to cover it is inevitable that a rate based on a “central scenario” assessment of possible costs will be too generous in some cases and simply not enough in others. A pragmatic approach would be to set the tariff rate payable by reference to the size of the installations that would be installed in the individual premises being served by the heat network. The total RHI payable would be the same whether one district heating system or many individual systems were installed. The difference between this rate and the lower rate that would be paid for a standalone larger installation would be used to fund a network if it is cost effective to do so. This would enable the more economically efficient solution to be developed.

Question: Q21

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A key concern of those investing in some forms of renewable heat technologies will be the ability to secure reliable supplies of fuel for the renewable heat systems at reasonable prices. This issue will be particularly critical for low income and fuel poor customers. Biomass fuel prices could move independently of counterfactual fossil fuel prices due to the increased demand for biomass in coming years to help meet the European renewable targets. Similar concerns arise with electricity where the linkage to gas and oil prices could be broken in the future. If is becomes too costly to run their renewable heating system, customers could return to their fossil fuelled system.

This implies that the fuel and non fuel elements of the tariff could be treated separately. Government should review the ongoing effectiveness of tariffs, and look to increase tariff levels in the future if fuel price differentials have materially diverged from assumptions used when setting tariffs. If this is the case, Government should increase tariffs to reflect the increase in fuel costs. To protect investor confidence, there should be a commitment that tariff levels for the non fuel element of the tariff would be grandfathered.

However, to maintain simplicity, tariffs should not be split into a non fuel element and a fuel element from the outset. It would be difficult to establish a price index to use for regular review of the fuel element of the tariff.

Question: Q22

British Gas supports the principle of degression. It sends a clear signal to industry about the need to cut costs, and will lower the absolute amount of the support that industry will require over the course of the RHI. However, as the UK renewable heat industry and supply chain is very immature at the moment, it is sensible not to introduce degression from the start, but to consider it at the first review point.

AgreeQuestion: Q23

We agree that the RHI should be used to support mainstream technologies, and with the approach that definitions should be sufficiently broad to allow for innovation. However, there is a requirement for a framework to ensure that new technologies are supported until a band is provided for them at a future review.

AgreeQuestion: Q24

We believe that the appropriate use of degression should encourage technology cost reductions. Greater experience of installing technologies in a UK setting, along with the greater economies of scale delivered by higher demand, should also drive cost reductions.

Question: Q25

We support the approach of aligning reviews across the three renewable financial incentive mechanisms, especially since biomass will be playing an important role for each. We recognise that will not be possible initially, as 2013 would be too early for the first review of the RHI.

AgreeQuestion: Q26

We agree that emergency reviews will be necessary, but their use should be minimised to provide stability and confidence to consumers, investors and industry. If there were too many emergency reviews, customers would put off purchasing decisions as they may consider a revised tariff would be delivered at a later date.Emergency reviews should only be used very rarely to avoid unnecessary and potentially damaging uncertainty, with their use being limited to: Major errors in the drafting of legislation preventing the scheme working in the manner intended To correct major errors in the calculation of tariff levels A change in external factors that could not reasonably have been foreseen including changes in energy prices, or to international obligations

Question: Q27

We believe that consideration should be given towards providing support for fuelled technologies installed prior to 15th July 2009. These installations will require support towards fuel costs which could be greater than the counterfactual fossil fuel costs.

Consideration could also be given to supporting all installations, so that early adopters are not alienated by the RHI, but instead act as cheerleaders for those in their communities considering a renewable heating system. These could be paid a lower level of support to recognise support they have already received.

We consider that the transitional arrangements regarding deeming for small scale installations could be onerous. Installers may require compensation to provide an estimate of the building’s heat load, and therefore requiring estimates from at least two MCS certified installers could be costly.

Question: Q28

As discussed in our response to Q3, whilst we agree that Ofgem should have overall responsibility for the administration of the RHI, we do not believe that Ofgem are the appropriate body to be providing customer service to owners of small and medium scale installations.

However, there is a requirement to ensure that the RHI scheme is not abused, to protect those who will be funding it. The scheme administrator will need to strike the right balance between this, and ensuring that the RHI is simple and hassle free for consumers to access. We believe that the proposals outlined in this consultation are appropriate to ensure this balance.

Question: Q29

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Covered in our response to Q20 & Q21.

Question: Q30

593 The Woodland Trust NGO

The Woodland Trust welcomes the opportunity to respond to this consultation. We are the UK's leading woodland conservation charity with a vision that the UK will be rich in native woods and trees enjoyed and valued by everyone. The Trust has over 200,000 members.

General comments on the Renewable Heat Incentive

The Woodland Trust welcomes the introduction of a Renewable Heat Incentive. As the UK’s largest woodland conservation charity, our main area of interest in relation to renewable energy is the use of woody biomass, and our comments on this consultation reflect this.

The Trust believes climate change poses a threat to both people and wildlife. There is an urgent need for measures that enable both mitigation of, and adaptation, to climate change. The Trust favours reducing greenhouse gas emissions through cutting energy consumption, increasing energy efficiency, and using renewable energy sources that provide real carbon savings. In particular, the Trust supports the development of bioenergy, and woodfuel specifically, where it offers genuine greenhouse gas savings, where it does not impact negatively on biodiversity and, if possible, delivers positive biodiversity benefits. The woodfuel sector has potential to benefit the UK’s woodland biodiversity through expansion of native woodland and positive management of existing woods where this is required. For example, it could stimulate restoration of ancient woods planted with non-native conifers, thus contributing to targets under the UK Biodiversity Action Plan.

The Trust is calling for an increase in trees and woodland in the UK, especially native woodland, which will create space for wildlife to adapt and migrate; store carbon; help ameliorate the effects of flooding; provide shade and shelter; and reduce urban heat island effects. This is supported by the UK Low Carbon Transition Plan which stated that if 10,000 hectares of new woodland were planted annually for the next 15 years, the resulting new trees would lock away 50 million tonnes of carbon by 2050 – making a very real contribution to the country's carbon reduction targets.

Use of woodfuel and other biomass for heat, especially in small-scale, local production, generally offers greater greenhouse gas savings than other forms of bioenergy . The introduction of a Renewable Heat Incentive redresses the current imbalance between incentives for use of bioenergy for heat and its use for production of electricity, and should give a welcome incentive to individuals and communities looking to use locally-sourced wood for heat prodcution. However, there is an urgent need to introduce sustainability criteria for biomass in the UK that ensure its use for both heat and power production does not have negative environmental impacts, at home or abroad. A recent report prepared for the British timber industry suggests that demand for wood fibre in the UK will soon outstrip supply , which could lead to increased reliance on imports in the short term, with no guarantee that these are from sustainable sources.


Yes

Comments: The questions below do not cover issues over sustainability of biomass. Given that, since the opening of the consultation, the European Commission has announced that it will not be setting EU-wide binding sustainability criteria for biomass, it is imperative that suitable criteria are developed at a UK level. We would urge that DECC develops robust criteria that ensure all biomass used for heat production in the UK, wherever its origin, is produced sustainably, and with stringent minimum criteria for greenhouse gas emissions, calculated through full life-cycle analysis of the product in question.

Question: Q01

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No

Comments: We are concerned that the use of woodburning stoves is excluded from eligibility for the RHI. In some, smaller homes these may be used as the primary source of heat. They are also simple to install and operate, and are therefore an appealing choice for many householders compared with woodchip or pellet boilers. A surge in interest in such stoves over the past couple of years, leading to increases in the price of logs , may begin to deter some users. The use of firewood by individual households stimulates development of local firewood markets and supply chains, and such small scale, local use of biomass for heat is to be encouraged, as it produces greater greenhouse gas savings than, for example, large-scale burning of biomass for electricity. We would like to see more encouragement for use of woodburning stoves, which would lead to more viable local firewood markets, an impetus for appropriate management of woodland and in particular creation of new native woodland (thus contributing to Government aspirations expressed in the Low Carbon Transition Plan , which stated that planting 10,000 ha of new woodland annually for the next 15 years, the resulting new trees would lock away 50 million tonnes of carbon by 2050). There is also a concern that offering support for large-scale biomass heat production, and not for the simplest, small scale uses, could lead to rapid increased demand for biomass, and associated increases in firewood prices that will deter users further.

We also disagree with the decision to allow only installation of new equipment (installed after 15 July 2009) to be eligible. This may encourage people to remove relatively new equipment and replace it in order to qualify for the RHI, which would be a waste of resources.

15 years, the resulting new trees would lock away 50 million tonnes of carbon by 2050). There is also a concern that offering support for large-scale biomass heat production, and not for the simplest, small scale uses, could lead to rapid increased demand for biomass, and associated increases in firewood prices that will deter users further.

We also disagree with the decision to allow only installation of new equipment (installed after 15 July 2009) to be eligible. This may encourage people to remove relatively new equipment and replace it in order to qualify for the RHI, which would be a waste of resources.


YesComments: We support measures to encourage energy efficiency, and the use of “deemed” rather than metered consumption under the RHI, since the latter could encourage profligate use of heat. The use of deeming should be sufficient to encourage householders to install suitable energy efficiency measures without imposing an additional condition.


Comments: We agree that RHI tariffs should be fixed for the duration of the project’s entitlement to support.

Question: Q22

594 Commission for Rural Communities (CRC) Local Government / A

Cover letter:The Commission for Rural Communities is a statutory body funded by government to help ensure that policies, programmes and decisions take proper account of the circumstances of rural communities. We are required to have a particular focus on disadvantaged people and areas suffering from economic under-performance. Rural proofing seeks to ensure that as policy is developed and delivered, appropriate account is taken of rural needs and circumstances. The CRC has an important role to play in supporting and advising government departments as policy initiatives are developed, to help ensure that these policies can be applied and delivered to all communities and localities regardless of where they are in England.

The CRC is concerned that as currently designed the RHI will not enable rural access to the RHI and could have significant cost impacts. We are keen to discuss the following key issues with the RHI team in more detail: urgent clarification, consultation and discussion on how the RHI will be funded and the disproportionate impact that the cost of the RHI could have on rural off net communities (if it is passed on through energy bills) who already pay more for their fuel and face technical and financial barriers to uptake of the RHI the need for funding and technical solutions to the impact of renewable heat technologies on weaker rural power lines the need to include measures to incentivise and reduce the cost of solid wall insulation as part of the renewable heat policy the inclusion of wood burning stoves used as a primary source of heat which is a key alternative technology for rural communities the need for greater consideration of how low income groups and financially excluded households can access the RHI greater exploration of public sector finance models to help community groups access the RHI.

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YES

1. Core design principle and lack of alternative policy optionsThe CRC acknowledges that the key focus of the RHI is to increase the uptake of renewable heat to meet the 15% renewables target. The CRC shares the government’s aims in this and is keen to provide support to DECC on how to ensure greater uptake in renewable heat across rural England.However the CRC is concerned that the RHI appears to be the only policy option that DECC has considered for encouraging greater uptake of renewable heat. The consultation impact assessment contains no discussion of alternative policy options such as grant based programmes, low interest loans or area based deliver programmes that could be explored further to achieve the 15% renewables target. The consultation document does not provide any evidence for why the RHI is the best policy option to pursue.The core policy design of the RHI as a revenue support tool rather than capital grants or low interest loans policy means that access to the benefits of the RHI may be limited to the small groups of householders and businesses that have access to upfront capital. In fact the consultation estimates that only 7% of households and 6% of businesses will benefit from the RHI despite it being paid for by everyone through a likely 21% rise on all our energy bills. Moreover if the costs are passed on through energy bills the policy has significant potential to be regressive in its impacts as relatively more costs are passed onto low income households who are more likely to be low energy users and already living in or at risk of fuel poverty. As currently designed the CRC is concerned that the costs of the RHI will have a disproportionateimpact on rural communities as technical and financial barriers such as the capacity of rural power lines to take more renewable heat technologies will limit access to the benefits (see below for further evidence on barriers) and off net rural communities already pay more for heat through off net fuels. CRC would like to gain a better understanding from the DECC RHI team of what other policy options have been or could be considered as alternatives to the RHI to meet the 15% renewables target. CRC officers will be in touch with the renewable heat team regarding possible dates for a meeting.2. FundingThe consultation document and March 2010 budget have not clarified how the proposed RHI will be funded. This is fundamental to how the policy will impact on rural communities. It is very difficult for the CRC, and no doubt all other stakeholders, to provide an informed response to the consultation without this information. Recommendation: DECC should re-issue the consultation and impact assessment with detailed funding options as soon as possible taking on board and reporting back on recommendations and views from stakeholders collated during this first consultation round before progressing with consultations on the RHI regulations. To proceed on developing regulations for the RHI without a public consultation on the funding options would not be in line with recommended consultation practice.3. Domestic / Commercial fundingThere is also a lack of information in the consultation document on how the costs and benefits of the RHI will be fairly separated and accounted for between the domestic and commercial sectors. As currently designed the RHI is targeted at a wide range of very different scales of renewable heat installations from individual households to small businesses and large scale industrial processing and commercial space heating. However DECC estimates1 show that it will be the larger commercial scale renewable heat installations that will deliver the lion’s share (85%) of the renewable heat by 2020. If 85% of the RHI benefits are to be passed onto businesses in RHI revenue, will 85% of the costs be paid for by the business sector? This question is not currently addressed in the consultation document or the impact assessment. Recommendation: Urgent clarification is needed on how the domestic and commercial elements of the RHI will be separated and charged to ensure the design of the RHI does not results in the unintended consequence of fuel poor households paying for benefits to commercial entities. The RHI should not proceed without further clarification and consultation on this issue.4. CostsThe consultation impact assessment estimates that the RHI could cost (if passed on through energy bills rather than general taxation) an additional 21% on domestic energy bills over the decade. The total cumulative cost of the RHI is estimated at £36bn by 2020 and has been publicly acknowledged by DECC colleagues as an expensive policy and not the most cost-effective means of saving carbon (19th March 2010 EEPH RHI stakeholder consultation event). The passing on of these costs will have a disproportionate impact on rural fuel poor households and those with no mains gas connection who already pay more for off net fuels and will not be able to easily access the benefits of the RHI (see rural barriers below). This is unacceptable in CRCs view. Recommendation: If the government is still minded to introduce a RHI levy off net fuels should be exempt until the rural access barriers outlined below have been addressed. There is a high risk that the RHI could push more off-net rural households into fuel poverty unless off-net fuels are exempt whilst the rural access barriers are tackled.5. Technical and financial barriers to rural access ad uptake of the RHIThe CRC agrees with the consultation that renewable heat has big potential to help rural communities that do not have a mains gas connection as these households rely on more expensive and unregulated off net fuels. We also agree that the potential cost and carbon benefits of switching from off net fuels to renewable heat technologies are much greater than for households that already have an efficient gas boiler and benefit from duel fuel tariffs. The CRC supports the views of other stakeholders including the Association for the Conservation of Energy and the Centre for Sustainable Energy that from a carbon, fuel poverty and cost perspective the RHI would have most benefit if it primarily focused on households that do not have a gas connection. This would avoid the and undesirable outcome of the RHI encouraging the replacement of efficient gas heating for minimal carbon savings. The CRC off net map attached in Annex 1 shows the wide geographic spread of non gas households across England and also highlights the prevalence of fuel poverty in off gas communities.However these off net communities also face significant technical and financial barriers to accessing the benefits offered by the RHI which are not addressed in the consultation but must be tackled if the RHI is to work effectively for rural communities. The CRC is keen to meet with DECC colleagues to discuss the barriers outlined below further and help find solutions.Barrier 1: Rural power linesAir and ground source heat pumps (ASHPs, GSHPs) are advocated as a key solution to rural off net households in accessing the RHI. The consultation document includes a case study from Community Energy Solutions (CES) who have worked in partnership with East Riding Council to fit grant funded ASHPs in 83 homes. The CRC is aware of these and other excellent examples of how heat pumps can help rural communities. However it is also important to learn the lessons from these examples and ensure that these are taken into account in policy design. At a meeting of key off net stakeholders on the 25th February the CRC heard evidence from CES and the Energy Networks Association (ENA) regarding the impact of clusters of heat pumps on the electricity network in rural areas (a copy of the minutes and evidence gathered at this meeting are attached in Annex 2).

Distribution Network Operators (DNOs) are concerned about heavy loads and maximum demand impacts on the network during start up of ASHPs

Question: Q01

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in the mornings and evenings which can lead to flicker on neighbouring lights and safety issues. CES fitted 10 heat pumps in one rural community and needed an electrical upgrade which cost an additional £12,000. Also the process for getting the electrical upgrade was very slow and added delays and cost to the project (it took 12 weeks to get the upgrade completed. In this case CES was able to fund the additional cost of this upgrade through grant sources. However, the need to upgrade rural power lines is an additional cost that most rural communities would not be able to afford. This is a significant rural issue as power lines are weaker and more likely to need upgrading to take the extra load that heat pumps require. This issue is not limited to clusters of heat pumps as CES have also found that in some rural cases the additional network costs of even a single heat pump can be between £2,000 and £6,000 which has resulted in these installations being abandoned due to lack of funding for this additional cost.It is important that DNOs work in partnership with installers to find technical solutions to the network issue and that DECC works with Ofgem and the DNOs to find funding solutions. We are aware of and welcome the DECC funded NEA work to monitor the impact of ASHPs on the network in North Blyth and hope that this work will be shared publicly soon and before decisions on the RHI are made in order that it can be properly reflected in the design of the RHI and/or other renewable heat policies. North East Electric, CES and NEA are showing leadership in working together on solutions and the lessons of this partnership need to be shared more widely. This important issue is not mentioned in the consultation document despite being a fundamental issue for the future take up of this technology and rural access to the RHI.Further partnership work is needed to map where the rural electricity network is vulnerable in order to plan where technologies will fit without the need for network upgrades and identify funding solutions where upgrades are needed. The Commission for Rural Communities is keen to work with DECC, Ofgem and the ENA to take forward this work and would welcome further discussion on how this can be achieved. Recommendations: DECC needs to work with Ofgem and ENA to find funding and technical solutions for householders that are faced with a network upgrade as part of their renewable heat installation. A subsidy or uplift needs to be considered to help with the cost of network upgrades for householders who want to access the RHI but are prevented due to the network upgrade cost.Barrier 2: Solid wall propertiesHeat pumpsSolid wall insulation is key to enabling ASHPs and other technologies to work effectively for many rural properties. More than one in three (35%) of rural properties are of solid wall construction and are very energy inefficient (50% of homes in sparse areas and 25% in village centres have a SAP of below 30 compared to only 8 % in urban areas2). This risks being a significant missed opportunity in terms of delivering national fuel poverty and carbon reduction targets as hard to treat properties represent over 50% of the UK’s total emissions from housing and the fuel poor are more likely to live in solid wall homes. Heat loss from these properties makes investment in ground or air source heat pumps inappropriate and often unviable from a cost and heat performance perspective unless complementary measures are available to deliver solid wall insulation.As currently proposed the RHI could lead to the installation of more expensive oversized heat pumps that do not perform well. Current fuel poverty and energy efficiency programmes (CERT, CESP, Warm Front) are primarily focused on cavity wall and loft insulation and are not delivering solid wall measures in any numbers needed. There is a huge opportunity to incentivise solid wall insulation at the same time as renewable heat systems. On average it takes two days to install a ASHP and like any new heating system the work is fairly disruptive i.e. floor boards up to fit new pipes and radiators (as often with a ASHP the radiators have to be changed as the old size will not be right for the new system requirements or under floor heating has to be fitted), this is an ideal time to also fit solid wall insulation as it reduces the marginal cost of each installation and the additional disruption of separate installations is reduced. Recommendation: the design of the RHI needs to include measures to incentivise and reduce the cost of solid wall insulation. Solid wall renewable heat packages need to be developed including the consideration of RHI solid wall uplift payments.

Wood burnersOne of the few alternatives to heat pumps available for rural solid wall properties (wood burning stoves) is currently excluded from the RHI. There are currently many highly efficient wood burnings stoves on the market that comply with high air quality standards (certified by Defra) and can be easily combined with back boilers to generate hot water and feed radiators and as a primary source of heat. The Forestry Commission’s Woodfuel Strategy for England has set a target of facilitating the harvesting of an additional 2 million tonnes of wood each year as fuel and other products by 2020. Renewable heat from woodfuel is a sustainable local alternative particularly suited to rural areas which should be encouraged through the RHI structure. Recommendation: the CRC recommends that wood burning stoves used as a primary source of heat are included in the RHI to enable access for rural communities.

Barrier 3: Access to capital financeThe consultation document recognises that a key problem with the design of the RHI as a revenue tool rather than an upfront payment is how the large upfront costs of installing renewable heat will be funded. The consultation document suggests that the RHI itself will stimulate the market to provide different financing options to consumers and businesses. However little consideration in these options is given to community groups and disadvantaged households.The CRC’s State of the Countryside Update on Financial Inclusion found that over 200,000 people living in rural communities do not have access to a bank account and demand for affordable credit and debt advice is significantly outstripping supply. Unless this issue is tackled disadvantaged groups will not be able to access the benefits of the RHI but will shoulder the costs pushing more people into fuel poverty. There is also a risk that renewables will become socially divisive and portrayed as an option for the ‘better off in society’ paid for by the ‘less well off’.Also research by ACRE village Halls Survey3 shows that private sector financial arrangements are not suitable for community groups such as village hall committees that are charitable unincorporated organisations run by volunteers who cannot obtain loans or private finance and rely on grant funding to maintain their facilities. The ACRE survey also shows that one in three rural village halls would like to carry out energy efficiency and renewable energy work over the next 5 years if they can access funding to help with the investment. Recommendation: DECC needs to give greater consideration to the impact of the RHI on disadvantaged communities and investigate means tested grants or interest free loans to enable them to access RHI benefits. More exploration of public sector finance models and community green investment funds are also needed to allow community groups to access the RHI. DECC should contact ACRE for further information on appropriate funding mechanisms for rural community groups.

YESAs noted above we are concerned that the market led finance models presented in the consultation will not help smaller rural community groups and those on low incomes access the RHI. Community groups and low income households will not be attractive to banks and investors and will not be constitutionally set up to take on private sector loans. Further work is needed to develop means tested grants or interest free loans and community green investment funds.

Question: Q02

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Yes but MCS needs further roll out to rural areas and training support is needed to expand the number of rural installers

The CRC agrees that quality assurance is important but remains concerned that this could act as a significant practical barrier if there are not enough certified installers covering rural areas. Community Energy Solutions (CES) have found that it is difficult to get hold of good experienced ASHP installers and this is driving up costs. Recommendation: DECC should conduct a rural/urban analysis of MSC certified installers to check that this will not act as a barrier to rural delivery and identify ways to extend roll out of the MCS scheme and appropriate training mechanisms to rural areas through business links.CES have also found that MCS registration and building control are not working effectively together due to the lack of a competent person scheme which means despite being registered with MCS installers cannot sign off their work as is the case for other similar installations such as gas, oil and solid fuel heating systems, minor electrical works and windows. Recommendation: DECC should investigate the need for a competent person scheme for MCS installers.

AgreeQuestion: Q04

NO

As noted above we do not agree that wood burning stoves that are used as a primary source of heating should be excluded from the RHI. There are currently many highly efficient wood burnings stoves on the market that comply with high air quality standards (certified by Defra) and can be easily combined with back boilers to generate hot water and feed radiators and as a primary source of heat. The Forestry Commission has identified huge potential to increase locally managed wood fuel making this option a sustainable local alternative particularly suited to rural areas which should be encouraged through the RHI.


Yes for FAME

Question: Q08

As noted above there are a number of wood burning stoves that have achieved the exempt appliance status set by Defra. We recommend that the RHI should apply to domestic woodburners and that in this case the Defra standards for clean burn should be applied to ensure high air quality standards are achieved.

Question: Q09

Yes but only where additional support and incentives are provided to help with the substantial cost of solid wall insulation.

As noted in question one improving the energy efficiency of solid wall housing is a key issue for rural communities. For the last nine years residents of solid wall properties have being paying through their energy bills for government programmes (ECC, CERT, CESP, Warm Front) to primarily deliver cavity wall insulation. It important that solid wall properties are now given equal support and access to suitable insulation and energy efficiency measures. A focus on solid wall insulation would also help tackle fuel poverty and deliver greater carbon and cost savings than a single focus on renewable heat.


Developers should be required or incentivised through the RHI (e.g. by basing the RHI payments on the deemed heat demand for a fully insulated property) to ensure that all appropriate energy efficiency standards have been met as part of the RHI system.

Question: Q11

The CRC is supportive of the RHI, the RO or other renewable energy policy options in encouraging greater investment in biogas and anaerobic digestion which has significant rural potential. Countrymatters4 has reported that the payment levels set through FITs are too low to incentivise commercially viable AD and as a result orders for AD plants are being cancelled. This indicates that the design of the RHI needs to learn from the FITs experience for AD and biogas. We suggest that DECC contacts the following organisations for further discussions on how this could work most effectively for rural communities. Farm Energy – Alex Templeton Farmergy - Owen Yeatman WRAPs Organic Capital Grants Programme NFU Farming Futures

Question: Q16

NO

The CRC believes that domestic wood burning stoves used as a primary heat source should be included in the tariff structure. The CRC is also concerned that the tariffs have been calculated using gas fired heating systems as the comparator and would like further clarification from DECC on why off net heating systems have not been included or used within the tariff setting structure.

Question: Q18

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CRC is not an expert in renewable district heating schemes, but we would like to note that to date most examples of district heating schemes have been found in urban communities due to the need for heat users to be close to the generation source. This does not mean that they do not have potential for some rural circumstances and communities, but we would be wary of additional costs being passed on where there is more limited opportunity for rural uptake of district heating schemes.

Question: Q20

as noted above we are wary of increasing the costs of the RHI further but a case by case basis seems a more sensible approach given the uncertainty of where these schemes will be delivered.

Question: Q21

Yes

Question: Q22

Yes

AgreeQuestion: Q23

Yes

Question: Q24

The CRC recommends that quarterly analysis on rural / urban uptake and impacts of the RHI is built into the RHI. Where the cost of the RHI is being borne by off net households and there is strong evidence that the benefits are not being taken up a review of the principles, design and structure of the RHI should be initiated. DECC may also want to consider an emergency review if the primary impact of the RHI in the domestic sector is revealed to be a replacement of efficient gas boilers rather than more inefficient off net heating systems. DECC should also implement an emergency review the RHI where evidence shows that the cost impact of the RHI is directly leading to an increase in fuel poverty.

Question: Q27

Consideration should be given to allowing the RHI for community groups such as village halls and community buildings that have invested in renewable heat before July 2009. These community groups are run by volunteers who will be able to use the revenue from the RHI to re-invest in community assets and maintain and expand their renewable technology base as well as encouraging the uptake of the RHI in other community groups by sharing their positive experience (rather than feeling hard done and discouraging others to go down the same route which could be the case if they are prevented access to the RHI). Rural community networks are strong and should not be underestimated as the most powerful dissemination tool for initiatives such as the RHI.

Question: Q28

YES

There is a high risk of multiple unintended consequences from the RHI as currently designed including: Disproportionate cost impacts and increasing levels of fuel poverty particularly in rural off net communities unless off net fuels are exempt from an RHI levy (if this is the chosen funding mechanism) Low uptake in rural communities due to technical and financial barriers including the impact of heat pumps on weaker rural power lines, the high prevalence of uninsulated solid wall properties making heat pumps unsuitable, the exclusion of woodburning stoves as a primary source of heat and lack of access to capital finance amongst rural disadvantaged groups Increased social tension between those that can afford to invest in renewable heat and those that are paying for the RHI but cannot access the capital finance to benefit from it The replacement of efficient gas boilers with renewable heat systems lowering SAP ratings and delivering marginal carbon savings at very high cost Domestic fuel poor and low income households paying for the commercial sector to take the lion’s share (85%) of the RHI payments Abuse of the RHI system whereby metered installations are incentivised through the RHI payments to produce much more heat than they need which is easily not policed through the proposed self-certification auditing system.

Question: Q29

See question 20 - No additional comments

Question: Q30

595 KinXerG Limited Consultancy

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KinXerG Ltd believes that the Renewable Heat Incentive is an important initiative to promoteresponsible change towards a greater proportion of the UK’s heat demands being met fromrenewable resources. Further, that the mechanisms and incentives detailed are likely to achievethe goals of the programme. However, the complete exclusion of stoves and similarapplications is a considerable oversight. Therefore this response primarily focuses on question 7concerning eligibility of energy sources, technologies and sites.

BackgroundWood burning in domestic properties is estimated at 358.6 ktoe (4.16TWh) in DUKES 09. It isnoted in this document that collecting statistics for wood burning is difficult. Manycommentators in industries related to wood burning believe this is an underestimate due to selfcollectionand log-wood traded ‘cash in hand’. Even so, this figure represents ~45% of allrenewables currently used for heat in all sectors, and is equivalent to ~90% of all electricityproduced by large scale hydro-electricity. Only a very small proportion of this figure is due toburning wood chips or pellets in whole house boilers, the vast majority being consumption oflogs in stoves and open fires.Rarely do stoves and fires constitute the main source of heating in a home. However, stoves andfires displace part of the cost and carbon emissions associated with alternative fuel sources. Inelectrically heated homes they will also tend to displace electricity consumption at the highest(and most polluting) time periods during evenings on the coldest winter days. The quantity offossil fuel heating displaced by wood burning will vary from home to home according to thesize of the stove/fire, house layout, comfort requirements of the occupants, availability of goodquality wood and willingness to attend the fire. The addition of water heating from a fire orstove can considerably increase the benefit of log burning by distributing heat to other areas ofthe home and through reducing the heat output in the stove location to avoid overheating.Government commissioned reports suggest a considerable opportunity to expand the amount ofwood burning from existing resources; large quantities of log-wood can easily be found rottingfrom road, rail, farming and domestic tree maintenance. Wood supply is more likely to beorganised and quality controlled if the market for log burning is expanded.Many modern log burning stoves and inset fires are clean burning with high efficiencies. Somehave gained exemptions for burning wood in smoke controlled regions through a regulatedtesting mechanism that ensures the highest standards are attained. By contrast, open fires are farless efficient and are unable to attain the combustion conditions for clean burning. Due to thepoor efficiency of open fires, coal is often burned (sometimes with wood) to obtain sufficientheat whereas replacement with an inset fire or stove is more likely to result in a greaterproportion of wood burning due to the considerable improvement in efficiency and burn control.In most but not all cases, the addition of water heating from a stove or fire, whilst increasing thescope to distribute heat (so displacing fossil fuel burning), also reduces the ability to achievehigh efficiencies and clean burning. With incentives that recognise the benefits of distributingheat it is likely that more manufacturers will produce clean burn appliances that can distributeheat this way.Domestic log burning is likely to be most prevalent in rural areas without access to mains gasdue to the availability of low cost wood and the high price of oil, liquefied gas or electricity forheating. There is a high correlation between fuel poverty and rural locations due to the highercost of fuels, greater weather exposure of properties and a high proportion of poorer housingstock. Conversely, rural locations have greater access to log fuel, often at lower costs, and areunlikely to be in smoke controlled areas.


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In the consultation the following paragraph appears:We propose excluding wood burning stoves, air heaters, open fires and similar applicationsfrom the RHI. These present practical difficulties as it is extremely difficult to monitor howmuch they are used (they are usually a secondary source of heat the use of which will beoptional), and to what extent they are used with renewable fuel rather than, for instance, coal.The administrative cost of including these appliances in the RHI in a fair way would likely bevery high.

Although KinXerG Ltd agrees with some of this statement, the importance of domestic logburning as the largest source of renewable heat is too important to ignore. The current level hasbeen attained without incentives (including full VAT), so it is likely that with less costlyincentives than those proposed for other technologies, this area can easily be expanded.Addressing specific points in the paragraph from the consultation:• Some stove models are configured only to burn wood (usually without a grate or with arestricted grate area). If support from the RHI required stoves that can only burn woodmore manufacturers would be likely to produce such stoves.• The most efficient, clean burn stoves have an existing identification mechanism throughsmoke controlled exemption testing. This also gives a defined position with regard toquestion 9 concerning air quality if stoves and inset fires were to be included in the RHI.• The use of stoves and fires is on the whole optional and other fuels may also be burned.However, the amount of wood burned could be assessed by monitoring the quantity oflog-wood delivered to a property in the scheme.The last point may suggest a way forward to incorporate log burning into the RHI. Even if acustomer is burning some coal, identifying the amount of wood delivered to a property providesa good indication of the renewable element of their burning. Administratively, the submissionof multiple receipts to claim the RHI payment may be burdensome. An alternative route may beapplication of the incentive through approved wood suppliers who could offer a rebate, up to apre-defined annual limit, for supply of fuel to those householders who are registered on thescheme through purchase of approved stoves. The rebates could then be accumulated andreclaimed by the fuel supplier. In addition to promoting wood burning in the most efficientappliances, such a scheme would help create a framework to encourage competition for supplyof quality regulated log-wood and would provide better statistical information about the amountof wood being burned. Approval of stoves and inset fires for inclusion in such a scheme couldbe achieved via existing mechanisms for exemptions to operate in smoke controlled regions.Question 7 asks about not only the technology, but also the sources and sites. Sources of logfuel have already been addressed in various reports, which indicate realistic availability toexpand the current supply from existing resources. In many cases, the energy required to deliverlog fuel is likely to be small as centralised collection for processing is not required. Manyhomes, particularly in more rural locations, are ready made ‘sites’ for such technology.Conversely, opportunities for whole house heating from biomass are not only limited by thehigh capital requirement, but are also likely to be limited by the space requirements to store thevolumes of fuel required. Log burning stoves and fires also represent a very low technical riskto the customer, being readily recognised, understandable and not reliant on electricity suppliesfor operation.Although the primary goal is to promote the use of renewable energy, for those customers whocan be incentivised to refurbish open fires with inset fires or stoves, such measures will alsoprovide an important energy efficiency improvement. In addition to the better utilisation of fuel,ventilation losses are also likely to be reduced substantially when an open fire is replaced withan enclosed burner.In conclusion, log-wood burning is far too significant to be ignored in the future promotion ofrenewable heat. Many households already accept the technology, but could benefit fromincentives to upgrade from open fires and to choose the most efficient, clean burning stoves.Existing mechanism are in place to identify efficient, clean burning appliances. Administrationof such a scheme via wood suppliers is practical and offers the opportunity to improve theavailability, quality and competition in wood supply. Where measures incentivise thereplacement of open fires with inset fires or stoves there is a considerable energy efficiencybenefit in addition to promoting renewable heating. Such a scheme is likely to have a positiveimpact on fuel poverty. The inclusion of stoves in the RHI should be reconsidered.


596 Vision 21 NGO

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Vision 21 are concerned and committed to changing behaviour, within the general public, which extends to businesses and local government. We intend to renovate our offices, to be as insulated as possible. The offices are in an old Victorian building in a planning conservation area in Cheltenham. To supply hot water and heating, we had initially intended to install solar hot water as it is going to be onerous and problematical to drill a bore hole for a ground source heat pump, due to the buildings layout. Unfortunately surrounding buildings take away too much sunlight for solar as it’s installation was limited by planning restrictions. We are therefore pursuing the difficult task of using a heat pump. The building is going to be an example for the town of how you can undertake work on an old building to make it as energy efficient as possible. As an exemplar building for the general public and other organizations, we have ruled out a biomass boiler due to macro concerns about increased greenhouse gas emissions, and ecosystem destruction regarding land use change.

Specifically, then, the relevant issues with the ‘design’:It does not deal with energy reduction and as with biofuels or carbon offsetting, gives the extremely mis-leading impression that we can carry on with our profligate use of energy, when oil may peak this year and gas is not far behind.

We understand that grants will be available for wood pellet boilers, which require the minimal insulation. This seems to be a retrograde step from the Low Carbon Building Programme. Any grant should be based on a meaningful maximum thickness of insulation. The RHI would therefore first have to greatly increase these standards. The required insulation thickness for walls is at least 75mm. Some older houses with cavity walls only have 50mm, so would also require dri-lining. And a third of our homes have no cavity and are known as ‘Hard to Treat’. Traditionally grants for insulation and those required for renewable energy ignore solid wall insulation. Lofts need at least 250mm. CAT advise 450mm.

This level of insulation would require updating building regulations, which should be strictly enforced.

A Renewable Heat Initiative would not appear to be the best use of subsidies, as you get more ‘bang for your buck’ investing in energy reduction. There are 17 million homes with cavity walls and a shocking 65% of these have no cavity wall insulation. The remaining third are ‘Hard to Treat Homes’. Countless jobs could be created by investing a mass insulation of the countries homes.

The recent, (over-subscribed) boiler scrappage scheme will replace a mere 4% of ‘G’-rated boilers. Extension of this scheme, together with providing, proper boiler controls, thermostats and thermostatic radiator valves as well as draft proofing, would also appear a better investment, than micro-generation, if money is limited.

Planning laws need to be changed to allow external solid wall insulation of houses in listed areas and internal or external insulation of solid walls in listed buildings.

All of these measures would very likely exceed the 12% by 2020 target of renewable energy that presumably refers to reduction in carbon emissions.

Which get’s to the nub of the issue if the RHI is a preferred option to energy reduction - The inclusion of biomass and biofuels as renewable energy, when they clearly are not. Certainly the definition of biomass as carbon neutral is incorrect. All mono-culture industrial biofuels create more greenhouse gas emissions than fossil fuels. In other words, their inclusion, will do the very opposite of the intended initiative. Biomass, will also lead to increased greenhouse gas emissions from land use change and other negative environmental effect to do with ecosystem destruction and biodiversity loss.

Having unwisely included biomass, the initiative then gives greater financial incentive to this over solar hot water. Why? Historically micro-generation has been the preserve of the middle-class as the price is beyond the reach of most. As Vision 21 have experienced, it would be far easier to install a wood pellet boiler than a heat pump or solar panel. These boilers would also be the cheapest option to purchase which combined with ease of installation, appears to make it the most likely first choice for homeowners. The will have a detrimental effect on our environment.

The RHI seems to take no account of adversel air quality impacts to health, by increased biomass burning.

Does the government have any plans to move to a hydrogen economy (powered by renewables) and encourage more district heating schemes and use of CHP from gas?

Question: Q01

No. Biomass and biofuels should not receive any subsidies. Current biofuel and biomass use is already unsustainable and harmful to the environment. This new use, will only add to the problem. There is also an issue about biogas. Whilst use of waste is laudable, subsidizing biogas could create another problem. In Germany biogas uptake has lead to increased use of agricultural land to grow mono-culture maize, leading to biodiversity loss.

True renewable like solar and heat pumps should be encouraged.


No, since they create the problem the initiative is supposed to prevent. The only exception to this is waste vegetable oil, but this accounts for a tiny fraction of current demand. Also, this isn’t just an issue pertaining to the domestic sector, the problems will be greatly exacerbated by businesses switching from fossil fuels to biomass and bioliquids.


No. They are not high enough and will therefore cause adverse impacts on health due to lower air quality.


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Absolutely – insulation is critical. Please see previous statements on insulation. The ‘minimum’ should however be a maximum value – in other words to highest eco-standards.

Question: Q10

Payment should be based on climate impacts and so solar would get a higher payment and biomass and biofuels none.

Question: Q18

No as use of the biofuel will make the mix worst for the climate and ecosystems, than if it had been left as a fossil fuel. Also this just creates yet another need for biofuels, with all their inherent issues. DECC proposes RHI subsidies for the conversion of heating oil boilers to ones burning a blend of heating oil and biodiesel. At present, around 3 billion litres of heating oil are burned every year in the UK. If 20% of this were replaced with biodiesel, 560,000 tonnes a year would be required, which is equivalent to 45% of all biofuels currently used in the UK.

Question: Q19

‘Grandfathering’ would make it even more difficult for bioenergy subsidies to be reviewed in future. Renewable heat technologies like solar thermal, and heat pumps are included in the RHI. They are far less environmentally damaging than using bioliquids and biomass for heating and therefore need higher levels of support.

Question: Q22

597 Viridor Private Company

Our main concern is that there is no detail at all in the Consultation as to how the scheme will be funded, which impacts on perceptions of deliverability and (political) risk. . The scheme is due to start on 1 April 2011. The Consultation inferred that there would be an announcement in the 2010 Budget but none was actually made.It is unclear whether or not there will be another consultation on funding of the RHI.

Question: Q01

We agree with the proposals

AgreeQuestion: Q03

We agree with this proposal, provided that the new limit does not exceed 300MW. As noted above Q4 in the consultation document, the MCS scheme is inappropriate for large-scale installations.

Question: Q05

We support the proposals.

Question: Q07

There is no doubt the original standards proposed were so tight that they would seriously hamper the roll-out of biomass boilers. We agree that current proposals are realistic.

AgreeQuestion: Q09

We agree that large-scale installations should have to meter the renewable heat generated in order to benefit from the scheme. However, as with the CHPQA scheme and CCA’s, we believe that it is sufficient to stipulate that meters must comply with a given degree of accuracy. BS EN 1434 is perfectly adequate, and there is no need for further regulation as mooted in the middle of page 45 (Practicalities of heat metering).We are concerned about the following proposal: “Where metering is used, we propose a requirement that the installation does not have any outlet valves that could be used for heat dumping after the point where the heat meter is installed. This would help ensure that only useful heat is compensated.”Firstly, it will be almost possible to enforce such a requirement – it would require a regulator annually to inspect every metre of pipe-work downstream of the meter to ensure that no un-authorised valve had been retrospectively installed. Secondly, on an industrial scale, a biomass/EFW boiler is likely to be connected into a heat distribution network. For safety reasons, such networks are required by law to have some valves (such as pressure relief valves) which could be used (i.e. misused) to dump heat. Rather than banning such valves out-right, there should be a requirement on operators to certify annually that all heat upon which RHI is being claimed is being put to useful purpose.

Question: Q14

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As stated in our covering letter, we are part of a Joint Venture currently constructing what will be the largest EFW-CHP plant in the country. The financial case underpinning the project assumed that ROC’s would be worth the buyout price plus the recycled buyout funds, i.e. something well in excess of £50/MWh.Initial analysis of the RHI scheme on our real-world example is that RHI’s at the lower end of the proposed tariff range (£16/MWh) are roughly equivalent to ROC’s without the recycle buyout funds. The higher end of the proposed range (£25 / MWh) is roughly equivalent to ROC’s plus recycled buyout funds. Thus, in order to maintain equivalence with the ROO, RHI’s need to be at the higher end of the proposed range. Anything less than this could undermine the basis for our project, and it would have an impact on the banking case and on the cost of treatment to the Greater Manchester Waste Disposal Authority.We believe the proposed tariff lifetime (15 years) is insufficient. To maintain equivalence with the ROO, the tariff lifetime for RHI’s should be consistent with that for ROC’s, i.e. at least 20 years.On page 66 of the consultation document, it is proposed that projects “installed” before 2013 would be able to choose between RHI’s and ROC’s. After 2013, there is no choice – such projects would only be eligible for RHI.’s. EFW-CHP plants such as ours take approximately 4 years from financial close to implement. Our project is due to start commissioning in Q4/2012 and it is expected that this will take approximately 6 months. Whilst the definition of “installed” is unclear, what is clear is that our proposed commissioning period spans exactly the proposed regime change-over date. This is creating considerable uncertainty, and we therefore propose that the regime changeover date should be no earlier than 2015. Note that this concession would only apply to CHP plants, so it should not be difficult to implement or significantly alter the RHI.

Question: Q15

As stated in the covering letter, we believe the limit of 200 kW is too low and see no reason why this should not be raised to, say, 15 MW. It is difficult to determine the right level of incentive without a better understanding of the costs of delivery.


See our response to Q15.

Question: Q18

In general, yes. However we have two issues:1.The consultation says (page 51) that unless the fuel is municipal waste, the RHI will require the use of separate boilers. The phrase “municipal waste” is not a defined term, so we are unclear as to exactly what DECC had in mind when drafting this. However, it should be made clear in the final drafting that the definition of municipal waste is a wide one, including not only “raw” municipal waste but other mixed wastes such C&I waste, SRF (as tightly defined in the Renewables Obligation Order) and RDF - fuel which is 100% produced from municipal waste but which does not comply exactly with the ROO’s very tight definition of SRF. 2.We would urge caution in the application of “ROC-derived” rules for determination of the biomass fraction. These rules are so restrictive that – to date -not one ROC has been issued for renewable energy generated from waste. In particular, the rules for RHI’s should explicitly permit the use of indirect measurement methods such as the C14 method.

Question: Q19

We agree that there may be a case for such uplift, but see our reply to Q21.

AgreeQuestion: Q20

As the analysis points out, district heating can be extremely expensive. Whilst we can see that there may be a case for such an uplift, there is need to ensure good value for money for the tax-payer. The scheme should not be designed around “hard-to-treat” customers – there needs to be recognition that in these cases stand-alone generation (or even non-renewable generation) of heat is the correct solution.In any event, if a district heating network is to be installed, design lifetime will be much greater than 15 years.

Question: Q21

Yes we agree that tariffs should be grandfathered to ensure investor certainty

Question: Q22

Yes

AgreeQuestion: Q23

Lead times for large projects such as Energy from Waste with CHP are typically 4 years from funding to final commissioning. If a review was held in 2014, then it would mean that an operator commencing a project today could not be sure of what level of RHI support he would get on the first day of operation, and this will damage the “bankability” of such projects.

Question: Q26

Please see our response to Q21.We note that as each district heating network is bespoke, there is no such thing as a typical one. There need to be many factors taken into account, including the distance of the primary plant to the distribution network, the mix of heat users, the variability of the load (daily, weekly and seasonally) etc. If reference networks are to be used, as a minimum there will need to be several reference networks.

Question: Q30

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599 susan nisbet (individual) Existing generator

As an early adopter of biomass technology in the UK, i.e. before July 15th 2009, I felt that it was important to write to you with my views on the proposed Renewable Heat Incentive. The key area around which I have concerns is question 28 of the consultation document.

Q28: Do you agree with our proposed approach to allow access to RHI support to new projects where installation completed after 15 July 2009, but not before? Do you have any evidence showing that in particular situations RHI support for installations existing before this date would be needed and justifiable?There are two points that I would choose to make in relation to this. Firstly, as a point of principle it does not seem fair or appropriate that individual projects which allowed the biomass industry to become established and grow should not be eligible for the RHI.Secondly, one of the key reasons that we chose to undertake our biomass project was based on the availability and affordability of biomass wood fuel. By intervening in this market in such a significant way it is likely that the cost of the fuel will increase significantly. It is a fundamental economic rule that when demand increases price increases. We are therefore extremely concerned that we will be priced out of the market for biomass fuel which will mean that our significant capital investment will not have been worthwhile. Given that we are already seeing prices in the region of £30 to £40 per MWh for wood chip fuel it is not clear how the modelling work that has been undertaken would predict that the upper range of fuel prices will be £34 per MWh in 2020 following the very significant increase in demand for biomass fuel which will be required to achieve the renewable heat targets.I therefore suggest that it is imperative that projects completed before July 2009 be given the opportunity to be eligble for the RHI. Given the small numbers of projects involved the costs of this should not be significant in the context of the scheme.

Finally, as the issue of renewable enery is a lesson we are trying to teach our kids - they're household is part of the answer, not the problem - it would be such a poor message to them if our UK governments decisions eventually forces mum & dad to resort back to a gas combi boiler. not to mention the waste of the money it cost to install the wood pellet stove and the hard graft to fit the fire. please, think this one through.


600 OFTEC Trade Association

OFTEC is a trade association representing some 150 companies and training centres in the UK and Ireland who are involved in the oil fired heating and cooking sector. Also it administers a Competent Persons Scheme on behalf of the Department of Communities and Local Government for competent oil fired technicians and currently there are over 9,700 persons on this Register.This consultation response includes two attachments:

1.Summary analysis on RHI Tariff levels for bio-kero2. Provisional Oil Firing Product Standard – Bio-Liquids for Combustion Purposes (PR OPS 24) which is CONFIDENTIAL and should not be published or copied outside DECC without permission of OFTEC.


All comments below assume that there is no fossil fuel levy applied to pay for RHI. Also we understand that a DECC Bio-mass strategy is being developed which could impact on bio-liquids in the future. These comments assume that any new policies allow use of bio-fuels for heating and transport.

Question: Q01

No Comment

Question: Q02

Yes

AgreeQuestion: Q03

22 June 2010 Page 1133 of 1348

No

Comments: Certification of the competence of installers and the quality of products eligible for RHI is an important consideration. However we are concerned that for installers MCS will impose high additional costs may prevent oil technicians from becoming involved in RHI conversion work.

Instead we suggest that DECC (or MCS) recognise existing Competent Persons Schemes (CPS) that are licensed by CLG as being capable of accrediting installers undertaking RHI work. Currently OFTEC has 9,700 technicians on its register with proven competence in oil heating and cooking products, and it will be important to re-train these people in bio-fuel conversions / installations which OFTEC can co-ordinate. Work is underway at OFTEC to develop relevant training material.

We have a further concern that manufacturers of the bio-fuel compatible product manufacturers may be unwilling to pay for MCS product approval, having already achieved separate test house certifications for their products.


No

Comments: We agree that the limit should be extended beyond 45Kw and that, for the certification of installers, CPS’s as well as MCS should be permited to issue accreditations.


Comments: For installers, all recognised Competent Person Schemes could be used. The schemes could develop new renewable competence standards for their relevant sectors which could then be approved by DECC. These standards would then enable persons to be registered with the relevant CPS.

Question: Q06

YesComments: There are significant benefits of switching off-gas homes and buildings to a bio-fuel blend. OFTEC has estimated this to be c 1.25 million tonnes of CO2 p.a. from 2020 (Ref Letter to Stephen de Souza dated 13/2/2009) and we suggest these benefits are being under-valued. With use of a proven methodology to demonstrate the supply chain of the sustainable fuels utilised, we believe that bio-fuels for heating must be encouraged.

We propose that the RHI be made available to all domestic properties that use a bio-fuel blend - including new houses that are installing liquid fuel heating. Evidence from Germany suggests that new “passive houses” are so well insulated that there is no case for paying for connections to mains gas. New rural homes should be encouraged to install renewable facilities that have a bio-fuel blend boiler as the core heat - combined with solar thermal, air source heat pumps and other renewable technologies as appropriate.

This is a flexible and cost effective way of encouraging take up of renewable heating.

AgreeQuestion: Q07

YesOFTEC has developed two blended fuel types using FAME . These are detailed in the provisional specification Pr OPS 24 which is attached as an appendix. We are not aware of any other bio-liquids that are suitable for heating in domestic properties. We urge that the FAME in these fuels is accepted as eligible for the RHI.


No

Comments: We believe that the maximum NOx emission standards proposed for biomass boilers at 150g/GJ are higher than the maximums being introduced by the EC’s “Energy Using Product Directive” (EuPD) and so may not be legal from 2013 when the EuPD becomes UK law. Therefore this matter may have to be reviewed as the RHI may have to be withdrawn from bio-mass boilers after that date because it will be illegal to place them on the market.


No

Comments: It may be possible to introduce minimum energy efficiency measures as a criteria for receipt of RHI after a few years when take up is well established. For the immediate future however we believe that this will add additional cost and complexity to the householder’s decision making which will deter take up of RHI and would be counter-productive.

Question: Q10

NO COMMENT

Question: Q11

22 June 2010 Page 1134 of 1348

Yes

AgreeQuestion: Q12

Yes

AgreeQuestion: Q13

NO COMMENT

Question: Q14

NO COMMENT

Question: Q15

NO COMMENT

Question: Q16

NO COMMENT

Question: Q17

Comments: We agree with the approach taken and note that the rate of return for the renewable technology installed should be 12% (p.39) . OFTEC has commissioned consultants FiveBargate to undertaken analysis which is attached as an Appendix. This shows that :

1. The proposed RHI tariff for Bio-liquids of 6.5p per kwh does not deliver sufficient Internal Rate of Return (IRR) or Net Present Value (NPV) for the targeted home-owners to offer a 12% rate of return. 2. In order to achieve an average of 12% IRR for targeted home owners, an RHI tariff of 9ppkwh is required for bio-kero. 3. The RHI is most effective in older solid wall construction properties. 4. At 9ppkwh, the cost per tonne of CO2 abated is £476.

Therefore we would ask that the proposed tariff for bio-liquids up to 45kW should be increased to 9 pence per kWh.


NO COMMENT

Question: Q19

YesComments: There is real potential for liquid fuels to provide renewable district heating but this will require Bio-liquids to be permitted in medium and large installations – which is not proposed at present. We suggest that the exclusion of bio-liquids from these categories discriminates against these fuels.

AgreeQuestion: Q20

NO COMMENT

Question: Q21

No

Comments: For householders to switch to bio-fuel blends with up-front capital conversion costs and then a continuing higher price to be paid for the new fuel, it is important that tariffs should be fixed for a specific time period. However it may be necessary to adjust the RHI for bio-liquids at regular intervals as the costs of fossil fuels and of bio-fuels will alter and it will be necessary to ensure that the price of the bio-fuel blend remains competitive with fossil fuels.

Question: Q22

YesComments: Any digression of the bio-liquid tariff before 2020 will undermine up-take of conversions because mass-uptake is unlikely before 2014 -2016 period.

AgreeQuestion: Q23

22 June 2010 Page 1135 of 1348

YesComments: It is important to keep RHI open for emerging technologies, but we would be concerned if digression from use of existing technologies is used to fund these.

AgreeQuestion: Q24

NO COMMENT

Question: Q25

No

Comments: It may be too early to have meaningful statistics ref oil conversions to the biofuel blend by 2013


NO

Question: Q27

NO COMMENT


NO

Question: Q29

NO COMMENT

Question: Q30

601 North London Waste Authority Local Government / A

Ofgem; Biogas


Overall, The Authority is content with the RHI and welcomes the introduction of the scheme. The Authority is also pleased to see that SRF is recognised as a renewable fuel.

Question: Q01

YesComments:

The Authority is content with Ofgem being the administrators of the RHI. The Authority’s proposed scheme(s) will be larger than the small and medium scale generation capacity threshold, hence, is unable to comment on the appropriateness of MCS.

The Authority is content with the proposed quarterly payments for installations above 45 kW. The Authority’s scheme(s) will all be above 45 kW and hence is unable to comment on the appropriateness of annual payments to schemes below 45 kW.

Question: Q03

Yes

Comments:

The Authority understands that only useful heating will be supported. The Authority would, however, like to see this extended to the parasitic load of an operational plant, such as heating of a digester in an anaerobic digestion plant.

Question: Q07

Yes

Comments:

The Authority is content with the proposed metering and deeming approach.

AgreeQuestion: Q12

22 June 2010 Page 1136 of 1348

Yes

Comments:

The Authority believes that the risk of metering resulting in a perverse incentive to overgenerate is low and welcomes this approach for large scale and process- heating installations.

Question: Q14

Yes

Comments:

The Authority is content with the tariff setting approach and the rates of returns that have been used to set the tariffs.

However, the Authority is concerned about some of the tariffs and the ranges proposed. As an example there is a 56% difference between the tariff range of 1.6p to 2.5p for Solid Biomass CHP and proposes that the higher tariff of 2.5p is used.

The Authority is also concerned about the length of the tariff and suggests that an approach is taken where the tariff lasts over the length of the project.

As an example, a Waste Private Finance Initiative Scheme is designed to operate over a period of 25 years. In this instance, this requirement should be recognised and the RHI should be paid over the 25 year period.

Question: Q18

Yes

Comments:

The Authority agrees with the approach to allow mixed waste to be combusted in a single boiler.

Question: Q19

Yes

Comments:

The Authority is glad that the RHI recognises that district heating can be a useful and cost effective alternative to installing individual heating systems in individual properties.

The Authority is very supportive of the uplift for renewable district heating and believes that as long as the uplift is designed to cover the additional costs of installing a district heating network and associated infrastructure, this will greatly aid the installation of district heating systems.

AgreeQuestion: Q20

Yes

Comments:

The Authority welcomes an uplift for all eligible district heating networks and believes that this should be determined on a case by case basis, however, it should not just depend on hard to treat properties, as the financial barriers with district heating networks lie around the cost of installing the network and associated infrastructure and not just on the type of property at which the installation will take place.

Question: Q21

602 Sembcorp Utilities (UK) Limited Private Company

CHP


22 June 2010 Page 1137 of 1348

Sembcorp has been an early adopter but has consequently suffered from a number of teething troubles with the introduction of the RO despite pointing them out in previous consultations. A good example of this was the fact that we had to initially construct our Wilton 10 Biomass Plant as “power only” due to the original way the RO legislation worked. This was particularly frustrating given the plant is located on one of the largest heat loads in the UK. Unfortunately we have seen further issues emerge with the introduction of RO banding a few years back and we fear similar mistakes could be made with the RHI.

Background

Sembcorp provides utilities and services to customers on the Wilton International manufacturing site on Teesside. Sembcorp owns a combined heat and power station on the site, running on fossil fuel, with an electrical capacity of around 240MW. We sell up to 500te/hr (400MW) of steam at three pressures to process plants on the site. The business Co-fired biomass on its boilers in the period 2004 – 2006 but was at a disadvantage to the major (power only) generators due to our CHP configuration leading to an overall lower power efficiency (and the fact that ROCs are only awarded on power output).

In 2007 we commissioned a dedicated (power only) 30MW wood-fired generating station (“Wilton 10”) adjacent to the original CHP plant at a cost of £65M. This unit is accredited by OFGEM as a separate power station. We are currently investing a further £5M to convert Wilton 10 from an power only plant to a CHP unit. Subject to outcomes on the RHI and other associated consultations we would seriously consider further Co-firing.

Reponses to the Consultation

We have responded to the Consultation using the template format, and these are detailed later, however we would like to provide an executive summary of the main points we raise:

1.We believe that good quality CHP schemes are an existing “low carbon technology” and should not be undermined by this new initiative. Therefore good quality CHP schemes should not have to contribute to the funding base of the RHI. This problem could be avoided very easily if the RHI is collected via the existing CCL mechanism (where existing exemptions exist for good quality CHP). The use of the existing CCL mechanism would also simply the implementation of the RHI.

2.The Renewable Obligation CHP Uplift (extra 0.5 ROC) should be retained with the RHI applied to any Heat Exported in excess of a QI of 100. As it stands there is a financial penalty that discourages RO schemes from exporting more heat & going beyond a QI of 100 (the overall plant revenue drops) . The RHI could easily address this problem and this would mean that around 100-200MWe of “early adopters” who have sanctioned biomass CHP under the RO can still optimise their overall heat output and provide further environmental benefits without being financially penalised. The other advantage of retaining the RO CHP uplift is that this minimises the tax burden (cost to society) of the new RHI as the RO is already fully funded.

3.We believe that the conversion of existing (power only) biomass assets to be Combined Heat and Power assets should be entitled to be eligible for RHI.

4.The exclusion of Co-firing under RHI does not align with other Government policies such as the Renewables Obligation, and we believe that Co-firing should be eligible on large scale biomass CHP under the RHI. It can make a valuable contribution to renewable objectives at a lower cost.

5.The RHI should be aligned with the RO in terms of timescales for eligibility and we believe that large biomass should be eligible for the RHI for 20 years in line with the RO eligibility.


YES

The fundamental issue of who is going to pay for the Levy has not been addressed to date.The lack of detail on the Levy leaves us concerned that the Government’s proposals for RHI will harm existing CHP businesses and lead to a reduction in the UK’s CHP capacity. The consultation proposes the introduction of a new levy on fossil fuel suppliers who supply fossil fuel to consumers for the purpose of generating heat, whilst at the same time exempting conventional ‘power-only’ generators from the same levy. It is not clear to us how you would treat fossil fuels which are used to produce heat and power simultaneously in a CHP plant, but logically such fossil fuels should also be exempted. Otherwise the operating costs of CHP plant relative to conventional boilers and ‘power-only’ electricity generators will be increase, thus reducing their profitability and undermining their competitive position.The impact of any levy on fossil fuels used for CHP production could be very serious particularly given that most large scale CHP serves industry (which is already in a fragile state following the recession). We aim to offer competitive steam prices to our customers but any extra energy tax will make them less competitive versus their global competitors. There is a real risk that our CHP capacity would decline, either because of customer closures or because we would be incentivised to install heat-only boilers rather than CHP in future.Clearly a logical solution is to exempt from any levy fossil fuel used in a good quality CHP scheme. The existing CHPQA methodology provides a mechanism for determining the Qualifying Fuel Input for CCL exemption purposes. Indeed the proposed RHI levy looks very similar to CCL and the RHI could perhaps be funded from CCL revenues (or an increased CCL). This proposal could save significant time in implementation of the scheme.We are certain that it is not the intention of Government to damage the scope fordeploying new CHP or maintaining existing CHP capacity, given the enormous potential that it has to provide cost-effective carbon savings. However, that will be the effect of the proposed amendment unless CHP is exempted from any RHI levy. We strongly supported the Energy Bill amendment tabled by Baroness Wilcox which explicitly provides that certain fossil fuel supplies may be exempted from the levy, and we urge that this exemption be applied in the relevant secondary legislation to good quality CHP schemes.

Question: Q01

22 June 2010 Page 1138 of 1348

YES (however we propose a solution to this in our response to later questions)

It is very unlikely that large scale Biomass schemes can be financed at 12% IRR. Neither developers nor Financial Institutions will be willing to take on the high inherent risks for such a large capital investment at this rate of return. The risks referred to include:1. Heat Off Take Risk – Developers will need to sign agreements with 3rd Party heat customers. There is the risk that this heat off take customers may close down or default in some way leaving the CHP facility with no heat off take and failing to qualify for the RHI in the future.2. Fuel Price Risk – UK Biomass prices have already doubled since our W10 Project was financed and there is a real risk of fuel price uncertainty negatively impacting returns on investment in new projects. It is unlikely (and also probably undesirable) that the proposed RO & RHI banding reviews will eliminate all fuel price risks.3. Capital Investment Risk – Large scale Biomass Plants have limited equipment suppliers with virtually no UK companies in the market. Through the development cycle (typically 2-3 years from inception to financial close) there is significant exchange rate risk as projects cannot hedge currencies until financial close. In addition there is more EPC risk for biomass projects due to the limited contractors who tend to have the upper hand in their negotiations with developers (the contractors will only bid projects on their terms)4. Political / Regulatory Risks – The RO has already been subjected to significant changes. In addition there has been a well publicised case of misinterpretation of the complex rules (e.g. the Grandfathering issue). This has created a feeling of unease amongst the banks and developers and increased the risk rating of investing in projects that are incentivised by schemes such as the RO and the RHI.

Question: Q02

NOOFGEM have really struggled to administer the RO Scheme and the LEC Scheme. Sembcorp have experienced numerous problems with the late issues of ROCs and LECs already. An example would be that we have been issued with our LECs (typically worth £0.5M p.c.m.) late on several occasions due to “IT problems”. Fortunately the scale of our business cash flow is able to withstand a certain element of delay but we are aware of many smaller developers and start up companies who could be more severely impacted.In fairness OFGEM were set up as a regulator whereas the administration of these detailed schemes with many participants goes way beyond their original remit (& core competencies) for a regulator. The administration of hundreds of applications and regular payments of millions of pounds per month requires different skills and competencies and in our view a separate dedicated organisation should be set up to administer LECs ROCs & the RHI.


NO

Refurbishment, repair or conversion – We believe that the conversion of appropriate (existing) assets to be Combined Heat and Power assets should be entitled to be eligible for RHI. There are a number of Plants that could be converted from Power Only plants to CHP Plants (either Biomass or co-firing), excluding them will only make the Governments 2020 targets harder to achieve. We can also see a much wider potential at a number of other major industrial centres in the UK. There are about a dozen large sites with a similar demand to Wilton e.g. refineries, heavy chemical and other energy intensive centres such as paper mills with existing CHP plant that could be converted to supply renewable heat. Our proposal would be that plant conversion should be allowed providing the applicant can demonstrate a future lifespan of 15 years (typical financing term for new projects)Co-Firing – This is an opportunity to address the anomaly that true** “Co-firing with CHP” is naturally disadvantaged against “power only” Co firing under the RO.** Unless the biomass is burnt in separate boilers (which is not really co-firing) then the same rate of ROC applies for CHP plant versus power only. Despite being more efficient in terms of total useful energy produced CHP generates proportionally less power per unit of biomass than a Power Only Co-fired plant therefore is not equivalently rewarded (the two plants may substitute the same quantity of biomass and “save” the same quantity of CO2 yet the power only scheme is rewarded at a much higher rate (typically double).We do not agree that there needs to be a significant administrative burden to include Co-firing in the RHI and would propose that RHI qualification can level the playing field for Co-firing CHP operators.Cooling – We believe there is a lost opportunity in not including Cooling as significant future transfer of heat loads will be in the cooling of buildings, cooling of processes etc.We return to this subject in the later questions of this response.


NOThere is a potential of bioliquids from existing technologies being made available for combustion in CHP configurations. For example Pyrolysis of rubber products resulting in an oil product that could be burner in a large Boiler with heat recovery.


YESComments:We agree in the requirement for an emissions standard for biomass boilers below 20MW. There is a potential that if unregulated then multiple small biomass boilers will have detrimental emissions to air levels compared to a single large boiler which will have to be compliant to an appropriate Permit.

AgreeQuestion: Q09

YES

AgreeQuestion: Q12

22 June 2010 Page 1139 of 1348

YES we agree that metering needs to be managed although there is a ready made solution in our opinion.

This issue has already been solved once by government for a similar risk (that operators might claim LECs for heat demand that is false). In that sense we are a bit surprised that we are “re-inventing the wheel”. Our proposal is that the existing CHPQA methodology is used to deal with metering issues (i.e. Accuracy, auditing, calibration) and that the same definition of useful heat is applied. This includes a declaration by the operator & penalties apply. In addition the paperwork includes contact details of the heat users.The common objection (to CHPQA) from smaller developers seems to be based on the misconception that registration under CHPQA (with all the good robust procedures mentioned above) does not have to mean that a QI of 100 is required to achieve benefits. These can be two separate things entirely with RHI benefits being independent of QI for small developers.The existing CHPQA, which operates well, should be utilised because it will speed implementation of the RHI, avoid duplication & save costs in administration both for industry and government.

Question: Q14

The RO amendment in April 2009 introduced the concept of ‘banding’ to the RenewablesObligation and in particular introduced the additional ½ ROC for ‘good quality’ biomass CHP plants (the ‘CHP uplift’). The result is that developers have responded to this additional incentive and a number of projects have already been sanctioned including our own. Therefore in our view the extra ½ ROC is working in the sense that it is the right level of return. This sets a benchmark for the RHI.However despite bringing projects forward there is a financial penalty that discourages RO schemes from exporting more heat & going beyond a QI of 100 (the overall plant revenue drops). There have been arguments that the RO CHP uplift rewards projects too quickly (i.e. with only around 10-15% heat export requirement) but in our experience most developers tend to need benefits to be front end loaded rather than exactly linear and so the “shape” of the CHP uplift curve actually works well in getting projects “off the ground”.(see full response for graph provided)

What doesn’t work well is that the overall revenue goes down after the CHP “sweet spot” has been hit.The RHI could easily address this problem and this would mean that around 100-200MWe of “early adopters” who have sanctioned biomass CHP under the RO can still optimise their overall heat output and provide further environmental benefits without being financially penalised. Our proposal is that developers can earn the RHI for any heat exported in excess of that required to deliver a QI of 100 (the existing CHPQA methodology can easily measure this quantity of extra heat – in fact a similar calculation is already performed to calculate the heat shortfall for schemes that achieve a QI below 100)

(another graph provided - see full response)

The other advantage of retaining the RO CHP uplift is that this minimises the tax burden (cost to society) of the new RHI as the RO is already fully funded.In addition it nullifies any argument about whether £25/MWh (or a 12% IRR) is the appropriate level of support (ref our response to Q2)To summaries we propose that the CHP uplift to be retained at its current level and then with the level of the RHI set at £25/MWh to be payable for each MWh of heat supplied beyond a QI of 100. We believe this will be a workable solution whilst minimising cost to the consumer.


NO

Please see our response to Q2 and the alternative approach suggested in Q15

Question: Q18

(table provided which summarises Sembcorp's proposals - see full response)

NO

The requirement to have a dedicated boiler for the renewable fuel does not follow the approach of the Renewables Obligation. There is already a mechanism for accreditation and administration of Co-firing within the RO and it is not seen as being a significant administrative burden to include Co-firing in the RHI.The condition that RHI will require the use of separate boilers (with a dedicated boiler for the renewable fuel) is unduly onerous and introduces a market distortion. We have previously given an example under the RO where a CHP Co-firing developer would have to invest capex of around £4000/kW to receiving 1 ROC per MWh on about 18% electrical efficiency. This plant cannot possibly compete for fuel with a Co-firer on a major power station earning 0.5 ROC/ MWh having double the electrical efficiency but where the Capex required to burn biomass (in the same boiler with coal) is much lower (i.e. approx £200/kW). The condition for separate boilers should be removed.The above distortion also has negative environmental effects because biomass will tend flow towards the large power only Co-firers who can afford to pay more (at 36% overall efficiency and only £200/kWe capex) whereas it could be utilised by CHP operators operating at 70-80% overall efficiency (burning biomass along with other fossil fuels in the same boiler). Frustratingly there is significant potential if government get this area of policy correct. The recent “Roadmap for heat” identified a potential 3.67MTOE of heat and 0.48MTOE of power from Biomass CHP plants.The RHI is an opportunity to address this issue with a “joined up policy” that firstlyrecognises the use of biomass over fossil fuels and then secondly rewards the additionalbenefits of biomass CHP on top.


22 June 2010 Page 1140 of 1348

NO

It is unlikely that any tariff based structure will incentivise District Heating enough forprivate developers to take on the challenge. In our opinion the solution to district heatingneeds to come from the public sector in the form Capital Grants to finance theconsiderable infrastructure required to connect the heat users to the heat source.Developers will be pleased to provide renewable heat at their plant boundary (based onthe proposals in this response) but are unlikely to be able to invest in “off site”infrastructure under public roads etc without some form of grant or soft loan.


see above

Question: Q21

NO

As an existing operator Sembcorp has been minded to support government’s proposals on the periodic banding reviews of the RO and would also back a similar concept under the RHI. We would however suggest that DECC should publish the banding review methodology in advance (ideally worked examples of the calculations) to give the clarity on how the system will work. Given all the concerns from banks & developers we see this as a simple measure to instil confidence in the market.We recommend that support under the RHI for CHP plants be extended to 20 years to match the RO. In addition the administration of the RO and the RHI should be aligned wherever possible so that reviews are conducted contemporaneously.

Question: Q22

YES

We agree with your proposal.

AgreeQuestion: Q23

YES

Yes, however please refer to comments on Co-firing and Bioliquids in other question responses.

AgreeQuestion: Q24

YES

See Q22. The criteria for the reviews should be published in advance, and if possible the formulae for the calculations should also be published in advance.We also reiterate the recommendation that that RHI aligns with the RO to ensure consistency in delivering low carbon heat and power.

AgreeQuestion: Q26

Yes with the caveat that conversion projects completed after July 15th can access the RHI. Within the scope of conversion we would also include existing plants that gain a new accreditation under the RO as Co-firers of biomass.Given the investment that Sembcorp has already committed (£70M including current £5M conversion of Wilton 10 to CHP) our primary concern has been that nothing jeopardises the CHP uplift (to 2 ROCs) which formed the basis for our boards £5M sanction of the CHP conversion project & the associated return of our capital grant (£12M in April 2009). We wrote to Ed Miliband (along with other companies in the same predicament) to emphasise this point in November 2008.Notwithstanding this we feel that if the choice is as straightforward as “stay with the RO” or elect to enter the RHI we will be forced to stick with the RO (double ROCS) as we have no guarantee that future heat demands will be sufficient to ensure we are able to at least earn the same RHI revenue as we would under the RO. This is unfortunate as we wouldthen have no incentive (in fact a positive disincentive as described in Q15) to go beyond about 15% heat export. In that scenario we will be sub optimising the potential CO2 savings that could have been achieved under our proposed composite RO & RHI solution

AgreeQuestion: Q28

Only those already mentioned in previous questions i.e.Q1 (Large CHP & its industrial customer base bearing RHI tax burden)Q3 (Risk that OFGEM cannot manage the additional administration workload)Q14 & others (Risk that RHI introduces duplication & undue admin cost which could be avoided by use of CHPQA)Q15 (Risk that those developers electing to stay with RO do not then optimise their heat export)Q15 (Risk that new developers with small initial heat loads “do not bother with RHI “ whereas they would have entered the CO under CHP uplift)Q19 (reinforcement of current market distortion under RO where biomass CHP cannot compete with power only co-firers due to CHPs lower electrical efficiency)

Question: Q29

22 June 2010 Page 1141 of 1348

603 Bartholomew Area Residents Association Private Company

•Bartholomew Area Residents Association, Green GroupThe Bartholomew Area Residents Association (BARA) is a group of residents living in the streets around Bartholomew Road in Kentish Town, London NW5. The chair of BARA is Des Bradley of Lawford Road, NW5. BARA is recognised by Camden Council, the Metropolitan Police, the local health authority and other state agencies as a properly functioning residents association. BARA has participated in many issues affecting residents in the area such as health, policing, road maintenance etc. The BARA Green Group is a sub-group of BARA and consists of members of BARA who are particularly concerned about energy conservation and climate change. The chair of the BARA Green Group is John Banks of 28 Patshull Road, London NW5 2JY. BARA Green Group members provide information and encouragement to each other on methods of conserving energy and collectively seek to encourage others to do the same.

•Installation of solar thermal panels by BARA Green Group membersSeveral members of BARA Green Group have installed solar water heating systems on the roofs of their homes. Others are considering installing photovoltaic systems. Solar panels seem to be the most suitable method of renewable energy for houses in a densely populated urban environment. These systems use solar power to heat water and so make a contribution to space heating, water heating and cooking. Each of these activities is described in the Consultation as “useful renewable heat generation” and as such is eligible for support under the Renewable Heat Incentive (RHI) (Consultation, page 29). The systems installed by BARA Green Group members have been part-funded by Government and local authority grants as and when they have been available. •General welcome to Consultation proposalsWe broadly welcome the proposals for the RHI and the Government’s desire to encourage more people to install micro-generation systems to create renewable energy. We believe that such a programme will reduce dependency on fossil fuels and help mitigate the worst effects of climate change. We do not comment on the technical aspects of the scheme or its pricing because we do not have expertise in those fields. This response focuses on aspects of the proposed scheme that appear to us to be unfair and discriminatory.


Certification of installers (Questions 4 and 5)We consider here the issue of certification only in so far as it affects early installation. We do not have any expertise in the question whether the certification proposed is a good one or not. Installers of systems for BARA Green Group members did not necessarily have Microgeneration Certification Scheme (MCS) certification because the MCS certification standard was and apparently still is not mandatory. However, the installers used by BARA Green Group members were sufficiently reputable to satisfy officials from the local authority’s grant department. We contend that they should be sufficient to satisfy the requirements of the RHI scheme. •BARA Green Group Alternative ProposalsThe BARA Green Group proposes that the Government include all renewable energy systems installed at the start date of April 2011 (whenever they were installed) provided satisfactory evidence is produced that the systems have been properly installed. We suggest that the Government change the requirement so that MCS (or whatever is the most appropriate) certification is required from the start date of April 2011 but that for systems installed before then, it will be acceptable if householders can provide evidence that their systems were properly installed. An example of sufficient evidence would be the allocation of a central or local government grant towards the cost of the installation. Another example, would be a later certification from a MCS approved installer.

This response was approved by BARA Green Group at its meeting on 19 April, 2010

Question: Q04

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Excluding systems installed before 15 July 2009 (Question 28)The BARA Green Group believes that it is wrong to exclude from the RHI scheme renewable energy systems installed before 15 July 2009. The Consultation document does not give reasons why systems installed before that date should not be entitled to RHI support (Consultation, page 64). The fact that 15 July 2009 happens to be the date on which the Government announced its Renewable Energy Strategy is entirely arbitrary. In the absence of explicit reasons, we have speculated as to what they might be. Firstly, the Government’s rationale seems to be that by promising a generous and long-term revenue stream it will attract those people who otherwise would not consider installing renewable energy systems. If this is the case, such a policy will be seen to penalise citizens who have already installed renewable technologies because of their concern about climate change. These pioneers did not install their systems in the expectation of future financial payback but because it was the right thing to do for our society and for our planet. To say, as the Government appears to be saying, the pioneers do not need a financial incentive because they would have done it anyway is both cynical and amoral. Secondly, the Government may be reluctant to include systems installed before 15 July 2009 on grounds of cost. Does the Government think that there will be such a deluge of people with renewable energy systems installed before that date that they would so affect the rates proposed that the scheme would not be financially viable? Although we have no idea how many renewable energy systems were installed before July 2009, such a scenario seems unlikely. But even if the number of people involved did affect the proposed financing of the scheme, the fair approach must be to adjust it accordingly. Certainly, the rates offered in the Consultation are generous. But how much more equitable it would be to offer everyone who uses renewable energy a financial reward for their contribution to reducing fossil fuel usage. This may mean reducing the rates proposed in order to maintain a comparable cost level but that would provide a fairer outcome. Because the difference between being within the scheme and excluded from it is so significant from a financial point of view (hundreds of pounds every year for 20 years for the former), there is a risk of fraud. The Government may find it difficult to supervise the scheme. With so much to gain financially, people might be tempted to falsify installation certificates and even to have their systems removed and re-installed. We would wish to continue encouraging our families, friends and neighbours to install renewable energy so that even more people are using renewable energy. However, it will be a massive dis-incentive to do so if the Jonny-Come-Latelys will receive large sums of money for 20 years while people with systems installed before 15 July 2009 receive nothing. We regard such a proposal as socially divisive. Although people’s responses to climate change are diverse, climate change will affect us all and it is important that the Government sends a unifying message about the need for all of us to act together. The decent thing would be for the Government to focus more on its main objectives (reducing fossil fuel usage and meeting EU targets) rather than whether it can bribe people to help achieve these objectives. To exclude people who have already done the right thing simply because they have already done the right thing is a poor precedent for any government to set. Thirdly, the Government no doubt and quite reasonably wishes to ensure that all systems included in the scheme have been properly installed. We address this issue in the next side-heading.


604 ENERGY ADVISORY ASSOCIATES Consultancy

eligible technologies


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1OVERALL APPROACH

The RHI proposes to give support on a revenue grant basis and to subsidise the least cost-effective technologies the most. This policy appears to be irrational and perverse.

Providing revenue grants also biasses the program towards helping well-to-do people. They can already afford to undertake high capital investments. Now, courtesy of RHI, they can obtain a “gold-plated” savings account which pays 12%. It is noteworthy that:

1.DECC plans to guarantee this income stream for 15-20 years, not for 3 years as most high-interest savings accounts do. 2.The yield is index-linked but the government’s NS&I only pays a real rate of ~1%/year on index-linked accounts - index-linked gilts are less generous than this. 3.The income is set to be tax-free and especially attractive to higher rate taxpayers.

On social policy grounds, it appears reprehensible to pay about 12x as much as the investment market pays on other index-linked investments. It may lead to extensive takeup by the wealthy and to little or no action in low-income households, rented buildings, flats and/or RSL estates. All these recipients, even if they wished to take part, would suffer from lack of capital or from other obstacles, for instance the conflict of interest between a landlord who owns a building and its heating system and the tenant(s) who pay(s) the heating bills, or the conflict between a management company and leaseholders of flats in a block.

A likely but hypothetical recipient of the RHI, as it is drafted, would be the owner of a listed, draughty, country house of 600 m2. He/she replaces a modern 100 kW(t) oil boiler, 80% efficient, with a bill of £8,000/yr = 18,000 litres = 140,000 kWh/yr of heat, by two 45 kW solid biofuel boilers. The bill stays similar; the lower combustion efficiency of pellets or chips offsets the lower price of the fuel.

He/she “pockets” the proposed RHI “tariff” of 140,000 kWh/yr x 0.09 p/kWh = say £12,500/yr for a period of 15 years. With 2%/year inflation this income rises by £250 annually. It more than covers the annual fuel bill, at present wood fuel prices, and helps to pay for the equipment. This support is over-generous and is questionable in view of the CO2 emitted when wood is burned - see later.

The real discount rate applied by the state is 3.5%/yr in the Treasury Green Book for projects lasting up to 30 years. Support on these terms via loans could be virtually self-financing from the viewpoint of “UK PLC” and would not need large subsidies.

Loans have already been proposed for retrofit insulation measures by UKGBC and others. What is needed is to combine measures into one programme and not give unduly high levels of support to some technologies as opposed to others.

The proposed support is subject to step changes. So it may drop sharply or disappear above a certain threshold. This guarantees a system which is full of anomalies and will tempt many to game the system, as attempted above with two 45 kW(t) boilers replacing a single 90 kW(t) one.

The proposed program pays no attention to energy efficiency. This introduces anomalies and an inevitable waste of resources.

It is unfortunate for us to to be told now that matters are so urgent that money must be spent wastefully to meet this renewable energy target. Many experts have stated that the situation is urgent for 15-25 years or more but we have seen slow progress.

Worse, the target now set is not consistent with the original discussion within government. It appears that at some point renewable electricity was confused with renewable energy. A feasible, albeit still demanding “15% renewable electricity” figure thereby became an almost unachievable “15% renewable energy” target.

15% renewable electricity needs a rise in the renewable content (excluding large hydro which provides 2%) from ~3.5% to 13%. But a rise in renewable heat, gases and liquid fuels from almost zero to 15% is a more major undertaking. The UK obtains very little heat from active solar, whereas Germany, Sweden and Denmark between them obtain about 20 TWh/yr of heat just from solar district heating - see later.

This error should be accepted. The target would need to be renegotiated. The majority of the UK’s energy is delivered not as electricity but as gases, liquids, solid fuels and a small amount of heat. This can be seen on the Sankey diagram which BIS publishes annually.

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2CONFLICTS BETWEEN TARGETS

In case of conflict, the UK’s GHG (mainly CO2) targets should come ahead of the renewable energy RE targets. If RE is allowed to dominate over CO2, the result could be subject to ridicule. A plausible scenario would be for climate change to continue unabated while RE targets are “met”.

The UK has set a binding legal target of a 80% reduction in CO2 emissions by 2050. This must receive top priority. But to arrive at a clearer and more correct CO2 accounting system, the target should be redefined as annual CO2 emissions minus annual CO2 sequestration. This is significant for biological fuels because, just like fossil fuels, they emit CO2 in combustion.

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12PREFERRED PROGRAMME

Faced with doubts over whether wood-fired boilers and ASHPs save any CO2, and doubts whether GSHPs save enough CO2 to make it worth replacing condensing boilers - they cost more to run than gas - some of the RHI proposals look more like an expensive way to make climate change

Question: Q01

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worse.

Given the short timescale to 2050, let alone 2020, the UK must spend its scarce resources in a way which delivers:

1.reduced GHG emissions (GHGs = CO2 plus trace GHGs such as CH4, Nox, soot, some refrigerants, fire retardants, foaming agents etc) and/or 2.increased CO2 sequestration.

We summarise below a program which we consider could contribute cost-effectively to a UK goal of lower GHG emissions.

Support should be given to the following main technologies on an integrated basis. It should not be delivered via two, three or four separate programmes. That approach is likely to waste scarce resources and to raise consumer transaction costs. The UK economy, especially since events of 2007-08, is not in a position to waste resources.

Proposals below are divided broadly between built-up areas and low-density ones. Because many renewable resources all occur as heat, e.g.:

1.geothermal aquifers or hot dry rocks2.solar3.CHP waste heat; e.g., from biogas electricity generation plants4.industrial or other waste heat

the full renewable potential in built-up areas will not be captured unless/until DH systems are developed and are available.

“Built-up” corresponds roughly to the boundary of the gas supply area. But there are some settlements which have no gas and which would be dense enough for DH. Conversely, there are some suburbs which have gas but which would not be dense enough for DH.

Built-up areas

1.Heat mains using today’s Danish best practice, as opposed to the techniques analysed in recent reports for DECC. Experimental techniques used there to reduce installed costs and reduce flow and return temperatures need to be field-trialled. This is not very practicable in a low-volume market without outside assistance. 2.Retrofit insulation, cheap window improvements; e.g. replacement sealed units only, leaving the frames in place. 3.Ditto airtightness, using techniques like in situ PU foam cavity fill for its greater energy saving. This is widely done for instance in the Netherlands in place of the out-of-date cavity fill materials used and subsidised by government in the UK. 4.Mechanical exhaust-only ventilation (MEV) systems, often the most economic and least obtrusive option on retrofit. It can save as much energy as MVHR for lower cost and less concern over maintenance, etc. 5.Natural gas and/or biogas CHP plant. This is much the more practicable option for CHP at small and medium sizes. 6.Solid-fuelled CHP, in large plant only whose particle emissions can be fully cleaned-up and with CCS too, given the high CO2 emissions from wood. 7.Large-scale solar arrays as discussed for instance at http://dbdh.dk/images/uploads/pdfbladet/Solar%20energy%20contributes%20to%20cleaner%20district%20heating.pdf8.Large heat pumps if this helps to stabilise the electric grid as the amount of windpower increases.

Lower-density areas

1.Very high insulation, possibly reaching Passivhaus levels, replacement windows when possible 2.Airtightness 3.MVHR or possibly MEV systems 4.GSHP.s.5.Solar to a high solar fraction plus backup boiler burning LPG or oil, mixed in later years with compatible and sustainably-produced biofuels. 6.CHP systems as/when applicable, usually feasible on large buildings only.

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13OVERRIDING PRINCIPLES

Incentives should be in accordance with the following principles.

1.Support on the basis of resource cost of measures in £/tonne CO2 equiv, at the real discount rates in the Treasury Green Book. Life-cycle costing so that measures which last 60-100 years are given credit over measures which last “only” 20-25 years.

2.No step changes in support as the size of system changes. Sliding scales avoid anomalies - which if they exist will be exploited to “game the system”.

3.Novel technologies to receive greater support if and only if there is clear prospect for viability or usefulness in a future UK energy system. Proven technologies, albeit proven abroad, appear sufficient to give more than a 80% cut in CO2 emissions by 2050.

4.In line with 1, no extra subsidies for small installations relative to large ones of the same basic technology. With, for instance, heat pumps it is large ones that are novel and have not been used before in the UK, yet they offer considerable scope especially on DH systems where they enable heat and electricity loads to be altered to keep a country’s electricity grid stable even if windpower and CHP supply quite a high proportion of

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demand. Http://www.energinet.dk/NR/rdonlyres/B57A4B4A-AC10-41C4-AB31-AFA55634FD31/0/WP4ReportMeasures_2009.PDF Small GSHPs do not offer this potential.

5.Support for DH systems and zoning, to lower consumer costs of complying with the stringent environmental improvements which are now required.

6.No significant support (apart from monitoring) to proven commercial technology whose use is widespread in the UK. ASHPs are a proven technology, with known limitations, and are already widespread; e.g., in commercial cooling systems.

7.Support to take the form of a subsidised loan or partial grant for all measures, energy efficiency and renewables, tied to the building. The choice between them on a particular building could be left up to consumers but we suspect that loans would be more effective since they give a positive cash flow. For instance, £14k of investment financed over 30 years at 3%/yr gives repayments of £450/year. This is profitable if it saves the consumer half of a gas, oil or LPG bill of ~£800/year. To make it very profitable, rather than just profitable, and speed take-up, the real interest rate could be cut to say 2%/yr. Or repayments could be index-linked and could start out at £300/yr, rising thereafter in line with gas, oil and electricity bills.

8.Support for DH

9.No support for technologies which could significantly worsen UK energy security.

10.No support for measures which would cause higher GHG emissions or higher air pollution (PM-2.5s, PAHs, Nox, CH4) than the current UK energy supply & use system.

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11PEAK DEMANDS AND ENERGY SECURITY

Peak demand on the electric grid nearly exceeded the available capacity in winter 2009-10. Much coal and nuclear generating plant is due to be closed in the near future. Interruptions to supply are a perceived risk in the period 2015-20 even without adding new peak loads such as heat pumps.

If a few million domestic heat pumps are installed, plus public and commercial ones, this could add more than 10 GW (e) to coincident peak electricity demand in 2020, posing considerable difficulties if the total capacity installed is similar to today or only 5 GW(e) higher. The concern is greatest with ASHPs, as their COP falls off sharply in severe weather.

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3THE BIOMASS ILLUSION

There is a misleading impression in developed countries that burning wood is CO2-neutral except for the processing and transport energy. This belief is at risk of having unfortunate consequences for atmospheric CO2.

Wood emits slightly more CO2 in its combustion than coal, around 0.34 kg per kWh from wood compared to 0.32 kg/kWh from coal (and 0.19 kg/kWh from burning fossil- or bio-methane). It is indeed true that growing trees absorb CO2. But to obtain meaningful results, the two activities should be accounted for separately and the net impact calculated.

If trees are burned now, they emit CO2 to atmosphere. The level emitted per unit of useful energy is higher than if natural gas were burned. Typically it may be 1.8 to 2.0 x higher, as one can illustrate below for a small heat-only boiler:

Gas condensing, compensation controls, seasonal efficiency 95% (HCV). Emissions 0.19/0.95 = 0.20 kg/kWh.

Wood pellet, seasonal efficiency 85% (HCV).Emissions 0.34/0.85 = 0.40 kg/kWh.

These are combustion-only emissions and exclude emissions in fuel transport and processing.

The CO2 may not be reabsorbed by new trees until 2100. Moreover, how many trees are planted and grow to maturity per tree cut down? The numbers may not be the same. In that case, it would be worth counting emissions and sequestration separately. The outcome may be positive. For instance, forests in many temperate countries; e.g., USA and Canada, are growing faster than they are being harvested, with consequent sequestration of CO2. If wood from such a forest is burned, it cannot continue to sequester CO2 and the outcome is no better.

To ascertain if a policy is useful, it is more useful to add up annual CO2 emissions and deduct annual CO2 sequestration for years of a period. If the much-discussed “tipping point” is considered likely to occur in the period 2010-25, then net CO2 emissions in the years 2010-25 are a more serious matter than in the period 2050-2100 and must be reduced sharply.

Some published estimates state that ~20% of all CO2 in the atmosphere has come from wood combustion; i.e, from net deforestation, not from fossil fuel combustion.

The fact that such CO2 accounting is difficult and awkward does not mean that it should be avoided. Pending progress in this area, it seems important not to reward burning a fuel whose use in the short term could make matters worse.

4RENEWABLE ENERGY DEFINITIONS

It is physically impossible for heat pumps supplied by a largely fossil fuel electricity system to be more “renewable” than CHP plants based on the same electricity system. Government energy policy usually aims to level the playing field, not to tilt it, so this anomaly needs to be corrected.

Either heat pumps should be redefined as non-renewable energy, or heat from fossil CHP plant should be redefined as renewable energy. The former would be a more logical step. They would still both be classified as energy efficiency measures and they could be eligible for support in many circumstances.

In late 2008 the Advertising Standards Authority (ASA) stated that it was misrepresentation for Danfoss Heat Pumps Ltd (DHP) to claim that a heat pump relied on stored renewable solar energy. DHP pointed out that other sellers, and for that matter the government, were making the same basic claims, but it lost the case on all counts. Are further cases needed to the ASA or to other authorities?

In the evidence to the ASA, it was pointed out that the heat in the ground is at a low temperature, fairly close to that of the ambient air. It has little or no value.

The closeness of this heat to ambient temperature explains why the UK’s power stations reject an average ~68 million kilowatts of heat (2008 figure) in their cooling water or up cooling towers, typically at 25-30ºC. This is a very large waste heat stream, but being at ~25ºC it has relatively little value.

If it had a value, the power station operators would make more effort to extract electricity from it before discharging it into rivers or the sea. They are, after all, commercial organisations. It only acquires a significant practical value if it is discharged at a temperature sufficiently above ambient; e.g., hot water at 50 or 80 deg C, to be utilised for another purpose, such as space or water heating.

Energy consultants, chartered engineers and others have a legal duty to provide professional advice which best safeguards their clients’ interests. Many clients want to minimise their environmental footprint and are confused by advertisers’ claims. Yet the government has engineered a situation in which the best advice to clients to minimise their overall impact on atmospheric CO2 conflicts with the best advice to clients in order to maximise their income stream. This is bizarre and reprehensible.


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5TECHNOLOGIES OMITTED

1.Large-scale solar heat. Not used in the UK. Widely used in Denmark, Germany and Austria and also Sweden and Canada. Needs DH networks. Apparently four or more times cheaper than solar thermal on single buildings. A profitable source of renewable energy when in widespread use, unlike most renewables on single buildings. See for instance http://www.energymap.dk/Cache/b1/b1479f0f-ab57-4c8b-adb2-5a7e82af8344.pdf

2.Geothermal heat. Used in Southampton. Available in other UK geothermal aquifers, including Teesside, the Scottish central belt, Worcester/Droitwich, Bath, et al but not used. Needs district heating (DH) systems. Quite widely-used in the past in Germany and France, and now in Denmark.

This document displays confusion between geothermal energy and ground source heat pumps (GSHP.s). The first source exploits heat from nuclear decay in the earth’s core, the second extracts heat at near-ambient temperature from the soil or occasionally bedrock near the earth’s surface.

3.Industrial or commercial waste heat. Needs DH. Less CO2-intensive than producing renewable energy from most sources listed here.

4.Very large scale heat pumps (using more stable heat sources, benefiting from scale effects and investing in multiple-stage refrigerant cycles to improve the COP). These factors combined might give an increase in COP of ~1.5-1.8x; i.e., a system operating at COP=2.5 on a domestic scale might operate at COP=4.5. Need DH. Denmark is planning to use spilled wind energy from the electricity system and store it as heat for use in DH systems. See for instance discussion in http://www.energinet.dk/NR/rdonlyres/B57A4B4A-AC10-41C4-AB31-AFA55634FD31/0/WP4ReportMeasures_2009.PDF

5.Passive solar (new buildings and major refurbishments, conversions or extensions.) Larger scope in GB (and Ireland) than in other regions of Europe due to our longer winter and cool summers (reducing risk of overheating). Subject to sufficient thermal mass, can provide ~1,200 kWh/year of heat to a typical new 100 m2 detached house, or pro rata.

6.Daylighting (new, especially non-domestic, buildings). Scope to displace 50-60% or more of electric lighting, depending in detail on design and controls. Passive solar energy used as light is more valuable than the same energy used as heat, since it displaces electricity, not heat, which in the UK is mostly derived from gas. However, if this discussion is confined to provision of heat only, daylighting could be excluded.

7.Solar thermal systems for single buildings, giving a high solar fraction, supplying ~80% of DHW and possibly 30% of space heat, typically 60% overall. Usually needs 8-12 m2 collectors and a slightly larger heat store than the usual 300 litres. Typical equipment is imported on a one-off basis from Germany, Austria and Switzerland and is therefore costly. Attractive in low-density buildings that back up the solar in mid-winter by a stored fuel; e.g. an LPG or biofuel condensing boiler.

Especially attractive in Scotland. A house retrofitted almost to Passivhaus standard still needs substantial space heating energy in the period late February to May and September to October, when significant solar heat is available. See schematic graph below for a retrofitted house in rural Invernessshire that was modelled in 2008.

8.Gas CHP heat. If the UK believes in energy efficiency, it needs incentives to use biomethane sent into the gas grid in CHP plant rather than in heat-only boilers - not the opposite. Support for fossil- and bio-gas CHP should be integrated.

A separate support system for biogas versus natural gas CHP will lead to waste of energy and lead to biogas being burned in small, less efficient plants, even in heat-only boilers. It is more energy-efficient to use gas in large electricity generating or CHP plant than in micro-CHP plant or heat-only boilers. The laws of thermodynamics cannot be repealed.

Because it is easier and cheaper to transport gas (few losses, cheap pipe) than transport electricity or heat (both ~10% T&D losses, the first has expensive wires and transformers and the other has fairly expensive pipes), the UK’s national interest would often be served by sending biomethane through the gas pipes to conveniently-located CHP plant which displaces gas combustion in inefficient heat-only boilers.

6NEW TECHNOLOGIES?

Some aspects of GSHP.s were patented ~100 years ago in Switzerland. There has been a century of periodic interest in them, especially at times of energy shortages and especially in regions which have abundant hydroelectricity and lack resources such as natural gas. The UK Electrical Research Association, Leatherhead, which was part of the nationalised electricity industry, worked on them in the 1950s and monitored one installation in detail in 1952.

Small GSHPs offer more scope for high CoPs than small ASHPs, especially at times of peak electricity demand (needing less generating plant to be installed). They are worthy of support in low-density areas with no gas and unsuitable for DH, but the CoP needs to be monitored over 5 years until temperatures have stabilised.

ASHPs are a mature technology, with limitations in the UK as past work showed. The CoP falls off sharply in cold weather and most ASHPs are supplemented by peak electric resistance heating. At typical CoPs of 2.5-2.7 for space and water heating combined they save little or no CO2 versus well-controlled gas condensing boilers. It seems irresponsible to support them in areas with a gas supply.

DECC implies that ASHPs can give an average CoP for space and water heating combined of 2.9. Assuming a space/water heat ratio of say 2:1 or

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3:1, this appears rather unlikely.

The theoretical maximum CoP for pumping heat from 5 deg C up to 60 deg C is 6.0. Given the effect of double-wall heat exchangers, friction, and other imperfections, practical commercial machines would be unlikely to reach more than 40-50% of this. This suggests a CoP of 2.4-3.0, averaging possibly 2.7 for a large range of installations.

The quoted CoP of one Japanese heat pump for space heating is 3.1 at +7 deg C (the heating season average in southern England) and 1.8 at -15 deg C. http://www.cetiat.fr/docs/newsdocs/166/doc/R744%20Technicians%20Manual%20CETIAT%20GRETH.pdf. The flow temperature of the space heating system is unspecified and is probably <60 degC which many radiators need even after retrofit insulation. The water heating CoP can be assumed to be less.

One Swedish 7 kW(t) ASHP http://www.ctc-heating.com/ has quoted CoPs of 3.9 at +7 deg C and 2.4 at -7 deg C. This supplies warm water at 35 deg C which is too low for most radiators and would need a replacement underfloor heating system. The same manufacturer suggests a CoP 2.9 for water heating or for supplying radiators in existing buildings at temperatures of 50/30 deg C at an outside temperature of +7 deg C. UK legionella rules usually require 60 deg C for DHW so the overall CoP for all heat would be lower.

DECC’s CoP of 2.9 may refer to space heating only. What supplies the hot water? If it is a gas condensing boiler, why bother installing a heat pump? If it is electric resistance heating, the CoP for the overall heating system is likely to be reduced to around 2.0 and the combination will emit more CO2 than:

Gas condensing boilersOil dittoLPG dittoLPG or oil boilers plus an active solar system for the hot water and some of the space heatingGas CHP

An agreed convention is urgently needed for quoting heat pump CoPs. Without this, as the above figure of 2.9 shows, suppliers may use conditions which apply to less than 1% of practical space and water heating applications and use sleight of hand by omitting the water heating CoP. It does not seem to be very strongly in the UK’s interests to install large numbers of ASHPs with an implied CoP of 2.9 if the prospective CoP for space and water heat is nearer to 2.5.

Condensing boilers, at ~35 years old, are actually newer than ASHPs and offer a more cost-effective way for the UK to reduce CO2 emissions in the near term. So does condensing CHP, which has a working installation in London.

It is thought by some that correct controls on new condensing boilers could save 10-20% or more of the resulting gas, oil or LPG consumption. This would give seasonal efficiencies nearer ~95-97% depending on fuel than the ~85% reportedly measured by EST on natural gas boilers.

This is a larger impact than is foreseen from this entire RHI program, but no incentives are available for such technology. Correct controls; i.e. to give ultra-low return temperatures, are compulsory on condensing boilers in Germany and the Netherlands but EST advises UK consumers against such controls. This is exceedingly unhelpful, given the urgency of climate change.

Solid fuel boiler plant is not new. Pellet boilers are new but do not deserve support unless/until plant can match the emissions levels of existing oil and LPG boilers, which are the likely type of boiler replaced in the countryside.

7HEAT ZONING

In urban areas, with political will, DH systems could be developed. They make some of the proposed installation(s) superfluous. This is because bulk heat sources are cheaper and can be installed more quickly.

The UK would benefit from a similar heat zoning approach to Denmark. It reduces overall consumer costs. None of DECC’s proposed technologies appear to compete with the cheaper heat supply technologies available to DH systems.

8PUBLIC HEALTH

The advances in public health in the last 50-100 years are thought to have contributed to significant rises in human lifespan. One trend has been to cleaner country air, because many buildings that used to burn solid fuel in winter have moved to use of oil or LPG boilers over past decades. Another trend, as intended by the 1956 Clean Air Act, has been to cleaner urban air. In fact, few urban buildings burn solid fuel any longer, even the cleaner-burning types. Most suburban buildings that burned oil 15-25 years ago have moved to gas, whose particle emissions are virtually zero.

There is extensive legal action against wood burning throughout North America and Australasia - all of them low-density, quite well-forested countries where wood heating is more common than in the UK. In one case where the smoke emissions had been prolonged and intrusive, damages of $270,000 were awarded.

It is undesirable to go down this route in the UK. The best way to avoid it is not to encourage small-scale biomass combustion. There are no economic, CO2 or other benefits to supporting such equipment. Subsidies for pellet boilers are likely to encourage all wood useage, by implying

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government support.

The medical / scientific case against particulate emissions is relatively well-proven - rather as the scientific case for the reality of anthropogenic global warming is accepted. It is set out in many reports. Recently the House of Commons Environmental Audit Committee highlighted the need to inform the public better of the risks.

In towns, small-scale solid-fuelled heating plant should not receive support. It cannot match the emissions from existing or potential technology such as gas boilers and district heating. Outside towns, solid-fuelled plant should only be supported if it has lower or equal emissions vs. the mix of coal, oil and LPG heating which is to be displaced. This mix can be determined from DUKES and other statistics.

The EU has greatly cleaned up emissions from diesel cars steadily in the last 15-20 years, the final stage being the new EU6 standard in 2014. The legislation was prompted by the awareness that diesel particles are harmful to health. This awareness has if anything grown. Some reports now estimate that exposure to particles causes 540,000 premature deaths per year in the EU-27.

We cannot see why the UK now wishes to apply the opposite principle to heating systems, compared to private cars and taxis. A so-called “high-quality” wood-fired boiler plant, as defined by DEFRA, typically emits 20 to 25x more particles in a year than a diesel car.

Soot is also a GHG. Climate scientists such as Hansen et al consider that soot has contributed to recent Arctic warming. DEFRA has recognised this point; DECC has not. Soot emissions are hard to avoid from solid fuel combustion plant. They can only practicably be reduced to near-zero; i.e. as low as from natural gas, LPG or biomethane combustion, if the solid fuel is burned in plant fitted with expensive devices on the exhaust stack; e.g. electrostatic precipitators. These devices trap most of the particles after they have been emitted from the combustion chamber, but before they enter the atmosphere. Small solid fuel combustion plant cannot afford such good pollution control.

We clearly should not seek to make climate change worse. An effective way to make it worse is to give grants to devices which emit more particulates than the heating systems which they replace, and which emit more CO2 per kWh than the combustion of coal (before allowing for “afforestation”).

9COMBINED TECHNOLOGIES

We should support combinations of technologies which conform to good engineering practice. We should not support others which do not.

Solar thermal “backed up by” an electric heat pump is an illogical combination. In the absence of seasonal storage, which is only practicable on larger scales than a single building, the main impact of adding solar is to reduce the load factor of the residual electricity demand and to impose a sharper peak on the electric grid.

This transfers costs to the grid operator. They must still build plant and grid capacity for the building’s design heat loss, but they see their load factor drop. If the solar collectors are large enough to provide 50% of the annual heat consumed, it is likely that the load factor imposed by that building on the electricity system would fall from say 0.15 to 0.08.

In other words, the generating plant and transmission and distribution capacity installed for this purpose is now in use for the following length of time: 0.08 x 8,766 = 701 hours/year.

This load profile is extremely unattractive to an electricity company. Two capital-intensive systems have been built to meet one load. Both must be paid for.

This is distinct from a situation in which solar displaces a storable fuel, such as LPG or oil. In this case there is less of a problem, because the backup heating system is relatively low in capital cost. LPG and oil distribution systems are not very capital-intensive either. If less fuel is consumed, the consumer simply orders less fuel and fewer HGV movements occur. The knock-on impacts on energy infrastructure are far less significant than with electricity.

Bivalent heat pumps have been proposed too, using a gas boiler to lop the peak. But consumers do not want complex heating systems. Surveys show they prefer simple “fit and forget” ones. If natural gas boilers are used to “lop the peak” of the electric grid, this transfers the risk from the electricity system to the gas system, which has peaks of its own to deal with.

Gas and oil condensing boilers can provide all a household’s heat. So can district heating. Why install heat pumps? Conversely, if a GSHP can meet the whole space and water heating load of a rural building, why install a second capital-intensive heating system such as solar panels and expect a second subsidy?

In the small print, many heat pump proposals only cover space heating. The water must be heated by the existing fossil fuel boiler system, or by electric resistance.

In the latter case, emissions for all heat put together are likely to be ~0.30 kg/kWh. This assumes that the space heating load of the building is around three times the water heating load. This compares to:

Natural gas condensing boiler (95% efficiency) = 0.222 kg/kWh LPG ditto (95%) = 0.26 kg/kWh Oil ditto (95%) = 0.29 kg/kWh Oil backing up large active solar system 0.12 kg/kWh

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Note: 95% seasonal efficiency needs controls specifically suited to condensing appliances; e.g. as applied in Germany and some other continental countries. For further information, contact German boiler manufacturers or consulting engineers experienced with such controls.

In other words, compared to well-controlled new condensing boilers, an air source heat pump for space heating and electric resistance water heating emits more CO2. Emissions are

40% higher than from gas 20% higher than from LPG 7% higher than from oil and ~150% higher than (i.e. 2.5 times greater than) a solar/oil combination or a solar/LPG combination, in which solar provides 80% of the hot water and 40% of the space heat over a year, 60% overall assuming high insulation and airtightness levels.

Present-day gas CHP consumes less fossil fuel than a bivalent heat pump and emits less CO2. Heat networks are easier to decarbonise than electricity networks too - heat is storable and some energy resources occur only as heat.

We cannot understand DECC’s objection to supporting gas CHP in a unified program for energy efficiency and renewable energy. The options assessed and supported would then be those which perform best on £/tonne CO2 or some other agreed basis.

See also question 1.

10EXPENDITURE

The document suggests various scales of subsidy on p. 46.

In a suburban semi-detached house with a heat load of 15,000 kWh/year, the subsidy is set to be: 15,000 kWh/year x 0.09 = £1,350/year if it is fitted with a wood pellet boiler.

The subsidy if it is fitted with an air source heat pump, assuming the same heat load, is: 15,000 kWh/year x £0.075/kWh = £1,125/yr.

Given that the proposal is to index-link these payments, and make them for 15 years for biomass and for 18 years for ASHPs, the NPV of the stream of support payments can be expressed roughly as follows:

Biomass15 x £1,350 = £20,250

ASHPs18 x £1,125 = also £20,250

In addition there is the likelihood of a separate program for energy efficiency in buildings involving cheap loans or similar, called possibly “Pay as you Save”.

The same scarce resources cannot be spent twice. Spending on cost-ineffective measures makes climate change worse versus the option of devoting it to effective measures. It is not the duty of the UK government to order money to be spent ineffectively and thereby make climate change worse.

A sum of well below £20,000 per dwelling would apparently suffice to lay heat mains to all urban and suburban UK dwellings (excluding some very low-density suburbia) and to fit cost-effective insulation measures. This would resolve the problem of CO2 emissions and fuel poverty once and for all, since the resulting running cost (the fuel consumption) is low to minimal.

Question: Q18

See also question 7.

Question: Q24

605 ICAX Limited Installer

Deeming; innovation


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ICAX welcomes the RHI and government’s recognition that an investment in Renewable Energy incurs an additional private cost for owners, and yields a public benefit for society in reduced emission of greenhouse gases.

The reduced emissions of CO2 is a public benefit that is badly needed and it is right that government should pay private individuals, private companies and public bodies cash to encourage further investment in Renewable Energy.

ICAX welcomes the principle of calculating RHI to provide a ROI of 12% per annum. (However, any subsidy of over 30 pence per kWhour could be criticised for diverting resources to uneconomic uses).

ICAX welcomes the principle of “deemed heat requirement” (in order not to subsidise any more heating than is appropriate) for its administrative simplicity.

The largest use of energy in the UK is within buildings, largely for temperature control and for hot water. Therefore the largest problem to be addressed is that of release of CO2 for heating and cooling. Cashback for Renewable Heat is also the most effective use of public money as it is the area where Renewable Energy technologies are closest to being economic in their own right.

Technology has advanced to the point where, while hydrocarbons are still vital for transport (by air, and by road), they are no longer needed to heat or cool modern buildings.

Interseasonal Heat TransferICAX has invented and developed IHT to provide economic renewable energy. IHT combines solar thermal heat collection in summer, seasonal heat storage and heat delivery via ground source heat pumps in winter. Please see www.icax.co.uk


See Q24.

Question: Q04

ICAX and Renewable CoolingThe RHI consultation document acknowledges “there is also the important question of renewable cooling technologies”. However, its preliminary conclusion is that “As the purpose of the scheme is to support the generation of renewable heat, the RHI will not support renewable cooling.”

We believe the real purpose behind the clean energy cashback policy should be to reduce the production of CO2 to help the UK meet its EU binding obligations by 2020. We believe the government should address the huge levels of CO2 released by air conditioning based on the use of chillers whose basic function is to cool buildings by wasting energy to the atmosphere in summer. The energy comes via electricity from power stations and this leads to a very significant release of CO2 in summer months.

There are alternative ways of providing cooling using renewable energy and the government should take the chance to harvest this low hanging fruit.

ICAX provides Renewable Cooling by capturing “coolth” in winter, storing it in Thermalbanks and allowing heat to escape to Thermalbanks in the ground in summer at a fraction of the cost of air conditioning.

Conventional air conditioning is traditionally provided by roof mounted chillers with a typical Co-efficient of Performance (“CoP”) of 2.5. This is inherently an inefficient process because (following the basic rules of thermodynamics) heat has a tendency to move from hot places to colder places (just as water will flow downhill, unless its path is blocked). Air conditioning is used to expel heat from buildings to even higher external temperatures – this demands a very high input of energy. The ICAX approach is to allow heat to escape from the building down to cold ground. This can be achieved with a very high CoP of over 20 yielding Renewable Cooling with a very low cost of electricity (and therefore lower release of CO2 from power stations).

Interseasonal Heat Transfer yields the kind of energy saving in Renewable Cooling that, we believe, the RHI should plan to support.

We understand why there are reservations about providing any form of cashback in relation to air conditioning – because traditional cooling is very expensive in terms of cost and in terms of CO2. However, this makes it all the more important to encourage low carbon cooling.

For clean energy cashback for ground source heating there are some overall requirements of efficiency for ground source heat pumps. We believe that similar controls could be used to ensure that clean energy cashback for Renewable Cooling is only paid where high levels of efficiency can be demonstrated.

We believe that Renewable Cooling should be supported where a CoP of more than 7.5 can be demonstrated (three times the efficiency of standard air conditioning using chillers to “waste” heat to the atmosphere).

It might also be advisable to restrict RHI for cooling down to a specific set point (eg 25°C) – and to restrict RHI for heating up to a specific set point (eg 18°C).

It should be noted that all references to heating in the EU Renewable Energy Directive also refer to cooling, usually directly linked in the same phrase. The DCSF Building Bulletin 101 places an upper limit on acceptable temperatures in schools.


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Need to accommodate innovationThere is a risk that a rigid approvals mechanism could block innovation. This issue is acknowledged in the RHI Consultation Paper.

We understand that the proposed mechanism requires approval of installers AND approval of installed products. This could block approval for innovative products not on the standard list – even if they would lead to larger savings of CO2.

We think the RHI should be seen to encourage innovation, not to suppress it. If the RHI were only to subsidise established products then would stop dead.

Interseasonal heat transfer (“IHT”) from ICAX is a case in point. IHT achieves very large carbon savings by integrating Solar Thermal, Seasonal Heat Storage and GSHP. An IHT installation uses gshp and might get approval as gshp for this. Seasonal Heat Storage is not on the RHI list. Solar Thermal is on the RHI list, but possibly only in the context of providing Domestic Hot Water from approved roof mounted solar thermal panels. IHT collects solar thermal energy from black road surfaces. IHT uses solar thermal not only for DHW, but also to charge the ground with heat in summer – in order to achieve a high performance from GSHP in winter.

The issues arising are:

An ICAX solar thermal collector is a bespoke item – not a standard mass produced part that could be “approved” as a standard unit.

Will approval be obtained if solar energy is collected from a tarmac road surface – instead of being collected from a roof?

Will IHT customers benefit from RHI for solar thermal where heat is used to charge the ground with heat? Or will this be restricted only to the amount of deemed heat needed for domestic hot water only?

We believe that IHT customers should benefit from these innovations as the purpose is to save energy and reduce carbon consumption. However, approval could be blocked if the person in charge of approval decides that the innovative IHT solution is not compose of standard “approved” parts on a restricted pre-determined list.

ICAX has also developed Solar Thermal Collection from flat roofs. This is a bespoke item constructed on site to suit a specific location.

ICAX also employs Solar Thermal Collection from Pitched Roofing – using an innovative product developed by Solex Energy Ltd. Again this is a bespoke product rather than a standard part supplied in standard units. ICAX would like to be able to continue to use this product from Solex Energy – but would be prevented from doing so if the customer forfeits RHI if ICAX specifies an energy efficient solar collection system.

Question: Q24

606 Environmental Protection UK NGO

Air quality


1. About Environmental Protection UKEnvironmental Protection UK brings together organisations from across the public, private and voluntary sectors to promote a balanced and innovative approach to understanding and solving environmental problems, through policy development and education. We are a registered charity with 110 years experience of environmental campaigning, public information provision, producing educational resources and policy formulation.Environmental Protection UK’s air quality policy committee has been involved in the development of this response. The committee brings together policy makers, regulators and practitioners from local authorities, consultants, developers, academics, industry, interested NGOs as well as members from Environmental Protection UK’s regional divisions.2. Responses to Consultation QuestionsOur response to the RHI consultation relates only to our views on the emission standards for biomass boilers, question 9 in the consultation document. This is not to say, however, that we are considering the question of emission standards in isolation, and we appreciate the wider role of the RHI in encouraging take up of renewable heat to meet the targets set in the Climate Change Act and the EU Renewables Directive.


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We do not agree with the PM10 emission standards proposed in the consultation document, and have reservations with those proposed for NOx.We understand that the emission standards have been revised over those suggested in 2009's Renewable Energy Strategy due to concerns that there are few boilers on the market that could meet the tighter 20g/GJ PM10 and 50 g/GJ NOx standards. Whilst this is a valid argument for a scheme aiming to start in April 2011, we believe that the standards should be set at a level which incentivise manufacturers who produce 'clean' boilers, rather than a level which essentially allows the vast majority of boilers on the market to comply. With this in mind we suggest that emission standards should be set at:PM10 – 20 g/GJ, as originally suggested in the Renewable Energy Strategy NOx – We would support the 150 g/GJ standard, but with the proviso that a clear signal is sent that the Government will look to tighten this standard when the RHI is reviewed in 2013. This is hinted at in the consultation document, but could be set out with greater clarity in the Government's response to the consultation.We are also concerned that proposals in paragraph 4.171 of the RES, for associating adherence with manufacturers’ maintenance schedules with emissions standards, appear to have been dropped in the final RHI proposals. Regular maintenance is essential to ensure that biomass plant operates efficiently and emissions performance is maintained. Linking proof that maintenance schedules have been adhered to with RHI payments would be a very effective incentive to ensure that this is carried out.The Need for Demanding Emission StandardsAt the current time total emissions of PM10 and NOx from modern biomass plant are low, due to the small numbers of boilers and CHP units installed. However, what is clear from the emissions factors in Table 1 below is that increasing deployment of biomass boilers will impact, to some degree, negatively on air quality apart from in all but the most advantageous fuel substitution situations. This comes at a time when the UK is in breach of EU PM10 Limit Values in London, and exceedances of EU NO2 Limit Values are experienced across the whole country.Table 1 – Approximate PM10 emission factors (energy input) from other sectors within the combustion industry1FuelEmission factor (g/GJ)coal120fuel oil12gas oil51 Figures taken from ‘Measurement and Modelling of Fine Particulate Emissions (PM10 & PM2.5) from Wood-Burning Biomass Boilers’, AEA 2008Environmental Protection UK Renewable Heat Incentive Consultation Responsenatural gas1This is not to demand that biomass should be drastically limited on air quality grounds – whilst air quality is driven by health impacts and the need to meet EU Limit Values, biomass deployment is equally driven by the carbon reduction agenda and the need to meet EU renewable energy targets. Instead we are suggesting that steps are taken to limit the air quality impacts of biomass deployment, and that any mitigation measures to offset air quality impacts are included in cost/ benefit analysis.A letter provided by DEFRA/ DECC and the Scottish Government to local authorities in 2009 provided practical guidance on reducing biomass impacts; this was incorporated into guidance on biomass and air quality produced by ourselves and LACORS last year2. The letter suggested targeting biomass deployment into rural (or less polluted) areas, encouraging substitution of coal and oil fired heating with biomass, encouraging larger plant and mandating high quality plant (in terms of emissions) . Below we briefly review how local authorities have experienced implementing this guidance.Geographical TargetingAs the majority of biomass deployment is currently driven by new development, and related planning conditions for renewable energy provision, the majority of biomass plant is still being driven into towns and cities rather than rural locations. Local authorities are generally dealing with this on a case-by-case basis at the development control stage, which creates a significant workload for the local authorities and frustrations for developers when issues with biomass plans are raised. Some local authorities are now reacting to this by developing planning policies for biomass, for example discouraging biomass in Air Quality Management Areas.The RHI may well be a 'game changer' with biomass deployment driven by the desire to obtain RHI payments rather than by planning conditions. However, if this occurs it will reduce the ability of local authorities to control biomass deployment, as they can only exert control where biomass meets the planning system or Clean Air Act conditions.Encouraging Larger PlantLocal authorities lack an effective lever to encourage larger plant through planning policy. The forthcoming Community Infrastructure Levy (CIL) appears to be one possible way to do this, with CIL contributions able to fund community heating infrastructure. At the present time, however, implementation of CIL is still developing, and it is unclear whether any local authorities will be using CIL in this way.Encouraging High Emissions Performance PlantAt present there are few effective means of identifying the emissions performance of biomass boilers and CHP units, bar simple compliance with the Clean Air Act's 'exempt appliance' provisions. With little emissions information available to hand, several local authorities are now requiring particle filters for biomass boilers installed in new developments, as these appear to guarantee low particulate emissions.Feasibility of Emission Standards2 See www.environmental-protection.org.uk/biomassEnvironmental Protection UK Renewable Heat Incentive Consultation ResponseEvidence we have seen from DEFRA suggests that a significant number of the boilers currently available can meet the 20 g/GJ PM10 standard originally proposed in the RES. For those that cannot, filters are available that radically reduce both PM10 and PM2.5 emissions. Ceramic filters have already been fitted to a number of boilers in the UK due to planning conditions imposed by local authorities, or because of health concerns around PM10 emissions. We understand that ceramic filters:Reduce PM10 and PM2.5 to below 5g/ GJ (please see attached results of laboratory testing by filter manufacturers) Add between 10-15% to the installed costs of the boiler (a figure provided by the filter manufacturers)Whilst we understand that there is currently little data on the long term performance of ceramic filters in biomass applications, the technology has been proven in a number of other combustion applications. Glosfume, the supplier of most of the ceramic filters currently installed on biomass boilers in the UK, tell us that they have supplied more than 400 filters over the past 20 years. Filters need regular maintenance to ensure that


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performance is maintained, and filter elements may need to be replaced periodically, which can be undertaken as part of the regular servicing biomass boilers need to ensure high efficiency and good emissions performance.One current restriction on greater deployment of filters in biomass applications is lack of a type approval scheme. We recommend that one is introduced as soon as possible, especially in the light of local policy initiatives that may see a large increase in filters being fitted (see next section).DEFRA's evidence also suggests that very few boilers can meet the 50 g/GJ NOx target originally proposed in the RES, and there is no emissions control technology that we are aware of to cost effectively reduce NOx emissions from smaller biomass boilers. With this in mind we agree that it is impractical to impose a 50 g/GJ NOx limit at the present time. However, the fact that it is currently difficult to cost effectively achieve demanding NOx emission standards does not mean that this is technically unachievable, it is just that there has been little incentive to date for manufacturers to address NOx emissions. To encourage investment in low NOx technology a clear signal needs to be sent to boiler and emissions abatement equipment manufacturers that emission standards will be reviewed in 2013, with view to tightening the NOx standard. We understand that the current small size of the UK market for biomass boilers makes it difficult to influence manufacturers, who are almost entirely foreign concerns. However, we should plan for the RHI to be a success, and with the UK market likely to increase in size significantly the Government should enjoy much greater leverage with manufacturers in the future.National and Local Policy IntegrationAs we have alluded to above, many local authorities are concerned about the potential air quality impacts of biomass boilers, and some are starting to put in place planning policies for biomass. Most notable of these is the Greater London Authority, which in the recently released draft Mayor’s Air Quality Strategy3 proposes to require biomass boilers fitted in PM10 Air Quality Management Areas to have abatement equipment (filters) installed.3 See page 92 - www.london.gov.uk/priorities/environment/vision-strategy/air-qualityEnvironmental Protection UK Renewable Heat Incentive Consultation ResponseMost local authorities will wish to align any emission standards with those contained within the RHI, however if these are not felt to be stringent enough many will be encouraged to set their own, more demanding standards. This would lead to a time consuming and frustrating situation for those installing biomass boilers, with different criteria applying in different local authority areas. The more stringent standards that we have proposed in this response would satisfy the vast majority of local authorities, with those experiencing particularly bad air quality problems (e.g. London) able to build upon them by stipulating filters in the most polluted areas.Conclusions and RecommendationsMinimising the air quality impacts of biomass plant puts us in the interesting position of planning to reduce a problem that we do not currently have – emissions from modern biomass plant are currently very low due to the small number installed. However, with the RHI likely to dramatically increase demand for biomass heat it is important that appropriate safeguards are put in place to ensure that air quality impacts are well managed, and any mitigation measures necessary are implemented.DEFRA modelling suggests that air quality impacts can be minimised through the targeted deployment of biomass plant, and encouraging high emissions performance plant. The former is, however, by no means a given though, and local authorities and their partners are currently struggling to control biomass deployment, a situation which the RHI could entrench by encouraging biomass deployment that bypasses the planning system. With this in mind ensuring that appropriate emissions standards are in place becomes even more crucial, and it is for these reasons we are suggesting that demanding emissions standards are set and managed within the RHI framework.In summary our recommendations for the emissions standards embedded with the RHI are:1. PM10 – 20 g/GJ, as originally suggested in the Renewable Energy Strategy. Boilers that cannot meet this standard would still be eligible if appropriate emissions abatement equipment is installed2. NOx – The 150 g/GJ standard is retained, but a clear signal is sent (for example in the Government response to this consultation) that the standard will be tightened as soon as it is technically feasible3. A type approval system is established for particulate abatement equipment (filters) alongside that set for boiler emissions4. Documented proof of adherence with manufacturers’ maintenance schedules for boilers and any abatement equipment installed is a condition of receiving RHI payments.

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.

608 UK Green Building Council Local Government / A

In February 2010, the UK-GBC/Zero Carbon Hub Sustainable Community Infrastructure Task Group released its report. It concluded that taking a holistic and integrated approach to the way in which we design and deploy the infrastructure that serves our communities can make a significant contribution to improving their sustainability. The potential benefits for community-scale energy and heat networks to reduce emissions from the built environment are particularly strong. Fundamentally this derives from the scope to use the waste heat from electrical generation within the built environment, that otherwise is rejected from conventional centralised thermal generating plants. District heating and cooling is already widespread in North, Central and Eastern Europe.The Task Group sought to achieve a common understanding between all stakeholders regarding the actions that need to be taken to unlock the most socially-equitable, cost efficient and carbon-effective ways of delivering sustainable community-scale infrastructure solutions. Some of the responses in this consultation reflect the findings of that Task Group. The full report can be downloaded at: http://www.ukgbc.org/site/resources/show-resource-details?id=642


UK-GBC feels it is difficult to offer fully considered and informed comments on the RHI proposal when there is little or no information about how the RHI will be funded. The consultation states that the funding mechanism would be outlined in further detail in Budget 2010. However, we understand that no such announcement was made in the Budget.Our concern over the funding mechanism is that if it is paid for by an increase in energy bills for all, it could contribute to higher bills for the most vulnerable in society and result in a rise in fuel poverty. Clearly this is highly undesirable and steps must be taken to ensure that the fuel poor, whether they live in social or private homes, not only are protected from these price rises, but also are amongst the first to benefit from the introduction of the RHI. We therefore welcome the Government’s commitment to consult further later in the year about how the fuel poor in particular can benefit from the RHI.We also do not believe that adequate consideration has been given to how the RHI (and FIT) policy will link up with others, in particular the Consultation on a Planning Policy Statement: Planning for a Low Carbon Future in a Changing Climate, review of the Building Regulations, and the CERT, CESP and PAYS mechanism. We have concerns that with so many schemes being administered in different ways, potentially by different bodies, a whole house/building approach, with a coherent offering to the occupier, becomes increasingly difficult.We believe it is essential that the consumer is offered a coherent package, with all energy efficiency and renewable energy initiatives and services brought together on behalf of the consumer to provide a smooth, attractive, easy to access offering. Above all the consumer must be provided with a comprehensive ‘whole building’ service, which offers the correct focus on reducing energy demand first through energy efficiency, and renewable energy second.

Question: Q01

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The UK-GBC supports the need for upfront financing mechanisms, and that this could be delivered through a range of market and government mechanisms.In particularly, the UK-GBC fully supports the concept of PAYS and has been instrumental in helping to shape this policy. We believe that it has the potential to complement the RHI, and help provide the upfront finance to carry out ‘whole home/building’ refurbishment, including the installation of renewable energy, as long as this pays for itself over its lifetime (including through the provision of RHI/FIT). As stated in our UK-GBC PAYS Task Group report of August 2009, we believe that in order to keep interest rates low for consumers and ensure the scheme genuinely does ‘pay as you save’, government should underwrite the ‘contingent liability’ element of the PAYS scheme. Further work is being carried out by UK-GBC and its members to explore this area further.However, it should be noted that some of the renewable heat technology market is still relatively undeveloped in the residential sector and may be seen as high risk by investors. Therefore, as with all measures installed under the PAYS or other financing scheme, it will be vital to properly accredit installers and offer assurance on technologies that they will perform as expected, with due recompense if they fail to deliver. We believe that there is likely to be a barrier for the fuel poor – who most need help with upfront financing – to access funds from the private sector as they will be deemed a high credit risk. Therefore, it will be important to ensure that these people have access to government backed schemes whether they are in social or private housing.

Question: Q02

Yes, however there is a risk of a potential bottleneck unless the scheme has sufficient capacity.

AgreeQuestion: Q04

Yes, but again the MCS must ensure it has sufficient capacity to service this.

AgreeQuestion: Q05

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Yes we believe that RHI should be deemed in order to encourage greater efficiency. However, we also strongly believe that householders and businesses must be required to install minimum energy efficiency measures standards as a condition for receiving RHI and that it is essential that the deemed energy need of a building be calculated only after all cost-optimal energy efficiency measures have been installed.

We do not believe that the additional income gained through insulating a property before claiming the RHI will be adequate to ensure that people carry out energy efficiency measures.

We recognise that the extra costs and disruption caused by the installation of these insulation measures may possibly deter some people from installing the microgeneration measures and taking up the RHI. However, if energy efficiency measures are not required, we believe that the RHI could:

•Undermine the basic energy hierarchy of reducing demand first and only then generating to the heat requirements; •Communicate the wrong message to consumers about the importance of insulation and energy saving over generation, at a time when wider Government energy strategy needs householders to reduce demand and install energy efficiency measures at an increasing rate. This miscommunication undermines the whole-house approach being promoted through HEM. •Miss an essential trigger point for reducing the cost and inconvenience of energy efficiency related changes to the building. Studies have convincingly shown that when performed at trigger points (one of which being installation of other measures or works in the building) the cost of and other barriers to such installations are greatly reduced.

Furthermore it could encourage oversizing of heat generating equipment which:

•Stimulates wasteful use of renewable heat; •Will no longer be the appropriate size and could need replacement once the house is properly insulated under the proposals outlined in HEM for every house to receive an eco-refurbishment;•Results in higher than necessary fuel (electricity or biofuels) bills for the householder, which in the case of electricity is both expensive and carbon intensive •In the case of heat pumps will put unnecessary strain on the electricity network, particularly in rural areas and could result in the need for extensive infrastructure investment to fortify the network. •Threatens the reputation of technologies supported under the RHI. The Coefficient of Performance of heat pumps (the efficiency with which they convert electricity into heat) drastically falls in an uninsulated building, which if not explained properly to a building owner will result in underperforming technology and very dissatisfied customers. •Produces a situation in which fuel costs are higher than expected and negative impacts on levels of fuel poverty. This issue is magnified by the uncertainty of future electricity and biofuel prices.

We therefore believe that in order to ensure the installation of standard (eg loft, cavity, draught proofing) insulation measures and energy efficiency measures (eg heating controls and low energy lighting), a household applying for RHI should be required to first have a survey undertaken by a qualified energy assessor. If the house does not already have basic, low cost measures installed, the first RHI payment should be made in the form of a voucher that within one year may be deemed against the costs of installing the missing standard energy efficiency measures.

This system could also be complemented by the PAYS mechanism, which should also be offered to householders at the time of taking up the RHI, and which would also help with the installation of higher cost energy efficiency measures where needed such as solid wall insulation.

Requiring minimum standards of energy efficiency to be eligible for the RHI would build on the precedent set by the Low Carbon Buildings Programme grant funding, which did not appear to restrict its success as the scheme was heavily over-subscribed.

Question: Q10

We believe that this can be avoided by setting minimum fabric efficiency standards for eligibility for RHI payments, through the Code for Sustainable Homes. However, beyond 2013, how the RHI can be best applied by house-builders and developers to bring benefits not only to their home owners (customers), but also the community as a whole requires consideration.The recently published Home Energy Management Strategy and the currently open consultation on the PPS: Planning for a Low Carbon Future in a Changing Climate, encourage where appropriate, deployment of district heating schemes. We welcome this, and believe that in the right settings, district heating can represent a ‘future proof’ infrastructure investment to efficiently move low carbon/renewable heat around a built environment, which is agnostic about the way the heat itself is generated. However, one of the most significant barriers currently facing the deployment of such schemes is the cost of pipe-work and associated legal costs.We are concerned that the high cost of pipe work may deter housebuilders from connecting their developments to existing district schemes, even where they are in close proximity, and instead pursue on-site solutions, which may be less carbon and cost effective overall. Connecting to existing schemes could not only benefit the house-builder by providing access to a low carbon or renewable source of heat (thus enabling compliance with building regulations) but it also could bring benefits to existing customers and the wider community. The more loads/customers a heat network has the greater the possibly of accessing economies of scale which may in turn reduce the cost of delivered heat to all customers.Therefore, we would urge Government to consider how the RHI could be applied within a new build context, to support and encourage developers to connect to existing or planned district heating schemes and thus support their organic growth, aligned to a local spatial plan. We would suggest that in instances where connection is both logical and consistent with the local energy master plan, and where the cost of connection is a barrier, that housebuilders are able to access a level of RHI to enable this.

Question: Q11

22 June 2010 Page 1161 of 1348

We believe there is a risk associated with relying on metering for large installations, since this could result in unintentional (through energy mis-management) or intentional abuse of the system. We know that very often a building does not perform in use as would be expected through its design – often due to poor knowledge of energy management.Therefore, we believe that metering for large installations should be compared against a deemed figure for that installation, and in cases where the meter and deemed figures vary drastically, the regulator should investigate to ensure the system is not being abused.

Question: Q12

Yes, however we feel that the SAP and SBEM methodologies should be subject to rigorous review to ensure they are fit for purpose and address any short-comings.

AgreeQuestion: Q13

See Q12

Question: Q14

This will depend upon how the scheme is administered and funded. The tariff must be set at a level to incentivise the reduction of carbon emissions which is as much applicable at a large scale as small scale. In fact, larger scale heat generation is more efficient and will have a greater impact on delivering the UK’s carbon reduction commitment at the same level of incentive as numerous small scale installations. The certainty of the biomass supply chain should also be considered and should be tied to local supplies rather than from those shipped internationally.

Question: Q15

See answer to Q20 and Q30

Question: Q18

District heating networks are currently delivering carbon savings across the UK. As with other infrastructure such as electric networks, heat networks are fuel agnostic, providing a system that can evolve over time responding to different priorities and costs. For example, a network originally serviced through coal boilers may move to gas CHP and then to biogas and heat pumps in the future. The renewable heat incentive has the potential to drive a step change in renewable heating in the UK. In many areas individual solutions may be both cost and carbon efficient but in areas of dense buildings, individual solutions may be very challenging to deliver and could potentially lead to significant challenges for infrastructure. For example, the delivery and storage of biomass in urban areas can be difficult and carbon intensive but energy centres can resolve these issues by providing a central location for fuel delivery and storage and using lower carbon delivery options such as rail freight. Furthermore in dense urban areas where electricity network may be under stress, a move away from gas heating to electrically facilitated modes may significantly increase the burden on the distribution network. The installation of a DHN which could combine electricity and heat generation with the use of technologies such as heat pumps may avoid some of the issues highlighted whilst delivering significant renewable heat. In some situations district heating may, therefore, be the best or only solution to delivering renewable heat in and, if the RHI is to be equally available to as many individuals and organisations as possible, it is vital that renewable district heating is supported from the outset of the scheme.We are concerned that, if the tariff levels proposed in the consultation document persist, there is a danger that they will be interpreted by local planning authorities as evidence that DECC does not recognise the major value of district heating. This could give rise to fewer start up schemes, little increase in competition and district heating will remain expensive in the UK and delivery targets will be missed.

Question: Q20

The Government proposal is that only ‘hard to treat buildings’ be eligible for support under the RHI DHN uplift. Whilst this may appear a valuable proposal, the likelihood is that hard to treat buildings will be dispersed across a given locality. A limitation of support for hard to treat buildings may mean that the resultant networks would bypass non qualifying buildings even if they could benefit from renewable heat from DHN. Indeed, the consultation appears to suggest that a potential penalty (through a reduced RHI uplift) could apply to a developer connecting ineligible buildings to a scheme supported under the RHI. If this were the case, the only solution open to buildings deemed ineligible for DHN support would be individual solutions even if this were at greater overall cost to the RHI scheme. Furthermore, the ‘hard to treat’ building requirement could trigger the development of sub-optimal networks both from a cost and carbon efficiency perspective. Any support for the development of DHN needs to stimulate ‘logical networks’ which have the potential to expand with new opportunities. The whole purpose of the RHI is to promote the reduction of CO2 emissions. Having only some methods and means applicable could restrict the effectiveness of the scheme. The lack of DH networks across the country indicates that they are currently not economic to run. A suitably set tariff for DHN would stimulate this market.Under any RHI DHN uplift, it is necessary to determine areas that are suitable for support. Determining uplift eligibility must be as simple and cost effective both for the developer and government. A scheme requiring developers to provide substantial evidence to demonstrate scheme eligibility for the RHI DHN uplift would be costly to developers and resource intensive for officials reviewing each proposal. In addition, developers investigating the feasibility of creating or extending a network need to know in advance whether the scheme would be eligible for the RHI DHN uplift. We recommend, therefore, that eligibility for the RHI DHN uplift be determined by an existing metric of heat demand. The Government’s decision to develop a UK wide heat-map, similar to that for London, provides a valuable opportunity for developing a system for determining site eligibility. Sites with a heat demand above a given threshold should automatically qualify for eligibility for the RHI DHN uplift. Connection to buildings at a site would, therefore, not be restricted. Instead the developer would be free to seek to supply as many customers as possible from the network. The proposed methodology does, however, present potential problems for sites ideal for DHN but not recognised by the heat map for reasons such as a lack of adequate heat map resolution or specific building issues. As a result, we recommend that developers be allowed to present proposals for DHN eligibility in areas not covered by the heat map for individual consideration.

Question: Q21

22 June 2010 Page 1162 of 1348

Yes.

Question: Q22

AgreeQuestion: Q23

AgreeQuestion: Q24

AgreeQuestion: Q26

A signal that the RHI is encouraging the over-production of heat for financial gains should trigger an emergency review.

Question: Q27

Please see answer to Q12

Question: Q29

As stated earlier, we are concerned that the introduction of RHI for individual building solutions could disincentivise the take up of district heating, which may offer the best solution in many circumstances. Therefore any uplift should seek to level the playing field for district heating.

Question: Q30

609 Sustainable Heating Solutions UK Limited Other

P&H Energy UK Limited imports a range of Danish-manufactured biomass boilers.


Whilst we consider the consultation addresses the key issues, we note that there is still a considerable amount of detailed design work to be completed. We are concerned that there will be a need for further policy instrument design required, which could risk delaying the introduction of the RHI beyond April 2011, as currently proposed. The priority for the industry is to see the timely introduction of the policy instrument to ensure that there is no further hiatus in the development of demand for renewable heating systems. Whilst we understand that Government has gone to some pains to try to avoid such a hiatus occurring, the nature of the consultation process (and the forthcoming election) have acted to deter customers from installing renewable heating systems until such time as there is definite information. It is a pity that transitional arrangements were included in the consultation process – we believe that it would have been preferable to provide clear criteria for the eligibility of installations during the consultation process so that it provided certainty to the market.

Question: Q01

Particularly at a time of severe economic constraint, we are not confident that there will be sufficient liquidity in the financing sector to be able to bring forward appropriate financing structures rapidly, although the extent to which this will be a limitation will depend on the rate of uptake in the RHI’s early years.

With regard to public sector financing structures, we are particularly unclear on how local authorities will be able to raise and provide additional finance at a time where public sector financing is facing very significant pressures.

With regard to private sector structures, clear, certain and long-term policy design will be needed to ensure lending institutions build confidence in the ability to repay debt off the back of RHI income.

Question: Q02

We are concerned that OFGEM will be assessor and payer. We hope that sufficient preparation will be given in that department to be able to conduct these tasks. In our experience, government grant schemes (LCBP or BECG) benefit from having trained assessors to sit behind the administrators , so a reasonably well-informed decision can be made on the application quickly and without too much frustration to the applicant. It is important that the mechanics are in place to provide timely payments to owners of renewable heating equipment.

Question: Q03

22 June 2010 Page 1163 of 1348

We believe that currently, there are not enough certified products to allow a market to function. Since, for biomass in particular, most of the manufacturers are based in mainland Europe, these companies will struggle to work with a UK system such as the MCS.

Whether the MCS is required as a pre-requisite for a scheme should be a decision based on the number of accredited products. Where the number of accredited products is too low for an effective market to function we recommend the use of a ‘transition period’ to allow projects to continue while MCS accreditation is sought. We believe this is likely to be necessary for biomass products. There are other European-wide standards that we feel could have been applied – rather than the insistence on MCS accreditation.

Installer standards - The installer standards are now in place but have proved very problematic for commercial installers. The scheme was originally designed to provide protection for individuals engaging a single contractor. Commercial installers working for a main contractor under a standard UK construction industry contract have found their business model does not fit the requirements of the scheme. This situation means that installers are forced to change their business model to suit the MCS. This situation stifles innovation and increases costs.

As a minimum there needs to be reform of the MCS, before it can be a mandatory requirement, to ensure it is transparent and accountable. Installers must have a right to explain their business model and not made to include elements not relevant to their business.

General MCS comments – There is currently a large amount of confusion about the accountability and process for amending the MCS. We believe that the role should be clearly defined and that industry representatives should be given greater control over the standards that the scheme applies. The requirement for all documentation to be provided in English is very expensive hurdle for many manufacturers. We feel that it would have been better to allow accreditation bodies to exercise common sense in this area. As most manufacturers are based overseas, this is an issue for most manufacturers. Perhaps allowing accreditation bodies to undertake translation work and charge applicants for it would have offered a more competitive solution than forcing manufacturers to obtain translation from the testing laboratories. There is also little point in translating every document for every product when similar products often share very similar test reports.

Question: Q04

The MCS should not be a requirement for installations over 45kW. Currently, no standards have been proposed or published for products above 45kW. In the future if new standards are introduced, after appropriate consultation with industry, they should not be a requirement until enough products are accredited to allow a market to function. For products in the range 45 -300kW it is unlikely that by the launch of the scheme there will be enough products to generate a competitive market.

If the MCS can be reformed to allow access to companies that don’t specialise in domestic installations, then the scheme could be applied to larger installations. Significant changes to the scheme conditions will be needed before these criteria will have been met.

Installations over 45kW are not ‘micro generation’ as such, and so the requirements both for installers and products will be different. In this case both the buyers and sellers of the equipment are different types of organisations and have different business models.

Allowance needs to be made for bespoke installations. We do not see how any custom-designed packaged solutions could possible obtain MCS approval as their very nature means that every system will be different – designed around the needs of the customer.

Changes to the MCS should be proposed, discussed and consulted on before adoption. Until now, this has not happened and changes have been introduced without consultation and judgements of accreditation bodies have not been open to appeal.

Question: Q05

We are not aware of another standard with such stringent requirements as the MCS – but as the rest of mainland Europe copes very well with the standards already in place, and they have many, many more biomass installations than we do, we believe that the requirements of the MCS accreditation scheme impose a new, much more bureaucratic and unnecessary standard on the industry. Why is EN303-5 not sufficient, for example? If a boiler has undergone a full EN303-5 inspection, this will have covered aspects of the build quality as well as performance and emissions tests – so we believe that a Class 3 boiler should be acceptable for RHI.

Question: Q06

Many buildings have legitimate cooling loads, which can effectively be met using biomass boilers in conjunction with absorption chillers (eg hospitals). Heat from biomass used ultimately for cooling in this way reduces carbon emissions and should be eligible for the RHI. In many cases a heat meter measuring the output of a biomass boiler will record the output regardless of the end use. To exclude the heat used for cooling uses will require additional monitoring complexity. I think that we need to raise the issue of space heaters too. For some buildings a biomass unit producing forced hot air will be the best option – eradicating the need for an expensive distribution system in large open spaces that simply don’t need one.

Question: Q07

Yes, we agree with your approach. We are not aware of bioliquids other than FAME that could be used as a replacement fuel in oil-fired domestic heating boilers.

AgreeQuestion: Q08

As the UK market for biomass boilers is a relatively small part of the European market, a UK-only standard should be avoided. A class within an existing European standard should instead be adopted to minimise barriers. EN303-05 contains definitions of boiler classes. This standard should be specifically referred to. We suggest that an EN 303 class 3 boiler would be an appropriate place to start the scheme.

Question: Q09

22 June 2010 Page 1164 of 1348

We believe that it is essential that a potential customer can determine very quickly what level of incentive can be applied to a project. This should be based on a calculation that can be carried out by the customer. If the installer is required to carry out this calculation then the incentive level may vary between competing installers. This would provide an incentive for installers to incorrectly estimate heat load to generate a better return. This is clearly undesirable.

A better solution would be to provide a benchmarked approach based on floor area (in m2) and building type. The building types could be assumed to be relatively efficient in line with the objectives stated in the consultation.

We don’t believe it should be required that energy efficiency measures should be installed as there may be site specific reasons why these cannot be undertaken. Many buildings are in constant use and a requirement to carry out disruptive building works could significantly reduce the market for renewable energy equipment.

In principle deeming the heat load, and producing a figure which assumes all energy-efficiency measures that could be implemented, are, would seem sensible in order not to reward those who simply burn more fuel than is necessary.

Question: Q10

Energy efficiency in new build should be managed through building regulations and should be completely independent of any other government scheme.

Planners could be given the power to insist on higher than normal standards in the interim. The 2013 and 2016 standards could be brought forward.

Question: Q11

We welcome the concept of deeming for smaller installations. For smaller projects deeming will offer a simpler method of determining the incentive to be paid to a system.

However, before we could fully support the system of deeming, we would need to review a proposal for exactly how the deemed output of a system will be calculated.

Above all, the system for deeming output must be simple and transparent to ensure it is clear, from an early stage, what the financial incentive payable to a project will be.

Question: Q12

Appendix S of the SAP methodology is designed for existing dwellings and could potentially be used to determine the heat loss of an existing building. However, the methodology is considerably more involved than would be acceptable for the purposes of providing quotations.

The scheme could use a significantly simplified methodology based on a benchmark value for building type multiplied by the floor area. This achieves both objectives of not disproportionally rewarding those without energy efficiency measures and ensuring that potential installers are able to provide a quotation without extensive surveying and calculations, the cost of which would need to be borne by the consumer.

Energy Performance Certificates for new buildings will provide an independent benchmark for new build projects.

For commercial projects many customers will have a design team including M&E consultants. In this case these designers could be authorised to carry out assessments. This would allow an independent analysis of the deemed output and allow the customer to determine the subsidy available at an early stage. This would also remove any problems associated with a conflict of interest of installers.

Question: Q13

Generators should be required to keep records of their energy generation which may be audited. For projects over 500kW the proposed level means that there is likely to be little to gain as the marginal cost of fuel is likely to be greater than that of the RHI payment.

Heat meters are widely available and reliable. The scheme should require that all heat meters installed are compatible with the Measuring Instruments Directive (MID)

Question: Q14

We welcome the rate of return of 12% this should allow significant numbers of projects to become attractive to both private individuals and commercial organisations.

The tariff structure will cause some specific problems. Most notably, the reduction in the tariff for biomass from 6.5 to 1.6-2.5p/kWh at 500kW will artificially cause projects to reduce the size of boiler installations. The reduction in the incentive level of up to 75% indicates that the current scenario assumes that there is a step change in cost at 500kW. We do not agree that this cost reduction exists. Having such a large step change in the level of the RHI at 500kW will lead to the perverse behaviour of installing 499kW boilers in applications for which a, say, 600kW boiler would be the optimal way of reducing fossil fuel use. This behaviour is liked to be repeated at each tariff boundary. We would recommend that it would be better to have a system with many bands and small increments between them than few bands and large increments.

Question: Q18

22 June 2010 Page 1165 of 1348

We can understand the rationale for the proposed approach.

Question: Q19

We agree with the approach. One possible way in which this could be done would be to allow the 45kW rate to be applied to each property connected. Thus 500 houses with loads of 30kW will get a deemed amount = 500 x (30X kWh/year) x 9.5pkWh. Further work would be needed on the economics of different types if DH scheme to see if such a simple approach would be reasonably ‘balanced’.

AgreeQuestion: Q20

All networks – the best schemes will go through. No – a mini DHS with 2-3 users makes sense and should be rewarded as above (deemed on each property connected basis or an individual heat meter on each property

Question: Q21

If the tariffs payable for a project can be reviewed and varied it will create uncertainty for potential investors. For the scheme to be a success people must be able to predict the level of income they will receive throughout the project life. Without this certainty the effect of the RHI will be dramatically reduced.

Question: Q22

The uptake of the scheme is difficult to predict. Once the scheme has been started real data will be available which can be used to calculate what degression rate will be appropriate. In our view it is preferable to wait for real data before committing to a degression rate.

Question: Q23

While a tariff based structure is a very sensible way to incentivise established technology, it is not adequate to incentivise very novel developments. Where little data about the reliability of technology is available, capital grants help to reduce investor exposure to technology risk.

The RHI is a central plank in the deployment of renewable and low carbon technologies but it is not the only tool needed for the research, development and deployment of technologies.

Where new products are available it may be necessary to introduce an interim tariff at more frequent intervals than the reviews. It would be beneficial for applications for reviews to be considered on an annual basis.

Question: Q24

Broadly speaking, yes

AgreeQuestion: Q26

Emergency reviews should be available if the policy can be seen to have fallen short of the intended outcome. Annual targets for installed capacity should be defined at the outset of the scheme and a review should be called if the target is missed by a substantial margin. Similarly, were it to become obvious that the system was being abused, an emergency review may be necessary.

Question: Q27

With biomass particularly, increased numbers of installations could cause fuel prices to rise. To adjust for this, a separate tariff for existing installation could be created. This tariff could start at a very low level and be adjusted to reflect changes in fuel price but not return on capital.

The small number of existing installations would generate good will and ‘pay back’ for itself in the marketing and promotion. It could be limited to users <45kW.

We further feel that it is unfair to eliminate those pioneers who, generally speaking, bore higher costs and greater risks in adopting renewables at an early stage. Some form of payment to such pioneers would seem just.

Question: Q28

We believe that such issues are likely to come to light fairly soon after the scheme comes into being – and should be dealt with promptly at that stage. To try to anticipate every possible abuse and design it out now would no doubt lead to an overly complicated and bureaucratic process, and additional delay.

Question: Q29

22 June 2010 Page 1166 of 1348

Lee Moor Farm – NE66 3RL is the first ESCO in the UK in a rural area joining domestic and commercial buildings together, with solar photovoltaic and ground source. It has been tried and tested for ten years, and the farm is in long term woodland schemes (FWPS) and energy crops scheme growing willow so that the site is not only self sufficient using a range of woodland produce which allows the suplus to be sent to the DEFRA Zero Emissions building Lion House in Alnwick.

Lee Moor is a fantastic example of using heat meters and other smart metering of utilities. I have also carried out surveys so the commercial units have both EPC and Display certification.

Question: Q30

610 AES Ltd Manufacturer

AES welcomes the Government’s commitment to the Renewable Heat Incentive. We view this as the most important development to date for the renewable heating industry and so we welcome the opportunity to give our feedback and influence in the development of the Renewable Heat Incentive. This Incentive will create many new jobs in the heating and other related industries.

The following section sets out our responses to the Consultation questions. We note that the RHI scheme as set out within the consultation is still in a gestation phase of development and we would commit to working closely with Government to develop the scheme in the coming year before its launch on 1st April 2011. We are keen to see an RHI that provides stability for our industry, so that we can assist Government in meeting its’ 2020 renewable energy targets.


From the solar thermal perspective, the proposed Renewable Heat Incentive (RHI) only deals with Domestic Solar Water Heating systems (DSHW). It does not cover other common and possible solar applications:

•Space heating•Pool heating•Air heating•Cooling•Industrial heating•District heating•Medium and large scale solar thermal systems •Many other solar applications of heat•Systems above 100kW output

This lack of support for the full range of solar thermal applications severely limits the impact of the RHI. It is essential that it is able to effectively support the full range of applications for this simple technology.

Question: Q01

We agree that financing schemes will be essential to ensure widespread take-up of these technologies. We also feel that the rates of return proposed for solar thermal will provide a barrier to the introduction of financing schemes for the technology. When all other renewable heat technologies have been given an ROI of 12% it is unlikely that any investors will want to back a technology with only 6% ROI. This uneven incentive will adversely affect the uptake of solar thermal technologies, the only virtually zero carbon renewable heat technology

Solar thermal is a key technology which can be used to reduce fuel poverty and unless finance is readily available, it will only be accessible for the richer segments of society.

We note 2 further important points

•Whilst the energy utilities are a vital route to market to support the growth of onsite renewable technologies, they should be seen as one of many routes to market. RHI must be designed in such a way as to enable many routes to market and not come under undue influence from the energy utilities.

•Legislation around loans and mortgages needs to be fully clarified. What is the security behind the loan or is the loan unsecured? Is it on the property in question or is it on the technology in question and so acts somewhat like a car loan. At the moment, there appears to be grey areas around this issue which if clarified would assist in the structuring of loan facilities.

Question: Q02

22 June 2010 Page 1167 of 1348

In broad terms we agree with the approach being taken. We have concerns over the running of the scheme specifically relating to:

•The complexity for householders in registering and accessing the RHI particularly where their system is financed by others.

•The ability of Ofgem to administer a scheme in a user friendly way which may have many millions of household users as well as some large commercial users.

•The frequency of payments suggested may be too long to enable regular loan repayments in funded installations (particularily those in fuel poverty situations). We note that sub 45 kW systems obtain yearly payments and over 45 kW systems quarterly payments

•Similar to the Feed-in-Tariff, RHI must be tax free and index-linked

•On-going concerns about the cost and complexity of MCS accreditation and very significant concerns about what above 45 kW accreditation will look like. All renewable heat equipment will be installed by the heating industry and not by “renewable energy” installers. Therefore, accreditation should come through heating industry routes and not establishing schemes that have no links to the heating industry.

All structures and accreditation need to be simplified and rationalised.

Question: Q03

We do agree that it is important that solar installations and products are of a high standard and that the consumer is protected from bad quality installations and unethical sales practices.

Therefore we support a scheme to ensure this occurs, however we have serious concerns over the MCS scheme and its potential to block entrants to the market. It is felt by many in the industry as an overly onerous barrier to trade which is substantially more complex and costly to become part of than the Gas Safe register for example. Urgent attention needs to be given to this to ensure that the scheme meets it objectives with out creating an unnecessary barrier.

It may be that different levels of certification or accreditation may be more appropriate for the solar industry; perhaps schemes aligned with the existing Competent Persons Schemes for the smaller scale installations / installers and a scheme like MCS for the larger companies and more technical installations.

Avoiding duplication in fees and certifications at this point would be very helpful in smoothing the path for new entrants as well as existing companies, who currently must register with a number of schemes to comply with the standards.

AgreeQuestion: Q04

The level of 45kW seems totally arbitrary and we would like to see different certifications for different types of system rather just a notional size cut off.

Each renewable heating technology needs to use the existing MCS working group structure to advise on what accreditation is required for each application of the technology and each size range.

Different skills are required for different applications on different technologies at different size ranges. The 45 kW model is simplistic and inadequate.

Question: Q05

22 June 2010 Page 1168 of 1348

We note that MCS is an EN 45011 scheme which requires the following 3 items:

•Evidence of an implemented product standard•A Quality Management System (QMS)•A regular audit of the above (normally annual)

Currently the only equivalent scheme is Solar Keymark and this is fully recognised. Before we can recognise other certification schemes, it is worth reviewing the British MCS scheme. On the product side, this seems logical to expect a product to be tested and then manufactured so as to qualify for a standard such as EN 12975, the solar collector standard. However, we note that the solar collector, like all other heating systems is just one component in a wider collection of components, none of which are required to have certification. This again demonstrates an isolated product rather than a “systems” approach that is the only way to ensure that a quality heating circuit is installed.

To recognise other product schemes, we should review if these schemes demonstrate that the component in question is made to a recognised standard (preferably international) and also that the component is manufactured, through a factory production control system or similar to the recognised standard. There doesn’t appear to be any other method to ensure product quality.

Reviewing the installation methodology, we note that the emphasis of the MCS scheme is on the Quality Management System (QMS) of the installation company. Whilst this is a laudable aim, we question the need for such a QMS when the issue at hand is the installation quality. Yes, an installation company should have good office systems. However, the purchaser of heating equipment rather wants a good system installed than efficient paperwork. The emphasis of installer MCS needs to restructured onto installation quality.

We note that much of this installer MCS review process is on-going and is being led by Summitskills. Much more emphasis and resources need to be diverted to this review process to make Installer MCS fit-for-purpose.

Question: Q06

No, we very strongly reject the criteria! Solar thermal is the only virtually zero carbon technology and we find it incredible that technologies that are only percentage points better than gas condensing boiler technology could qualify for a 12% ROI when a solar thermal system only qualifies for a 6% ROI. All renewable heat technologies must be treated equally when setting the rates of return.

The UK solar thermal industry is still small with only 100,000 completed installations. When compared to a potential market size of about 20 million installations it becomes obvious that the market is still at the “early adopter” phase and threfore must have complete parity with other Renewable Heat technologies in terms of levels of support if it is to reach suitable level of market penetration.

As currently designed, the Incentive scheme is based on cost rather than a balanced approach including carbon. In this configuration it seems highly likely we will miss both 2020 and 2050 targets, and underperform on the deployment of these technologies. The emphasis must be changed to favour technologies that save carbon, are user friendly and reasonable cost/unit of carbon saved rather than technologies that are similar in carbon performance to gas condensing boiler technologies without some of the user friendly advantages of other renewable heat technologies.

We are therefore asking for a rethink of both the deeming process and returns for different technologies. The scheme will fail to meet its objectives as it is currently structured. We would encourage DECC to complete more technical analysis of the proposal in relation to different technologies as we believe that this is required to refine the design of the RHI and significantly the schemes impact.

We suggest that the whole RHI process needs further consideration so that it includes carbon savings and is not based just on a cost/ kWh basis. A properly funded task group which consists of known industry experts needs to be established to advise on this process. Much more advice should be sort from our European neighbours who have a more advanced renewable heating industry to inform our UK based options. We are happy and willing to facilitate such a contact (as we have already started to do) and are very happy to have an input into the design of the scheme going forwards.

Therefore we ask for a task group to be established with industry experts that could refine the space and hot water heating look-up tables discussed elsewhere in this consultation response so as to balance the carbon benefits and the cost/kWh benefits of different technology and system solutions.

We find it unacceptable that RHI does not specifically include cooling. Solar thermal technologies are proven in cooling applications and are becoming widely used for such in some countries. Peak output from a solar thermal collector often coincides with peak cooling requirements. If cooling or heating is required, then they both need to be supplied in an efficient manner and excluding cooling from the scheme is misguided (unless there is another route to support cooling). Supplying cooling with low and zero carbon technologies will significantly reduce our national energy consumption and carbon output. The RHI must be implemented under the reduce then supply premise and not under arbitrary its heating or its cooling premises.

Finally, we do not agree that equipment should only receive the RHI if installed after 15th July 2009. Early adopters who have helped to establish a market for solar thermal and other technologies in the UK will be a key part of the promotional force to accelerate its uptake. Excluding these early adopters sets a precedent whereby those who do the right thing even though there is limited personal benefit are then disadvantaged when good benefits are brought to market. There needs to be more balance in the scheme with some additional benefits for these early adopters.


Solar thermal technologies have no effect on air quality.

Question: Q09

22 June 2010 Page 1169 of 1348

We note that as part of any hot water system intervention, the building regs require that the installation company has to bring the Hot Water system up to the latest Part L standards and so all Domestic Solar Water Heating RHI installations will have to install minimum energy efficiency HW standards to pass building regulations.

We do not feel that the RHI should be linked to specific energy efficiency measures, as this could act as an unnecessary barrier to uptake.

Question: Q10

We believe that this issue would be properly addressed through planning policy statements. We are concerned that planning will often be sought in one year say 2012 for a planned construction at a later date so that the building can be constructed to older building regs. This loophole could be legislatively addressed via several different routes.

Question: Q11

In principle, we agree with the proposal of deeming for smaller systems and metering larger systems.

However, we have observed that both in the consultation and in wider discussions, both with the British Government and our European colleagues that deeming is a complex process and that 2 separate deeming calculations are required, one for space heating and one for hot water heating. Deeming should also take into account bivalent and multivalent heat sources, weather compensation and the manner in which different heat distribution systems including cylinder volume, radiators, underfloor or fan coils influence the final outcome.

A fully funded and resourced deeming task force needs to be immediately established to address these issues. Relying on unqualified consultants will not deal with this issue. It requires heating industry expertise to develop a consensus view that can be implemented by Government.

We do not want to enter into a wider discussion of advantages and disadvantages of deeming within this consultation response. We have carried out some of our own analysis and are willing to share this information in the appropriate fora.

We are also working with our European colleagues to collect and collate data on medium and large scale solar thermal systems and will feed this onto the RHI team at DECC as we obtain useful and easy-to-process information

Question: Q12

The deeming process is creating much confusion and concern. As is clearly understood, “gaming” (i.e. any form of over-claiming) is the major risk associated with adopting an incentive process. To avoid this gaming, space heating incentives probably have to be based on a look-up table as featured in appendix 2 of the consultation document. The task group discussed elsewhere in this submission could review this table and implement a more advanced version which covers the requirements of being:

•Quick & easy•Certain•Consistent•& reasonably accurate.

We believe that using existing fuel bills in the deeming process should be avoided because this brings in behavioural elements. We also note that the insulation should be upgraded before renewable heat is installed and this will alter the buildings performance as compared to the fuel bills. An appropriately designed look-up table overcomes the potential complexities for both space heating and hot water heating technologies.

To achieve a more acurate result for solar thermal technologies, a slightly more complex methodology can be employed that uses elements of a look-up table to avoid “gaming” allied to the solar algorithm in appendix H of SAP. This calculation takes into account the zero-loss efficiency and efficiency curve of the collector and also the dedicated and effective solar volume of the hot water cylinder in its computation. Much of this information is readily available from Solar Keymark and MCS standards. We will gladly work on the further development of this process as part of a properly funded and resourced task group.

Question: Q13

The consultation document does not propose medium and large scale tariff levels for solar thermal technologies therefore the perverse incentive to overgenerate would definitely be low. As we have previously said we feel that this is a huge oversight. If a suitable tariff is introduced for systems of this scale then metering of the heat produced would be an appropriate way to measure the levels.

It is unlikely that large scale solar thermal applications would over produce heat as these systems are carefully designed to meet a heat loading. Installation of systems that were much larger than required would cause major stress on the system and potentially cause the system to fail. Excess heat in a solar thermal system is hard to dissipate, and therefore is normally designed to be a kept at a minimum.

A properly funded and resourced committee of industry experts needs to be established to support the RHI review process. This committee should include measurement and monitoring expertise so that metering processes can be evaluated by this committee.

Heat meters are a tried, tested and established technology. The key elements of a heat meter are accurate and reliable flow meters as well as robust temperature, data acquisition and storage systems.

Question: Q14

22 June 2010 Page 1170 of 1348

Some initial analysis from some of our European neighbours is as follows.

Systems costs vary a lot depending on the application, placing and size.

For your reference, system costs in Austria (including storage and installation):100 - 500 m²: +/- 600 €/m² corresponding to 850 €/kW500 - 1000 m²: +/- 500 €/m² corresponding to 700 €/kW

If it is a system for district heating (no need of a storage and secondary loop) the cost are significant lower (minus € 200/m²)As for Sweden, we can estimate 1.100 €/kW (solar collector costs are of the order of 5 000 - 3 000 SEK/m² corresponding to +/- 570 €/kW and system costs incl. storage tank etc. adds up about the same)

Therefore, taking the highest cost (Sweden) and considering:-yield of 400 kWh/a.sqm-Annuity between 0.05 - 0.10We can estimate solar heat costs about 0.14-0.28 €/kWh (or 0.07-0.14 €/kWh if is doesn’t include storage, etc.).

Question: Q17

The ROI on solar thermal technology needs to be the same as that on the other other low carbon heating technologies. A tariff level which provides a ROI of 6% when all the others receive 12% will provide a disincentive to invest in the technology.

Please see our answer to question 7. We want to see a balanced cost/kWh & carbon based deeming methodology which favours systems that save carbon as well as just cost benefit measures. The current system is in danger, without careful evaluation of the deeming process, of favouring technologies that make only minor improvements on gas condensing boiler technology.

To realise this, we are calling for the setting up of a short term task group of properly funded and resourced industry experts and representatives to design and establish a fair and reasonable deeming process based on space heating and hot water heating look-up tables.

This short term task group could be used as the basis for establishing a group of leading industry heating experts to advise government on the operation of the RHI scheme.

Question: Q18

Yes, all renewable forms of heating should be supported.

AgreeQuestion: Q20

Yes a fully fixed tariff will provide stability to the market.

Question: Q22

Yes. We support the principle of degression.

AgreeQuestion: Q23

22 June 2010 Page 1171 of 1348

We note that this discussion is based on cost/kWh rather than cost/unit of carbon saved. We have to be implementing technologies that are much and not just partially better than gas condensing boiler systems if we are to fully meet our long term targets.

We also note that this innovation discussion is based on a technology approach to the renewable heat issue. Heating is not just based on technologies; it is based on integrated systems consisting of many control, provision, collection, storage and distribution elements. These individual elements or technologies make up the heating system and innovation occurs within the elements and sometimes within the whole integration principle of the system.

For example, most heating systems, if effectively controlled and installed with underfloor heating often save more carbon as compared to their radiator based alternatives. However, the type of underfloor heating employed also has an effect on the heating system performance.

Whilst we must have a relatively simple to use deeming process, this deeming process must encourage carbon saving and be supported initially by the task group of heating industry experts and this task group has to be developed into an independent set of government advisers so that all aspects of the RHI can be supported and the incentive scheme is developed to bring through a “systems” or portfolio approach to innovation and carbon saving.

Finally, we note that in the specific case of solar heating technology, costs are very different for different situations.

In our experience, the most expensive property to install can be a one-off new build situation where the installer is called back in by the contractor for several fixes at the various stages of the construction process. Several site visits adds to the total installation cost.

Then, in a typical retrofit scenario, to achieve the highest available solar fraction, the solar installer will opt to change the existing cylinder and as well as passing this cost on, they will also have to absorb the cost of access equipment within the total installation cost.

Finally, in a large number of new build properties, the installation cost can come down somewhat due to the ability to leave installers on the construction site for sometime as they move from property to property to install the system and both access cost and cylinder cost is covered by the wider construction process.

Room for innovation is fairly limited. If bigger solar fractions are to be obtained, current evidence indicates that the hot water cylinder should be changed and this has fairly fixed associated costs. Innovative access systems for reducing collector installation cost could be realised. However, there are many costs that only offer limited room for improvement.

Statements such as economies of scale don’t always apply when analysing heating systems. Sometimes the individual local and integrated unit can be much cheaper than the large scale solution with all its inherent complexity. It brings us back to the case-by-case basis and the need for independent expert and knowledgeable advisers to support innovation and review processes.

Question: Q24

AgreeQuestion: Q26

With an independent group of heating experts meeting every 3 or 6 months or so, they would be capable of advising Government on innovative cases and Government could be provided with advice on whether an emergency intervention was required or not.

Question: Q27

This decision to deny support to early adopters is misguided as it discriminates against those who have acted in good faith and looked to support the early adoption of on-site renewable technologies. These early adopters, if supported in some way through the RHI can act as ambassadors for the new Incentive scheme.


A complex and bureaucratic deeming process requiring 2 MCS companies is described in the consultation; we consider this unnecessary. The deeming of all systems installed after 15th July 09 should go through the same deeming process which is likely to be based on look-up table for space heating and a SAP Hot Water and appendix H calculation allied to a look-up table for solar thermal hot water. This methodology should be applied to all RHI applications for incentives including those installed between 15th July 09 and 31st March 2011.

Question: Q29

611 Stewart Farm Forestry

Uplift DH


No

Question: Q01

22 June 2010 Page 1172 of 1348

Yes

Finance for individual houses may be hard to acquire in many poorer situations off the gas grid. To avoid future fuel poverty It is our contention that the Government should guarantee loans from banks and finance houses, where installations are off the Gas Grid.

Question: Q02

Yes

AgreeQuestion: Q03

NoTo achieve accreditation under MCS is an extremely expensive, lengthy, inappropriate and time consuming process for both the installer and biomass manufacturer . Some major continental manufacturers, where often the best biomass technology comes from, have opted not to be involved given the complexity and inappropriate nature of the scheme. Additionally almost all EU countries adopt EN303-5 and we should be happy with the same.Most importantly MCS puts Biomass at a distinct disadvantage to fossil fuel installers and manufacturers and consequently will be drastically counter productive in achieving aims for Biomass. This scheme is totally beyond the ability and resources of small installation Companies , at a time when it is clearly apparent that the biggest hurdle to achieving targets is the lack of Installation engineers and companies.


No

See Q 4 Response


See Q 4 response

Question: Q06

Yes

AgreeQuestion: Q07

Yes

AgreeQuestion: Q08

No

IN rural areas especially the proposed emission standards are far too stringent, as they would exclude many if not all log boilers and many chip boilers that are currently acceptable under accreditation schemes and planning and other legislation. It is fundamental that Biomass is all but Carbon neutral, and that this saving should be offset against any minor addition to particle emissions, especially when there are lower or the same emissions from alternative oil boilers. Also only a moderate curb on privately owned vehicle emissions would more than compensate, so given the Carbon neutral benefits of biomass other areas should be targeted to reduce particle emissions, before biomass.We would suggest that that all accredited boilers under the MCS or previous schemes should be eligible subject to existing local planning consent etc .


Yes

Question: Q10

Yes

AgreeQuestion: Q12

Yes

AgreeQuestion: Q13

Yes

Question: Q14

Large scale CHP should not be funded due to shortage of Biomass fuel

Question: Q15

22 June 2010 Page 1173 of 1348

Yes

Question: Q18

Yes

Question: Q19

Yes

The suggested level for uplift is a min of 10 units for community heating, whereas the most likely situation in a rural situation may often be an isolated small row of cottages or a Farm house with one or two adjacent Cottages with no other opportunity to add to this. Where these buildings are in close proximity of say 50 to 200 yards, or even a joined row of cottages, costs would not be excessive. Indicative costs from one group members proposed installation (Farmhouse and Cottage) would add 26% to project costs which, it is hoped, would equate to an equivalent uplift in RHI payment.In many such rural situations, off the gas grid, oil costs are higher than elsewhere and a second or third addition to a system, may well relieve fuel poverty in a situation where owners or tenants would otherwise be left at the mercy of oil prices. Without uplift Landlords may be discouraged from installing small systems and boiler/ fuel suppliers discouraged from putting in full ESCO systems, again leaving tenants at the mercy of oil prices, and in possible fuel poverty as oil prices rise. It is our view that two units and above should be eligible for uplift at a 30% rate on the eligible rate for the size of unit.

AgreeQuestion: Q20

Yes

See as Q20

Question: Q21

Yes

Question: Q22

Yes

AgreeQuestion: Q23

Yes

AgreeQuestion: Q24

No

Question: Q25

Yes

AgreeQuestion: Q26

No

Question: Q27

Yes installations before Jul 2009 should be rewarded after the relative grant, if applicable, has been repaid by RHI benefits, RHI benefits thereafter should be freely given .


No

Question: Q29

Yes

See Q 20 comments

Question: Q30

612 Southern Solar Installer

22 June 2010 Page 1174 of 1348

Deeming;


Southern Solar Ltd is a specialist solar energy installation business operating from fiveregional bases across the south of the UK, London, Hereford, Sussex, Bristol and Wales. Wefocus solely on the integration of solar thermal and PV systems, and have installed thousandsof systems over the nine years since we established. Our clients consist of both domesticcommercial and public sector projects.We would like to congratulate the team at DECC for its pioneering work with the FIT and it’scommitment to the Renewable Heat Incentive. We see this as the most importantdevelopment to date for the renewable heating industry and welcome the opportunity to giveour feedback and influence in the development of the scheme. We hope that this Incentivewill help us to create many new jobs by giving us some much needed stability, and reduce theUK carbon emissions from heat substantially. During the last nine years, despite massiveinstability in the ever changing grant support schemes we have managed to grow ourcompany from one person to a team of forty. We now hope that the combined effect of boththe FIT and the RHI will ensure that we can add many more people to our team over thecoming few years. We anticipate that we may be able to grow the company from 40 people to200 in the next four to five years if the RHI is correctly set.We see solar thermal as the first step for householders when adopting renewable energy.Previously we have offered all renewable heat technologies, but have found that the othertechnologies that we tried – biomass systems and heat pumps were difficult to site and veryeasy to get wrong. Solar thermal on the other hand is exceptionally simple, when wellinstalled very reliable, and as yet totally under used and misunderstood.The potential for solar thermal across the UK is massive, and if other countries use of thistechnology was copied in the UK we believe it will have massive consequences that gobeyond the energy the system actually produces. In our experience solar thermal and PVtechnologies are paradigm shifting technologies for most people. Most generators of their ownenergy become active in how much energy they consume, in a way no reduction measurecan ever achieve.It is quite normal for our clients who have had a solar thermal system to contact us a fewmonths later asking “why is this not compulsory – it is so simple, and it works really well – wehaven’t had our boiler on for months”. As we have heard from the recent pre election debates– even Gordon Brown has had this experience. We sincerely hope that many more willdirectly as a result of the RHI.I wish the team at DECC every success with the development of this exciting new measure,and am very happy to be called upon if you require any assistance.


From the solar thermal perspective, the proposed Renewable Heat Incentive (RHI) only dealswith Domestic Solar Water Heating systems (DSHW). It does not cover other common andpossible solar applications:• Space heating• Pool heating• Air heating• Cooling• Industrial heating• District heating• Medium and large scale solar thermal systems• Many other solar applications of heat• Systems above 100kW outputThis lack of support for the full range of solar thermal applications severely limits the impact ofthe RHI. It is essential that it is able to effectively support the full range of applications for thissimple technology. As a company actively pushing the boundaries of installation possibilitiesin the UK it is essential that this is addressed to ensure that we can bring new and innovativeapproaches to the market place. We are keen to be involved with the Uks first solar districtheating scheme – so there needs to be a tariff to help us make it a reality.

Question: Q01

22 June 2010 Page 1175 of 1348

Yes - financing schemes will be essential to ensure widespread take-up of thesetechnologies. However the rates of return proposed for solar thermal will provide a barrier tothe introduction of financing schemes for the technology. When all other renewable heattechnologies have been given an ROI of 12% it is unlikely that any investors will want to backa technology with only 6% ROI. This uneven incentive will adversely affect the uptake of solarthermal technologies. Solar thermal is a great technology for reducing fuel poverty and unlessfinance is readily available, it will not reach those who could benefit most.It is essential that the energy utilities are not the only companies that can access the RHI andthe loan schemes. This would be disastrous for delivery of these technologies, which willneed many companies and individuals to be involved in their successful deployment.

Question: Q02

Yes but it needs to be simple.People in fuel poverty are not necessarily good at filling in forms on websites.It needs to be similar to the Feed-in-Tariff - tax free and index-linked.Annual payments may make PAYS loan repayments hard to meet for the fuel poor – cashflow issues.

Question: Q03

We have found the MCS scheme a reasonably useful process for our development – if a bitbureaucratic. However what is complex is the number of different schemes and regulationswe must adhere to. To name a few; MCS, REAL code, NECIEC, IoP, Building Regs, Waterregs, CPS schemes etc. It would be great if it could be much simpler, and involve lessregistration fees – as we pay about 5 different organisations money just to be certified.

Question: Q04

Different skills are required for different applications on different technologies at different sizeranges. The 45 kW model is simplistic and inadequate.

Question: Q05

Solar thermal needs to have the same ROI as the other technologies. All renewable heattechnologies must be treated equally when setting the rates of return.The UK solar thermal industry is still small with only 100,000 completed installations – and itis therefore unjustified to assume that barriers are minimal – our answer to question 4 provesotherwise!The RHI should include cooling. Solar thermal technologies are proven in cooling applicationsand are becoming widely used for such in some countries. Peak output from a solar thermalcollector often coincides with peak cooling requirements.Early adopters who have helped to establish a market for solar thermal in the UK will be a keypart of the promotional force to accelerate its uptake – should get some form of RHI –perhaps not the full payment. Excluding these early adopters is just plain stupid – the verypeople who will market the scheme for us are going to be moaning – very bad PR.

Question: Q07


Question: Q09

Of course energy efficiency is absolutely vital. However we do not feel that the RHI should belinked to specific energy efficiency measures, as this could act as an unnecessary barrier touptake. Other schemes specifically deal with efficiency measures

Question: Q10

We feel that deeming should only apply to smaller domestic systems (possibly includingspace heating), and that metering should be an option for all other cases.

Question: Q12

However deeming works, it needs to be:• Quick & easy• Certain• Consistent• & reasonably accurate.We believe that DECC and industry need to work together to get this right.

Question: Q13

22 June 2010 Page 1176 of 1348

The consultation document does not propose medium and large scale tariff levels for solarthermal technologies therefore the perverse incentive to overgenerate would definitely be low.If a suitable tariff is introduced for systems of this scale then metering of the heat producedwould be an appropriate way to measure the levels.It is unlikely that large scale solar thermal applications would over produce heat as thesesystems are carefully designed to meet a heat loading. Installation of systems that were muchlarger than required would cause major stress on the system and potentially cause thesystem to fail. Excess heat in a solar thermal system is hard to dissipate, and therefore isnormally designed to be a kept at a minimum.Heat meters are a tried, tested and established technology.

Question: Q14

No

Question: Q17

The ROI on solar thermal technology needs to be the same as that on the other other lowcarbon heating technologies. A tariff level which provides a ROI of 6% when all the othersreceive 12% will provide a disincentive to invest in the technology.

Question: Q18

Yes, all renewable forms of heating should be supported.

AgreeQuestion: Q20

District heating is not within our core levels of expertise.

Question: Q21


Question: Q22


Question: Q23

Yes.

AgreeQuestion: Q26

No

Question: Q27

This decision to deny support to early adopters is misguided as it discriminates against thosewho have acted in good faith and looked to support the early adoption of on-site renewabletechnologies. These early adopters, if supported in some way through the RHI can act asambassadors for the new Incentive scheme.


614 Central Scotland Wood Fuel Group Other

No

Question: Q01

Yes

We need a ‘green bank’ or loan scheme so that all can access the benefits of RHI, not only the well off with ready access to capital.

Question: Q02

22 June 2010 Page 1177 of 1348

Yes

However OFGEM will be assessor and payer. We hope that sufficient preparation will be given in that department to be able to conduct these tasks. The track record of OFGEM on the RO payments has not been good.

AgreeQuestion: Q03

Yes

Product standards – Currently, there aren’t enough certified products to allow a market to function. Installer standards - The installer standards are now in place but have proved very problematic – there are only 400 registered companies.

Whether the MCS is required as a pre-requisite for a scheme should be a decision based on the number of accredited products. Where the number of accredited products is too low for an effective market to function we recommend the use of a “transition period” to allow projects to continue while MCS accreditation is sought. We believe this is likely to be necessary for biomass products.

AgreeQuestion: Q04

No

Installations over 45kW are not ‘micro generation’ as such, and design teams are commonly employed.


22 June 2010 Page 1178 of 1348

No.We agree that open fires should be excluded from the scheme due to their low efficiency, but we believe that wood burning stoves should be included as long as all the following 3 criteria are met;-

(1)The stove conforms to the national standard for efficiency which is BS EN 14785. This standard imposes a minimum efficiency pass level of 70%.

AND(2)The stove is registered as a DEFRA exempted appliance under the Clean Air Act 1993. This currently represents the best legislative measure in the UK for ensuring low emissions from small wood-burning appliances.

AND(3)The stove is operated with wood-fuel that conforms to a national quality standard, such as the HETAS Solid Biomass Assurance Scheme. This can easily be verified by requiring the appliance owner to produce copies of their fuel invoices at the time of the proposed annual RHI claim. The adoption of this criterion has the merit of supporting existing Government initiatives, such as the UK Renewable Energy Strategy, and also of accelerating the supply of high-quality wood-pellets onto the UK market. It would also facilitate the annual check-up of comparing the actual energy produced by the stove against the deemed performance level.

The adoption of all the above criteria would, we believe, result in the promotion of the best performing wood-pellet stoves and wood-pellet fuels currently available on the market and this should have a small and manageable impact on air quality, and actually improve local air quality when replacing open fires, oil or coal heating appliances.

Moreover, we reject the argument put forward by DECC that “these present practical difficulties as it is extremely difficult to monitor how much they are used (they are usually a secondary source of heat the use of which will be optional)”(sic).

This argument is also true for other technologies which are planned to be supported. A solar thermal system, for example, is also a secondary source of heat as the existing (usually fossil-fuelled) boiler is always retained to generate hot water in the winter. To what extent any technology is deemed to be optional depends on the value perceived by the user. If the technology is valued, then it will be operated. Wood pellet stoves offer many features – such as thermostatic control, timer control and automatic ignition – not available with wood-log stoves and therefore they more closely resemble wood-pellet boilers which are intended to be supported under the RHI scheme.

We also reject the argument put forward by DECC that “To what extent they are used with renewable fuel rather than, for instance, coal” (sic) While this argument may be valid for multi-fuel stoves, which offer different grate positions for wood-logs and coal, it is certainly not valid for wood-pellet stoves which are designed to operate on exclusively wood-pellet fuels. The same objection could be raised for wood-pellet boilers which are a technology proposed to be supported under the RHI scheme.

With regards to the argument promoted by DECC that the cost of administering the RHI scheme for stoves would be large, we disagree and believe that the cost of administering the RHI scheme would be low as we support the proposal to use a deemed basis for “small schemes”. We suggest the following figures as typical for the annual energy produced by a nominal 5kW wood-pellet stove;-•Approx 4,000 kWhrs/year for a wood-pellet stove. It is not unreasonable to expect longer operating hours in comparison with a wood-log stove due to the additional features offered by wood-pellet stoves such as automatic ignition, automatic feed and an on-board fuel hopper.

By adopting wood-pellet stoves into the RHI scheme, the scheme would gain greater credibility with the UK public since for most existing houses, and especially where outside space is at a premium or the roof is not pointing south, a wood-pellet stove may be the only practical, automatic, renewable energy option for refurbishing the property. Excluding wood-pellet stoves from the RHI scheme effectively disenfranchises such householders from taking part in the decentralised, locally produced green energy shift which the Government is seeking to create.

We also have concern that the ‘sustainability criteria’ as mentioned in the document, could be onerous. Existing forestry from the UK is de facto sustainable as it is regulated by the Forestry Commission. We urge consultation with the growers and supply sector before any criteria is decided upon.


No

As a group we are concerned that the standards will exclude automated log boilers, which may be a good solution in rural localities and don’t have the concerns over air quaility. We would prefer alignment with the Clean Air Act (1993) exemption process, with an acknowledgment for further abatement in declared air quality management areas.


NoThe RHI scheme needs to encourage consumer take-up from the outset and not to discourage it. If the take-up rate is deemed excessive then policies can be introduced later at review stages to dampen down demand.We believe that it is essential that a potential customer can determine very quickly what level of incentive can be applied to a project. This should be based on a calculation that can be carried out by the customer. A better solution would be to provide a benchmarked approach based on floor area (in m2) and building type. The building types could be assumed to be relatively efficient in line with the objectives stated in the consultation.

Question: Q10

22 June 2010 Page 1179 of 1348

Yes

A simple method of determining the incentive to be paid to a system is essential. Deeming is the best mechanism for achieving this.

Before we could fully support the system of deeming, we would need to review a proposal for exactly how the deemed output of a system will be calculated. Above all, the system for deeming output must be simple and transparent to ensure it is clear, from an early stage, what the financial incentive payable to a project will be.

AgreeQuestion: Q12

Yes

Appendix S of the SAP methodology is designed for existing dwellings and could potentially be used to determine the heat loss of an existing building. However, the methodology is considerably more involved than would be acceptable for the purposes of providing quotations.

The scheme should use a significantly simplified methodology based on a benchmark value for building type multiplied by the floor area. This achieves both objectives of not disproportionally rewarding those without energy efficiency measures and ensuring that potential installers are able to provide a quotation without extensive surveying and calculations, the cost of which would need to be borne by the consumer.

Energy Performance Certificates for new buildings will provide an independent benchmark for new build projects.

AgreeQuestion: Q13

Yes

Question: Q14

Yes

We welcome the rate of return of 12% this should allow significant numbers of projects to become attractive to both private individuals and commercial organisations.

The tariff structure will cause some specific problems. Most notably, the reduction in the tariff for biomass from 6.5 to 1.6-2.5p/kWh at 500kW, will artificially cause projects to reduce the size of boiler installations.

An additional band would prevent smaller biomass boilers being installed and so increase the carbon savings of the scheme.

Question: Q18

Yes

Question: Q19

Yes

This is best done by allowing the appropriate rate (eg <45kW rate for domestic houses) to be applied to each property connected.

AgreeQuestion: Q20

YesAll networks – the best schemes will go through. No – a mini DHS with 2-3 users makes sense and should be rewarded as above (deemed on each property connected basis or an individual heat meter on each property).

Question: Q21

Yes, fully fixed

Question: Q22

Yes

AgreeQuestion: Q23

Yes

The RHI is a central plank in the deployment of renewable and low carbon technologies but it is not the only tool needed for the research, development and deployment of technologies.

AgreeQuestion: Q24

22 June 2010 Page 1180 of 1348

Yes

AgreeQuestion: Q26

Emergency reviews should be available if the policy can be seen to have fallen short of the intended out come. Annual targets for installed capacity should be defined at the outset of the scheme and a review should be called if the target is missed by a substantial margin.

Question: Q27

NoWhile we agree that all from 15/7/09 should be eligible (despite any subsequent quailifing criteria – i.e. MCs or emissions).

However with biomass particularly increased numbers of installations could cause fuel prices to rise. To adjust for this, a separate tariff for existing installation could be created. This tariff could start at a very low level and be adjusted to reflect changes in fuel price but not return on capital.

Over and above this the choice should be there for someone to pay back a grant and then receive the RHI. The small number of existing installations, and thus small cost, would generate good will and ‘pay back’ for itself in the marketing and promotion. It could be limited to users <45kW.


No

Question: Q29

Yes

As per Q20.

Question: Q30

615 Infinis Plc Existing generator

Biomethane to grid; waste heat


As the UK’s largest purely renewable power generator we broadly support the proposals for the RHI as set out in the February consultation document and would like to make three comments that we believe will significantly improve the chances of the scheme reaching its stated ambitions. Two of these comments directly answer questions posed in the consultation and the third relates to what we believe to be an important barrier to success not addressed in the consultation document:


Biomethane to grid: We are concerned that no specific question is asked in the consultation document regarding biomethane gas injection to grid. There are a number of significant barriers which need to be overcome for this process to become common place. Firstly, we believe that, without suitable obligations/incentives, mains gas infrastructure companies are unlikely to facilitate biomethane injection to grid. Secondly, and linked to our first point, the quality standards are currently set too high to allow for biogas injection to the grid and will require lowering. Finally, the tariff will need to be set accordingly in relation to the outcome of these two points i.e. if the quality is kept high a very large RHI will be required to justify the investment required to produce biomethane at the current gas purity standard.

Question: Q01

On the whole we agree with the proposed technologies, sources and sites covered however careful wording around the area of retrofit and modification is required to ensure that the largest currently available resource of renewable heat is covered. Landfill Gas (LFG) electricity generation currently produces but does not utilise 7.5 TWh of renewable heat per annum. LFG electricity generation is a mature technology covered by the RO. However, the current economics of recovering this waste renewable heat are such that heat recovery from LFG is virtually non-existent in the UK.

Our view is that the addition of heat recovery equipment to an existing renewable power generation source should attract support as ‘new equipment’. The support for this additional equipment should be set to deliver a return in line with that proposed for other technologies. In this way the additional CAPEX and OPEX of the waste heat recovery plant will be supported while existing plant will not be additionally rewarded. The Infinis group of companies has 44% of the UK’s LFG electricity generation resource and we believe that over half of this may be utilisable subject to the provision of a suitable tariff. Although we have less detailed knowledge of the rest of the industry, we have no reason to believe that this is not representative. Simply put, we believe that 3-4TWh per annum of renewable heat could be delivered from this proven technology under a suitable RHI tariff.

Question: Q07

22 June 2010 Page 1181 of 1348

The average LFG electricity generation site in the UK has 1.3MW of recoverable renewable heat. Clearly, this is significantly above the <200KW level for which an RHI tariff value is proposed in the consultation. Attached we provide the requested evidence for the value that should be set for facilities above this threshold. Linked to our point above (the large amount of heat potentially available from LFG) we believe that support for technologies of this scale is key to keeping the cost to consumers down through the economies associated with utilising heat on a larger scale. As heat utilisation projects do not currently stack up economically, we have no operational scheme to report on and so we have modelled the cost of heat utilisation from an average LFG site. The support required to deliver the 12% return (as proposed by the consultation) on the additional investment required to utilise this heat is at least £46 /MWh. An outline of how this figure has been derived is set out in the document accompanying this submission and can be summarised as follows. Utilisation of waste renewable heat has a number of significant benefits (e.g. scale, geographical spread, proven reliability of underlying technology) which will help reduce operational and capital costs that the RHI needs to support. This is partially offset by the cost incurred in transporting the heat. Although many landfills are sited near potential users of heat, neither the landfills nor their gas utilisation plants were sited with delivery of heat in mind. The cost of moving heat is therefore greater than for other technologies and this should be recognised in the support regime. A review of LFG electricity generation sites shows that from an average site the heat will need to be transported between 1.5 and 2 km. However, this is more than offset by the other economies associated with this technology and the support required to deliver the proposed returns is significantly lower than that proposed for other technologies.

Question: Q16

616 Which? Other

The consultation stated that Ofgem will be administrating, monitoring andauditing the programme. Ofgem must ensure a maximum of transparency in theadministration of the RHI scheme, especially with regard to tariff changes andthe financial impact that the scheme is going to have on consumers’ energy bills.As part of their monitoring and auditing we recommend Ofgem collect andregularly publish information including:> The number of households that have applied for and have been approved RHIcompensation> The type of installation that was installed including the size> The total amount of TW produced during the period that has elapsed since thelast review and since the beginning of the scheme> How much money had paid to households> How much money has been ring fenced> How the costs of RHI are being passed through to consumers on a tariff bytariff basis> Calculation of pounds spent per million tonne of CO2 savedWe would also recommend that Ofgem states how far these numbers meet theexpectations of the government.

Which? recommends the Government explore the opportunities offered by thecoordination of RHI with other existing energy efficiency schemes. Under theCarbon Emission Reduction Target (CERT) scheme consumers are able to accessenergy efficiency measures and microgeneration installations at discountedrates. This may help some consumers to address part of the up-front costs,especially vulnerable individuals and those with low incomes as they can oftenget those measures at heavily discounted rates. Other schemes such as “WarmFront” and the CESP are especially targeted at low-income homes and couldmake a great contribution to tackling poverty. So far, however, CESP is still at anearly stage and no RHI-eligible measures have been installed under this schemeyet. We want the Government to actively promote the cooperation betweenthese schemes to ensure that both average and vulnerable consumers are givenadequate access to the benefits of renewable heat.


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Which? supports the promotion of microgeneration. It is one of the few mechanisms to give consumers real control of their future energy supply and its cost; increasing the number of homes who generate their own heat will contribute to the CO2 emission reduction targets, as well as contributing to increased level of renewable energy. However we are concerned with the potential high cost of the scheme and whether this is the most cost effective mechanism for delivering these ambitions.

There is uncertainty regarding the final costs of the scheme. However the impact assessment indicates a real potential of a negative net cost benefit and the cost of which is likely to be met by consumers via their energy bills. It is vital that Government reviews this, and associated schemes (e.g. feed-in tariffs), to determine if the arrangements are the most cost-effective for delivering the scheme, and if the schemes are the most effective for delivering the overarching objectives.

This review must include an urgent analysis of and solutions to address the impact of an increased financial burden on consumers, potentially pushing even more people into fuel poverty.

Which? represents all consumers and we are concerned that this scheme will not be accessible for all consumers. We support the Government’s proposal to ensure that vulnerable people and those on the lowest income are enabled to take-up the scheme3, for example by working closely with social landlords to ensure that tenants with lower incomes can benefit from the opportunities to reduce their energy bills. We also recognise the commercial benefit for social landlords as it will provide a degree of protection against expected rising energy prices.

However, the scheme still leaves many consumers, that don’t have the money available, with no access to the scheme. This is especially true for those consumers with low incomes that are not eligible for financial support for energy efficiency measures proposed under different schemes such as the Community Energy Savings Programme (CESP) and Warm Front. These consumers will not be able to resort to personal savings, could possibly fail to secure a loan, or simply be disinclined to take up a large loan unless the interest rate is low and the payback period short5. We recommend the Government gives further consideration to these issues and explores other means of finance, including government loans.

Question: Q01

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Availability of finance8 We have a number of concerns with the practicalities of the financing schemes6proposed:> the difficulty of estimating exactly how many people are going to take uprenewable heat technologies> up-front costs might put consumers off despite high return rates due topeople’s limited time horizon - they simply prefer shorter return periods7> the transparency of return rates: do they take into account the loss throughinterest payments on loans?8> the transparency of a levy on energy bills9: will the implicit subsidy for RHI inenergy bills reflect the level of uptake? Which? is concerned that the levy willreflect expectations regarding the uptake and not the actual uptake whichwould be unfair to consumersAs a result there is a possibility that the market remains under-stimulated andthat the sources of finance do not actually materialise. There is a dilemma asthe availability of sources of finance depends to a large extent on the potentiallender’s estimation of how well the market is developing, but without thosesources of finance the uptake of renewable heat technologies could remain farbehind the expectations of the Government.9 Furthermore, the current economic and financial situation in the UK is not veryconducive to the offering of loans at attractive interest rates. Interest rates forconsumer credit are currently very high and availability of credit is still verytight, though is has eased recently10. It is therefore unlikely that banks or otherfinancial institutions will become primary sources of finance for people to meet the up-front costs, especially because vulnerable households that would profitthe most from loans often face much greater difficulties in securing one.Consumer attitudes10 Even if banks and other financial institutions were willing to offer loans formicrogeneration there is no guarantee that consumers would be willing to takethem up. Research has shown that people prefer zero-interest and low-interestloans from either the government or their energy supplier as a means to financetheir energy saving measures, while banks and other financial institutions are atthe far end of the consumer’s preference11.11 Another potential barrier to financing is the dilemma of repayment. Peopleprefer shorter payback periods but because most of the renewable heattechnologies are quite expensive, ranging from £3000 for a small solar thermalsystem to £14000 for an automatically fed biomass boiler12, this could mean thatshorter payback periods might result in short-term loss as consumers would bepaying back more than they would receive in savings through reduced energybills13. On the other hand, because bigger loans are needed, many consumerwould be disinclined to opt for longer payback periods as the interest paymentscould upset (at least partially) the expected return on investment. TheGovernment needs to take this into account and realise the difficulties ofconvincing consumers to take up large loans in a time of increased wariness infinancial matters and decreased trust in financial institutions.12 There is evidence that, whatever the long-term benefits of RHI, up-front costsmight turn out to be a much bigger obstacle than expected as people’s decisionto purchase microgeneration technology hinges on the price. Price is a muchmore decisive factor than the type of monthly repayment or the incentives thatare offered14- it is often the case that some consumers will choose a cheapinstallation even if they could achieve better returns if they invested in a moreexpensive one. In fact, a report by DECC has found that many microgenerationtechnologies that are cost-effective are not taken up by consumers (e.g. biomassboilers). By contrast, the least cost-effective technology, namely solar thermal,is by far the most popular renewable heat technology although it is not expected to break even before 2017 at the earliest15. There are several reasons for thissuch as knowledge of the technology and low installation challenges16, but acrucial factor is that solar thermal technologies have much lower up-front costs.In fact, while people are comfortable spending smaller amounts on energy savingmeasures such as insulation and draught proofing, there is a steep decline in thetake-up of measures once they exceed the price of £1000. The tipping point is at£4000 after which the percentage of people willing to take-up the technologyremains at a steady low level. Therefore only measures between the range of £0to £4000 have a chance of being taken up by at least 15% of the consumers17.This is clearly a problem for the RHI scheme as most technologies tend to costmuch more.


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We have no objections regarding the registration process - we think it is clearand straight-forward. However there needs to be further clarification on how theGovernments intends to balance the requirements of those generators who havetaken out a loan that they have to repay on a monthly basis if payments are onlymade on a quarterly basis. While the number of consumers in such a situationmaybe small consideration of their needs is required.

Question: Q03

While Which? is concerned about the accuracy of the deeming procedure weunderstand that it is a pragmatic approach balancing the accuracy of heatmeters and the potential of people producing and so wasting more heat forfinancial gain. Consequently we support the principle behind and the structure ofthe tariffs to incentivise energy efficiency, however it is vital that consumers aremade aware of this.18 Consumers may not be aware that the rate of return on their investment mightbe lowered and the environmental benefit reduced if they do not installminimum energy efficiency measures first. We recommend that the Governmentrequire installers to provide clear information to ensure that potentialgenerators are informed that the heat output is deemed on the assumption ofhaving minimum energy efficiency measures installed, as well as the lower costof the heat system required (i.e. a smaller system) in a more energy efficiencyhome. The consumers will then be able to make a more informed choice ofwhether they want to get those measures, respectively whether they can affordthem, or alternatively accept that they will get lower returns than the expected12%.

Question: Q10

As mentioned above, we agree that where there is no possibility of exporting thegenerated heat, output should be deemed to prevent the over-production ofheat for financial benefit. Where heat can be accurately measured the use ofmeters should be preferred but the decision to install heat meters, which areoften less accurate than electricity and gas meters, should be weighed againstthe potential increase in total costs. We therefore agree that heat meters shouldnot be used with small installations as the cost of metering will increase thetotal costs disproportionately.20 Which? agrees that there should be a cap on metering for medium-sizedinstallations to prevent generators from producing and dumping excess heat. We also acknowledge the difficulty in deeming for larger installations and thereforeagree that the output should be metered in that case22.

Question: Q12

Which? agrees with the tariff setting and the tariff structure. There needs to beclarification regarding the inclusion of water source pumps, and if they are to beincluded, which tariff band will be applied to this technology.22 We are generally supportive of a return rate of 12% - it balances the total costsand the need to incentivise people sufficiently to ensure a wide enough take-upto meet the UK’s emission targets. Return rates should reflect not only the costof the installations themselves but also maintenance costs and likely futureincreases in energy prices in order to ensure that consumers receive the returnthey expect.23 We are however concerned that those consumers that have to take up loans toaddress the up-front capital costs could be disadvantaged. The interest ratesapplied to the loan will impact on their return rate, and consumers should befully informed of this prior to making any decision. Which? recommends theGovernment give consideration to this especially in conjunction with theexploration of alternative sources of finance.

Question: Q18

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Tariffs are set to degress to reflect the changes in the costs of the installationswhich are expected to take place as renewable heat technologies mature andachieve economies of scale23. We are generally supportive that degression shouldnot be implemented from the outset but be considered at a later date. Inaddition, we want the ‘degression’ process to be as transparent as possible witha requirement that Ofgem publish up-to-date data on the costs of each of theeligible technologies (including installation costs). This information would alsohelp future consumers to make informed choices about what installation topurchase in order to make the best out of their money.26 Since the costs of the scheme are likely to be passed on to consumers, Which?wants utility companies to be required to make those price increasestransparent. We want energy companies to inform consumers how RHI is going toaffect their bills, i.e. whether it is going to be added to the environmental levy,and if so, by what amount the levy will increase. Which? also wants DECC toclarify whether the levy will reflect the level of uptake. We think it is unfair tocharge consumers disproportionately for RHI if the level of uptake remainsbehind the Government’s expectations.

Question: Q23

The argument for granting support through RHI only to those generators thathave installed their system before the cut-off date of 15 July 2009 is based onthe fact that the feed-in tariff (FIT) and RHI schemes were announced on that date through the publication of the Renewable Energy Strategy18. In the feed-intariff consultation document it was argued that those installations which wereinstalled and operated prior to this date were without the need for financialsupport and that therefore could not claim that they needed the support now19.Which? questions the validity of this argument as FITs and the RHI were firstannounced in the Energy Act 200820. While not all early adopters will haveexpected to gain financial support, there are consumers21 that have based theirdecision to install renewable heat systems on the prospect of being eligible fortariffs as was indicated in the 2008 Energy Act.15 As RHI, and FIT, were set out in the Energy Act 2008 we do not support the 15thJuly 2009 cut off date, we believe that should be pushed back to the point atwhich they were first discussed. Not to do so would unfairly penalise earlyadopters for their foresight. In addition a long-term commitment to reducingcarbon emissions and managing the shift towards a greater use of renewableenergy is likely to require the support of consumers that truly care about theenvironment. The Government should take into account that barring earlyadopters from the financial benefits might undermine the credibility of theRenewable Energy Strategy and lead to the loss of support from committedenvironmentalists that have pioneered many of the green technologies.16 As detailed above Which? has had feedback from a number of members regardingeligibility. We are also in the process of gathering evidence from early adoptersthat face financial detriment because they are not eligible for the RHI scheme,and we would be happy to discuss this with you further


617 Highlands & Islands Enterprise Private Company

Deeming


Highlands and Islands Enterprise (HIE) is the Scottish Government's agencyresponsible for economic and community development across the northern half ofScotland and the Islands. Renewable energy is a focus of our efforts to promotesustainable economic development and is of growing importance as a means oftackling fuel poverty. Due to a limited gas network in some rural areas, manyhouseholds in the Highlands and Islands rely entirely on electricity or oil for heatingtheir premises, which are often also hard to treat homes.

HIE along with its local partners (Shetland Islands Council, Orkney Islands Council,Comhairle nan Eilean Siar, Highland Council, Argyll & Bute Council and MorayCouncil) has been proactively working to reduce barriers to the development anddeployment of renewables in the region for a number of years. Therefore, HIE verymuch welcomes the RHI scheme and the opportunity to respond to this consultation.


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Financing of the RHI scheme:We understand, at the time of the publication of the consultation, the Government is stillconsidering what would be the most effective way to fund the RHI scheme (including levyprovisions). However, it is clear from the consultation that the costs will be passed on toconsumers (with the distribution of these costs between different types of consumer still tobe determined).The nature of this impact on different types of consumers will be dependent on the actualdesign of the mechanism. We agree with the statement highlighted in the RHI ImpactAssessment,"...the higher the prices of fossil fuels the more attractive renewabletechnologies become... potential benefits of the RHI to rural communities are considerable,especially those not connected to the gas grid and currently using more expensive fuels toheat their homes". However, these same rural households are also those which will be mostaffected by any potential RHI levy on fossil fuels. Irrespective of a RHI levy on fossil fuels,householders are already facing increasing energy prices. According to Ofgem (ProjectDiscovery, 2009) domestic energy bills may increase already between 13% and 26% by 2020(from 2009 levels).A large number of homes in the Highlands and Islands simply cannot comply with currentenergy efficiency standards, and arguably require the most support in converting torenewable generation. Much of the housing stock in the Highlands and Islands is classed ashard to treat and is therefore less likely to benefit from conventional energy savingmeasures offered by schemes such as the CERT program. With almost 50% of the area'shousing stock being off the mains gas network, households in the Highlands and Islands areoften reliant on oil for heating and are therefore particularly vulnerable to increases in oilprices and are most susceptible to fuel poverty.We are concerned that a levy on fossil fuels will have a disproportionate impact in theHighlands and Islands. It would target those with the greatest need for change and couldhave the unintended consequence of forcing those in hard to treat, off gas homes, typicallyon low incomes, further into fuel poverty as they may lack the ability to make the requiredcapital investment to switch.Interconnection with other schemes:Across the UK, awareness about renewable heat is still insufficient and understanding aboutenergy in general is low. Ofgem's 2008 report on Consumer Attitudes and Awareness ofGreen Issues and Energy found that around half of the population is unaware of their energyuse.As a result, and in our view, the success of the RHI will rely on the progress of other schemeswhich for instance engage with the public and with potential recipients of RHI, supportenergy education, promote 'good practice' and target the high upfront costs. Weunderstand from the Warm Homes, Greener Homes Strategy (DECC, 2010) that certainactivities are being planned. However to support the RHI, these measures need to be inplace before, or at least as soon as, the RHI is actually implemented. The RHI andcomplementary measures need to be aligned.

Question: Q01

Access to finance is crucial for consumers to overcome the high upfront capital expense ofrenewable heat technologies and eventually enjoy RHI tariffs. Alternative finance sources(e.g. Pay as you Save), which are suggested by the recently published Warm Homes, GreenerHomes Strategy (DECC, 2010), require legislative changes (e.g. to connect loans to propertiesrather than individuals). There is therefore a danger that finance will be not in place beforethe RHI is implemented.To-date, the majority of commercial finance institutions/banks have not shown a majorinterest in renewable heat technologies. Alternative means of finance are thereforeneeded. The interest free loan scheme administered by the Energy Saving Trust Scotland,but extended to support domestic and community projects, could help fill the gap in theshort term. In our view interest free loans will, at least initially and in the current economicclimate, be important, given high up front costs of installation and length of payback period.Bearing in mind that renewable heat technology is not mainstreamed, availability ofimpartial advice will also be important.

Question: Q02

The proposal refers to annual payments for installations below 45kW and quarterly for thoseabove this level. We understand that payment will be one year in arrears. In our view,annual payments are unsuitable for installations below 45kW. Instead quarterly paymentswould appear more appropriate as it would ensure available income to meet regular fuelbills and credit repayments.

Question: Q03

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In general we support the proposal to use a certification scheme to determine the eligibilityof products and installers. The proposed Microgeneration Certification Scheme (MCS) isvalued by many market players as a tool which creates consumer confidence by providinginformation about installers and products. As highlighted in the RHI consultation, otherschemes (Feed in Tariffs, grant funding) already use MCS as a reference. While we haveconcerns about the MCS, which are described further below, if it can be improved then itcould be used for this purpose in order to avoid unnecessary confusion and additionaladministration costs.However, before the MCS is adoped we suggest that a number of adjustments are made toit. In its current format, the scheme is seen by many as a barrier to installers entering themarket - specifically, entry requirements are complex and expensive. Small businesses, andparticularly those in remote areas, find it difficult and costly to go through the accreditationprocess. As a result there are only 9 accredited installers in Scotland. An option may be tohave MCS as a reference for good practice to enable small businesses to install theequipment and for the installation to then be checked and regulated by an MCS accreditedinstaller.One of the objectives of the RHI is to increase the demand for renewable heat. But thecurrent number of accredited installers may not be able to respond to an acceleratingdemand. Often consumers in rural areas, and in particular the Highlands and Islands, cannotattract installers to travel long distances to their premises. Common customer feedback isthat MCS accredited installers regularly increase the project cost to the customer by thevalue of the grant they will receive by using an accredited installer. We are concerned thatthis trend will continue into the RHI.If the MCS acts as a barrier to market entry, competition may not increase and consequentlyprices may not come down as forecasted, leaving the market with artificial 'price umbrellas'.Finally, the consumer complaint process for the MCS is complex and its effectiveness is opento question.On the whole, the MCS could be a good reference scheme for RHI, but before adopting it, athorough assessment of it in its current form is needed. This should consider its efficiency,effectiveness and whether the costs associated with it are reasonable. If it cannot beimproved then there is a strong case for the establishment of a separate scheme.

Question: Q04

The MCS was introduced to create confidence in particular for householders. Larger projectswill be primarily implemented by non-domestic consumers with larger 'market power' andmay not require the same security. However a certain number of larger projects may betaken forward by community groups. While they may appreciate the security a certificationscheme can deliver, its introduction could present issues and associated costs for technologydevelopers to develop approved products. This could drive up costs and reduce choice forconsumers. To avoid this, an option may be to consider some form of self certificationscheme based on providing performance data for new/novel/unaccredited technologysimilar to the CHPQA scheme for Enhanced Capital Allowances eligibility.

Question: Q05

To our knowledge the MCS is taking into account European quality standards (e.g. EnergyStar Rating and EN 255-2/EIM 14511 for heat pumps) for some of the renewable products. Inthis case, the RHI would not need to consider additional standards.In event of a review of MCS, DECC may wish to investigate the (potential) link between it andthe European initiative QualiCert: the common quality certification and accreditation forinstallers of small-scale renewable systems.

Question: Q06

To prevent any complication and ensure consistency, we suggest that the RHI scheme doesnot define the eligibility of products, as the certification scheme will serve that purpose. Anexample of potential confusion has already emerged in relation to eligible biomasstechnology. The RHI consultation excludes biomass stoves, but in doing so does not attemptto differentiate between manual or half-automated biomass stoves. However, beingrecognised as efficient technology, half-automated wood burning stoves (manually fed byusers, but controlled automatically) are a certified technology and should be eligible for RHIas well.We agree that manual-fed/traditional wood burning stoves should not be eligible for the RHIgiven that they are both proven and relatively inexpensive, but modern half-automatedbiomass systems should be considered due to their potential to contribute to carbonemission savings.

Question: Q07

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We are not in the position to judge the efficiency, effectiveness and emission levels ofbioliquids and associated systems.

Question: Q08

Emission standards, as well as the Clean Air Act, are already in place and new or additionalstandards would confuse the market. We suggest emission standards should remain aconcern of MCS and/or local authority planning departments, rather than Ofgem.The RHI governance should stipulate whether existing systems (e.g. systems installedbetween 15.07.2009 and 31.03.2011) would need to comply with the requirements andwhether retrofitting of flue filters is needed when certain standards are not in place.

Question: Q09

Being the most cost effective method to save energy and carbon emissions, we stronglysupport energy saving measures and believe it should be always given priority whenpossible. However, introducing energy efficiency as a qualification criterion for RHI will behard to realise and to control. It could complicate a scheme which could otherwise berather straightforward. However we feel very strongly that energy efficiency measuresshould be promoted alongside the RHI.We suggest that energy efficiency should be integrated with existing and planned schemes,such as those which will be introduced as part of the Warmer Homes, Greener HomesStrategy.If energy efficiency is to be a pre-condition for the RHI then it must require the lateststandards to be met, wherever possible. For example, the basic minimum level of loftinsulation (125mm) proposed in the RHI does not reflect the latest standards (270mm), andwould introduce a new lower standard, which would be counter to energy efficiencyambitions.

Question: Q10

We assume developers are only interested in the RHI scheme, where they remain theowners of properties and heating systems, and / or where they sell heat to occupants. Highlevels of energy efficiency reduce the capital expenses for heating systems in general andconsequently the development costs. Thus, lower energy efficiency standards should not beof interest for any developer under these circumstances. However, targeted education isneeded to make developers aware of the issues.The combination of owning the system and selling heat represents an energy service, whichwill come with a set of heat tariffs. Given that the market for generating and sellingelectricity is highly regulated, we would support this new market for heat being observed (byDECC, Ofgem or such other) to ensure vulnerable consumers (fuel poor households) get theright deal when buying heat.

Question: Q11

Due to the similarity of what is being asked, we have responded to questions 12 and 13together.Given the additional costs associated with metering, the deeming of small-scale installationsseems appropriate. However, the potential for metering for small-scale installations shouldbe assessed in more detail given its advantages over deeming.Suggested methodologies for deeming (like SAP and EPC) do not consider differentbehaviours and circumstances in which people live (e.g. home-based occupants are likely toneed more heat than those who are away from home for much of the day) or regionalclimatic differences. As a result, deeming may not accurately reflect heat output.Moreover, additional assessments associated with deeming may result in additional costs(partly) for consumers.The RHI scheme needs to be simple to be attractive for a large number of heat generators.Consideration could be given to integrating the RHI with the roll-out of the smart meterprogramme, which is currently in development. If smart meters could combine overallenergy use rather than electricity only, it could help the RHI to become a straight forwardscheme with the potential to be understood by the general public, without additional directassessment costs for consumers.


See Q12.

Question: Q13

22 June 2010 Page 1189 of 1348

Similar to the case of small-scale installations, we believe metering is the most suitable andstraight forward method in the case of large-scale installations. We believe that appropriatetariff rates will not encourage over-generation mainly due to the fact that all users of heattechnologies (except solar hot water generation) must pay for fuel to operate the heatsystems (and the proposed RHI tariffs are lower than the current fuel costs).

Question: Q14

We do not hold any specific information to inform the appropriate level of incentive to bringforward large scale heat projects but suggest that assessments of existing systems should beundertaken to understand the economics of large-scale biomass and biogas combustionabove 200kW. Without further details it will be impossible to judge the right incentivelevels.With regard to CHP we believe during summer time, less heat is used (unless it is used asprocess heat). The RHI scheme needs to ensure heat production is not incentivised thenwasted during periods of lower demand.

Question: Q15

See Q15

Question: Q16

See Q15

Question: Q17

The view of industry is that a 12% rate of return will encourage a large number of projects toproceed, and on that basis we welcome it. However, industry has noted concerns, which weshare, in relation to the bounding structure, specially the reduction at SOOKw. Again, weshare Industry's view that consideration be given to the introduction of a further band forSOOKw to 1MW scale projects.

Question: Q18

Due to the limited information available, we have to assume a dedicated boiler forrenewable fuel should be the right approach. We understand a dedicated boiler wouldensure maximum efficiency levels. We support the industry view that alignment with the ROwould be straight forward and would bring consistency.

Question: Q19

Considering the potential of renewable district heating (particularly for hard to treat homes),we welcome the idea to support this form of heat supply. However, in order to decide onuplift and form of district heating to be supported, we strongly recommend considering theeconomics of district heating in more detail. Within the recent consultation on the EnergyEfficiency Action Plan for Scotland, a selection of district heating schemes located inScotland were described and may be good reference projects to assess the economics.Other examples can be found in other European countries (e.g. Denmark) and may be worthconsidering for an assessment.Setting the uplift according to the actual cost of a project is important in order to encouragedevelopment. On that basis, we would support a case by case assessment of eligibility. Ameans by which developers are encouraged to connect subsequent heat loads should alsobe included.

AgreeQuestion: Q20

See Q20.

Question: Q21

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In order to create investor confidence, the RHI should be fixed and only corrected forinflation. This is of prime importance during times of high capital costs and challenges toaccess finance at reasonable rates. At a recent conference session on the RenewablesObligation there was a strong consensus that no matter what form the RO takes, its primaryfunction is to create stability and investor confidence in the market. It follows that the corefunction of the RHI should be to create investor confidence which we believe can best beachieved though a fully fixed inflation tracking model.There is already evidence on the market that prices for biomass fuel are fluctuating.Therefore, we support inclusion of the fuel part of bio-energy tariffs in the grandfatheringcommitment.

Question: Q22

By including degression, the RHI would provide signals to reduce costs, but as theconsultation notes, finding the right method for introducing degression is challenging. Giventhe uncertainty as to how it would work and the impact uncertainty may have on themarket, we support the proposal not to introduce degression from the outset.DECC's RHI Impact Assessment states that there will be regular planned reviews of the RHI.These will be conducted to ensure developments are taken in to consideration anddegression may be introduced as a result. In order to make this decision, robust informationabout market development, in particular costs, will be needed. We are not aware of asystem for monitoring costs being in place at the moment.The study "Power from the People - Domestic Microgeneration and the LCBP", prepared bythe University of Oxford (2009) was one attempt to assess price developments. However weunderstand the assessment has been discontinued and focused on microgenerationtechnologies only. Moreover, the majority of technologies assessed were in the South (asonly a few individuals/organisations in Scotland applied for the LCBP). Observed costs forrenewable energy technologies in the North (in particular in the Highlands and Islands) canbe significantly higher.

Question: Q23

We welcome the approach to considering innovations during upcoming reviews. Weunderstand the approach for calculating RHI tariffs will follow the same method employedfor most-commonly used technologies and as a consequence will reflect higher upfrontcapital expenses.The scope to reduce technology costs by innovation may be marginal. For example, usingsolar thermal systems to provide domestic hot water and space heating is not an innovativeapproach as such. In Austria, about a quarter of the installed solar thermal units are combisystems(feeding into domestic hot water and space heating). In addition, some cases inEurope (Austria, Denmark and Sweden) prove the practicality of district heating combinedwith solar thermal systems.The RHI consultation does not clarify whether such combi-systems are being considered foreligibility (except the combination of solar thermal and heat pump technology or biomasssystems). We would support further consideration of eligibility in advance of introduction ofthe RHI. If they are to be eligible, then the calculation used for standard solar thermalsystems may be not sufficient given the higher costs involved in solar combi-systems (e.g.due to additional pumps) and may require a separate RHI tariff.

Question: Q24

See Q24.

Question: Q25

We do not have concerns about the proposed approach to review the RHI scheme otherthan comments made earlier about investor confidence. While reviews are necessary toensure the efficient operation of the RHI; stability and certainty must be the primaryconsideration when undertaking reviews.

Question: Q26

We expect an emergency review may be needed if the process for generators (e.g.application, payment) is found to discourage investment or a sufficient number of projectsare failing to come forward.

Question: Q27

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We are aware of a number of projects which were installed before the 15 July 2009 which, ifthey meet the RHI standard, should also be eligible. The fact that an RHI has been inconsideration for some time prior to the 15th July 2009 should provide justification for thisposition.Often, the so-called early adopters faced higher costs in implementing renewable energy.This is partly related to the fact that early adopters faced higher upfront capital expenses,and needed much more time and resources to get access to limited information. Also, in theHighlands and islands of Scotland, there are significant additional costs involved due to thedistances involved which impact on both initial capital installation but also ongoingmaintenance. Access to technologies is severely limited as the distances involved offer abarrier to achieving the critical mass of projects required in the region before technologyinstallers can justify entry to the local market.


As expressed earlier, deeming does not reflect the real situation for heat generation. Forinstance, a house used as a weekend domicile will earn RHI for the owner withoutgenerating heat. Therefore we suggest considering the use of smart meters as well forsmall-scale installations. This requires the smart meter programme to consider energyoverall rather than electricity only. Where smart meters can accommodate heat, the dangerof fraud can be limited as real-time heat generation would be automatically reported (withvery limited chance to manipulate readings).

Question: Q29

With regard to district heating and the associated economics, we suggest referring to thecase studies presented in the recently proposed Energy Efficiency Action Plan for Scotland(e.g.: Aberdeen Heat and Power and Edinburgh University), and examples from otherEuropean countries to get a wider perspective on hard to treat homes and housingassociation projects.

Question: Q30

618 Federation of Petroleum Suppliers Ltd Trade Association

The Federation of Petroleum Suppliers (FPS) is the trade association for the oil distribution industry in the UK and the Republic of Ireland. It represents the majority of distributors in the UK from the small family business, which forms the greater part, to the distribution arms of some of the refiners and importers – a total of around 3,000 road tankers. Our members deliver almost all the heating oil used in Great Britain as well as making deliveries to retail forecourts, agricultural, marine, industrial and commercial customers for power, heating and transport fuel.

Accessing the RHIComment on the paragraph on rural communities:We disagree with some of the implicit assumptions on rural communities. The fuel poor in rural communities are not poor because they do not have access to mains gas. The October 2009 edition of the Sutherland Comparative Domestic Heating Costs showed that oil was cheaper than mains gas at the time. The RHI will only enable the rural fuel poor to switch permanently from off-grid fossil fuel to renewables where the costs of running a renewable system are lower and, in any case, will probably not remove them from fuel poverty. That is more likely to happen through improved insulation. Also, many of the rural fuel poor live in rented accommodation so there is the barrier of having to persuade landlords to take action.

We also disagree with the statement that the RHI could reduce dependence of remote rural communities and businesses on more expensive fossil fuels with a limited choice of supplier. There is, in fact, far more choice of supplier for non netbound fuels than for netbound. There are over 200 oil distributors in Great Britain, which is why there is no need for formal regulation of the market in heating oil.

Comment on the paragraph on fuel poverty:It is disingenuous to state that the RHI will shield vulnerable consumers from the large increases in fossil fuel prices when a proportion of these increases are due to the EU’s/government’s choice to impose levies and taxes on these fuels.

Eligibility and Standards:We agree that the definitions in the Energy Act should be amended to enable RHI to support bioliquids and biogas.


Yes

Comments: It is difficult to comment fully when DECC has not given any details of the way in which the levy is to be raised. Some of our views expressed below may therefore change once these details are available.That said, FPS commends the decision to re-think the manner in which the levy is to be applied in order to ensure that the mechanism put in place is workable. Because application of a levy directly on fossil fuels would exacerbate fuel poverty, we propose that the funding comes from general taxation to ensure that it is raised more equitably.

Question: Q01

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Yes, with the reservation that the costs of registration with MCS must be low so that they do not prevent oil heating system installers from registering and thus prevent RHI conversion of systems to bioliquid blends. We also do not see the need for further qualifications for these installers beyond the existing Building Regulations’ competent persons schemes for oil heating and storage installation. The technology of the systems for bioliquid blends is not very different from that for mineral oil and so does not justify additional qualifications.

AgreeQuestion: Q04

For installers of oil heating and storage systems, there are already competent persons schemes under the Building Regulations. These could be used in place of MCS and, being industry specific and established, are of greater depth than an MCS scheme would be.

Question: Q06

No

We disagree with limiting the eligibility of oil boilers to conversion of existing domestic boilers only. Why are commercial boilers and new builds not included as well? It is the same technology. Oil boilers are far simpler than automotive engines and so it is more sensible to use bioliquids in static applications. As electricity becomes the power source for transport applications, there should be higher volumes of bioliquids available for static applications. Sales of road fuels that must contain a proportion of biofuels under the RTFO were approximately 37 million tonnes in 2009 compared with approximately 1.2 million tonnes of heating oil (Source: DECC Energy Statistics). Overall volumes of FAME for use in heating oil will therefore be comparatively small and transfer of only a relatively small proportion of transport to electrical power sources would release sufficient FAME for widespread takeup for heating.


Yes

We are not aware of any bioliquids other than FAME that are currently available for use in oil heating boilers.Whilst bioliquids may be less cost-effective to produce at present than some other sources of renewable heat, substantial research into alternative feedstocks is taking place. Also, as the consultation document states, bioliquids are in limited supply, but, the Government is encouraging the use of electricity as an energy source for transport, in which case the bioliquid availability situation will change. Making bioliquids generally eligible for support at this stage will avoid having to amend the scheme at a later stage.

AgreeQuestion: Q08

No

Under the EUP directive, the NOx emissions from boilers are to be limited to a maximum of 105mg/kWh from 2013. The proposed maximum NOx emissions level from biomass boilers of 150g/GJ is considerably higher and should be reduced to align with the EUP directive.


We think it would be too complicated and unfair to require householders to install minimum efficiency standards as a condition for benefiting from RHI support in view of the high percentage of old/hard-to-treat housing stock in Great Britain. Such a requirement would exclude much of this sector of the housing stock from being able to benefit from the RHI scheme.

Question: Q10

Yes

We agree with deeming by the method described, except that the BRE Standard House Set listed in Table 1 of Annex 2 is very simplistic. For example, volume would be more representative than floor area.

AgreeQuestion: Q12

No

Comments: We do not agree that bioliquids should be included in the scheme only for small and domestic installations: all sizes of installation should be included and both domestic and commercial.

Question: Q18

YesWe agree with the general approach to mixed fuels, but do not agree that bioliquids should be included in the scheme only for small and domestic installations: eligibility should be extended to all sizes of installation and both domestic and commercial.

Question: Q19

YesConsumers need assurance that the tariffs are fixed for the duration if they are to have the confidence and make the necessary commitment to install renewable heating.

Question: Q22

22 June 2010 Page 1193 of 1348

Yes

The scheme will be complicated enough to establish without introduction of further complications, such as degression.

AgreeQuestion: Q23

Yes

AgreeQuestion: Q24

Yes

AgreeQuestion: Q26

Yes

AgreeQuestion: Q28

Comments: Over-regulation will push up costs disproportionately.Ofgem may already have governance, auditing and assurance procedures in place, but these may not necessarily be directly transferable to or suitable for dealing with domestic householders.FPS would prefer the administrative body for the scheme to be completely independent of government.The subject of the Macrory Review was business rather than consumers. Any enforcement and sanction regime applied to householders must be proportionate and appropriate.It is essential that any appeal mechanism is readily accessible to and affordable for consumers.

Question: Q29

619 Confederation of Paper Industries Other

Overall cost. We continue to express concern that the UK target is too ambitious and the cost for consumers excessive. Energy bills significantly higher than in other Countries will inevitably mean the long term loss of UK manufacturing jobs. Increases in conventional fuel bills in the region of 20-30% by 2020 are particularly troubling. The cost of the RHI should be spread as widely as possible. Certainly all sectors drawing support from the RHI should share in the overall cost and this includes the domestic sector. We argue that the RHI should be funded by general taxation, or if this is not accepted then by an extension to the coverage of the Climate Change Levy to include all purchasers of fuel. This would have the advantage of being simple to administer.

Sustainability standards for biomass. We strongly support proposals to impose appropriate sustainability standards on biomass. In particular we express concern that material could be diverted from recycling or paper making to be used for energy generation. The principles of the waste hierarchy should normally be respected, with energy use only permitted after more environmentally and economically beneficial uses are exhausted. The industry is already experiencing problems with an increased cost of raw materials for pulping caused by potentially unfairly subsidised use in energy production. Indeed during winter 09-10 there was a spike in pulping timber prices caused by Scandinavian demand for biomass for heat generation.

An RHI driven increase in fuel bills plus higher raw material costs will inevitivly impact on the UK paper industry and likely result in job losses.

Support for CHP. It is of concern that the environmental benefits from CHP are not recognised by the scheme, other than those sites using renewable fuel. Indeed CHP fired by natural gas is disadvantaged by the RHI by potentially being subject to the levy raised to cover the cost of the RHI. We urge this issue is re-examined.

Question: Q01

Yes

Comments: Access to capital for investment continues to be limited and expensive, with a number of different projects competing for any available finance.

The proposal to set the rate of return at 12% lead to considerable debate during our consultation with members, with a difference of opinion if 12% would be sufficient to affect the large scale investment decisions required to reach the targets. The automatic mechanism to review this rate in the light of actual investments is sensible.

Critical to investment confidence are guarantees that support will be offered for the period promised as this will be required to pay back commercial loans secured to cover the investment costs. In particular issues around grandfathering of biomass facilities need to be resolved.

Question: Q02

A monthly payment approach for larger scale installations would be more appropriate. There should also be an option where the plant owner can nominate a third party to receive the payment if they wish.


22 June 2010 Page 1194 of 1348

The requirement for smaller equipment to be fitted by MCS accredited installers may lead to a bottleneck and exclude competent installers who cannot afford the expense of registration. It may be appropriate for there to be an option for the equipment to be certified as scheme compliant and for the supplier to confirm the quality of the installation.


It would be expected that for larger installations specifiers would have the expertise to ensure their own value for money. Additionally the requirement for actual heat metering in such cases means that the RHI would only pay for metered heat and so need have no concern over the actual combustion equipment.


Eligibility. It is important that there should be flexibility to ensure that all sources of biomass including those mixed with non renewable elements can be utilised. Within the paper sector, potential biomass based fuels such as paper sludge and industrial/municipal waste almost always have an element of non renewable waste. RHI credit should be given for the renewable fraction. In the case of installations in EU ETS, there is already a requirement for the non renewable element of these fuels to be measured and such a requirement could also be imposed on smaller installations. This information could be used alongside the metered heat measurements to calculate the credit to be drawn from RHI. Without such allowance a number of potentially large contributions to the scheme will be lost.

Co-firing of boilers. There must be an acceptance that many industrial boilers are co-fired – larger models used in the paper sector require the use of gas at start up and sometimes to maintain combustion. Additionally (as explained above) a number of predominantly biomass fuels contain an embedded element of non biomass fuel.

Conversion of equipment. Existing equipment currently fired by fossil fuels should be eligible for support if converted to use renewable fuel. RHI support would be required to support such proposals; if support were not required the conversion would have already occurred. Date for eligibility. We would suggest a more appropriate date would be the publication date of the UK Renewable Energy Strategy (26 June 2008).


We agree with concerns that achieving high environmental performance with smaller combustion plant is more difficult that achieving the same standards with larger plant. For this reason it may be more sensible for support to be targeted on larger sites.

AgreeQuestion: Q09

This requires proper regulation of buildings to ensure the appropriate standards are delivered. If these are too low, the building standards should be revised at an earlier date.

Question: Q11

No – please see answer to Q14.


Safety issue. It is a requirement that appropriate overpressure protection is provided in steam systems. It is possible that “safety valves” may be required to be installed after the heat meter which could lead to intermittent losses of heat and this should be recognised. It is very unlikely the economics of the RHI would encourage excessive generation and subsequent dumping of steam.

Heat metering. We support proposals that the topic of heat metering should be the subject of investigation and development by the National Measurement Office. The involvement of CPI in monitoring existing meters across the whole sector for purposes of the CCA has alerted us to the quality of gas meters. Around a third of our installations experienced meter related failures during 2009 and we would highlight similar issues for heat meters if they are widely deployed.

Question: Q14

Investment decisions will be made based on a number of different factors and it is only actual developments that will reveal if the level of RHI support is correct.

However we would make the following points;15 years is too short a repayment period for large scale biomass plant – 20 years would be more appropriate.Linking tariff payments to the cost of fuel is difficult. Firstly there are no standard prices for fuel as contract conditions differ and secondly we disagree with the inferred suggestion that biomass prices will fall over time.

Question: Q15

We support proposals for the productive use of biogas, but have no comment on the incentive level for larger developments.

Question: Q16

15 years is too short a repayment period for new biomass combustion plant. 20 years would be more appropriate.

Question: Q18

22 June 2010 Page 1195 of 1348

No. Any rule requiring the use of a dedicated boiler for renewable combustion will restrict the use of the RHI for no good purpose.The requirement for separate combustion facilities for renewable fuel should not be implemented - conventional biomass boilers require the use of gas at start up and potentially to balance combustion depending on the calorific variability of the input fuel. Potential fuel sources (for example paper sludge or waste wood) contain some element of material from fossil sources. Sites in EU ETS using such mixed composition materials are already required to monitor the composition of the fuel. The RHI will require the installation of heat meters. Accordingly the heat generation can simply be factored by the fuel composition figures to enable a simple calculation of the heat arising from the renewable element of the fuel source for RHI purposes. Similar monitoring requirements could be placed on non EU ETS sites. Already we have examples where permitting of combustion activities limit the range of materials that could be utilised and effectively prevents waste being used for heat recovery. This proposal would reinforce this policy failure.

Question: Q19

Proposals should be cost effective and reasonable. Care should be taken that costs do not become excessive for those paying the cost of the RHI.

Question: Q21

On balance we agree that tariffs should be fixed over the lifetime of the RHI commitment because each installation/company is likely to have a different energy price contract; there is not a standard price that can be used in calculation. If the RHI price support level is fixed, the consideration of fuel price fluctuations is left in the hands of the installation operator. The wording in the consultation also seems to suggest that the price of biomass is likley to fall in the longer term. We would not agree with this analysis and would suggest that widespread deployment of biomass generation may drive prices upwards. Indeed demand for biomass in Scandinavia during the most recent severe winter caused a demand and price spike meaning material for paper making was in short supply.

Question: Q22

It seems sensible to review this option during the first review. With such an ambitious overall target it is equally likely support will need to be increased to stimulate additional investment.

AgreeQuestion: Q23

Micro management of technology would be difficult and complex with no guarantee of securing a better outcome than simply leaving it to the market between equipment suppliers to drive innovation.

Question: Q24

AgreeQuestion: Q26

We would suggest a more appropriate date would be the publication date of the UK Renewable Energy Strategy (26 June 2008).


621 Low Carbon Innovation Centre, University of East Anglia Academic / Profession

Yes.

There should be consideration of other sustainability criteria when larger scale schemes are planned. These should include issues of the possible impact of other industries such as timber and related products (e.g. paper, furniture, board, construction industry) and who as a result of the RHI may see significant impacts if their raw materials are displaced for energy production thereby seeing a possible loss of industry in the UK.The scope for carbon sequestration at least in terms of decades by use in durable product such as furniture should not be overlooked and a price for temporarily sequestering carbon should be factored in for large scale schemes. On the other hand, small scale, domestic sized schemes are unlikely to have a substantial impact unless their market share grows significantly, and any issue thereby arising can be covered in the periodic reviews. See also comment to Question 27

Question: Q01

Yes.

See the response to Question 3 over the definition of the word “owner” when covering and Energy Service Companies in the Domestic Market.

Question: Q02

22 June 2010 Page 1196 of 1348

Yes but the approach can be improved.

A formal RHI registration is important, but it must avoid being over- bureaucratic. The proposal to restrict payments to the “owner” may cause confusion in the domestic market in cases where an Energy Service Company has a long term contract with the householder. A person who owns a mortgage on a house is usually referred to as the “owner/occupier” even though he/she does not own the property outright – most being held by the mortgage company. In a similar way there may be issues with Energy Service Companies (ESCO) who would finance the required scheme up front and thereafter expect benefit to cover their costs. Greater clarity in the word “ownership” is needed in such cases. Thus an ESCO might fund a scheme and have a contract for the householder to pay for heating used at an agreed tariff which would be comparable to that which the householder would have paid had a conventional heating system been installed. Thus, for instance, a ground sourced heat pump scheme would be compared with the equivalent condensing boiler system. The householder would pay the ESCO the agreed equivalent tariff of what the condensing boiler would have consumed, but the ESCO would pay to the utility company the actual cost of electricity consumed in the heat pump. The difference between the two tariffs would provide, in part, the finance for the ESCO to ensure the project went ahead. It would be important that the ESCO had at least some benefit from the RHI payments. This is different from the example quoted relating to a local authority and a housing association. A potential way around this would be where there is an ESCO agreement with a householder, the payment is made to the ESCO for a defined period, but that checks are placed on the ESCO to ensure that excessive profits are not made and there is an agreed cap. on profits, particularly if the timescale when the ESCO is involved is less than the 15 or 20 years.

Question: Q03

There may be a question of the specific limit of 45kW. Essentially the approach is correct for domestic properties, but there may be some such larger properties which have a higher heat demand, on the other hand there may be non-domestic properties under this limit. A solution would be to use this limit as suggested for all installations, but where there is a single domestic dwelling, that threshold might be exceeded, but it would still require certification.

AgreeQuestion: Q04

See also comments to Q4.

AgreeQuestion: Q05

We have no information on this, but there is sense in establishing a pan European review body to investigate comparability between standards not only for the RHI but for any future low carbon initiatives.

Question: Q06

Not in the domestic market.

In the non-domestic market, the proposal of the cut off of 15th July 2009 is sensible as any business will tend to make investment decisions based on prevailing financial costs. However, in the domestic market this is very much less so. There should be an option available for domestic consumers only who installed systems prior to 15th July 2009 to have the option of receiving the RHI benefits provided that they repaid any capital grants they had previously received for the scheme within a predetermined timeframe – say 2 years. This would be a one off choice and many may prefer not to bother.On the other hand there are schemes which were installed by motivated householders and which did not receive capital grants. These should be eligible for retrospective support – perhaps at a reduced level. It is precisely these people who have been motivated in the past – not by financial motive but by altruism to be at the forefront of innovation, and yet they miss out. The danger is that such people become disillusioned and are become reluctant to take initiatives in the future. A case in question, associated with feed in tariffs relates to 1A Gilbert Road, Cringleford, Norfolk where a PV array was installed at significant cost by the owner before any grants were available. He is now so disillusioned by missing out yet again with the introduction of FITs that he is unlikely ever to take initiatives in the future. We must reward early movers in the domestic sector and encourage them to take further measures. They are, after all, the people most likely to encourage others to take advantage of renewable energy ventures.


We must be open to the inclusion of bioliquids other than FAME and these can be incorporated in any modification to the RHI.Eligible bioliquids should be not only for domestic boilers, but also for micro CHP schemes which can work using biofuels provided there is no contradiction with any incentive from the Feed in Tariff. The method of reliably assessing the renewable content of the delivered fuel is important and this should only be done for deliveries of blended fuel to the premises which have a certification as to renewable content, or alternatively there is installed in the premises a certified remote smart meter to determine the weighted average renewable energy content of fuel actually used over the accounting period.

Question: Q08

We recognise that some biomass boilers may not meet the original targets set of 20g/GJ particulate matter and 150g/GJ for NOx,. However, the implication in the consultation document is that at least some boilers meet the target indicating that it is technically possible. It would run counter to long term policies to set higher targets as there will then be a legacy which would be held over for one to two decades. Perhaps a better strategy would be to allow higher alternative levels initially, but that legislation be enacted to ensure compliance to a lower level within say five years. Those projects which started under more relaxed rules would then be expected to comply to the newer standards after a short period. Alternatively they could lose completely or receive a reduced incentive payment for the remainder of the 20 year period.


22 June 2010 Page 1197 of 1348

..with qualifications.

There should be a minimum standard and the RHI should be structured to encourage energy efficiency. However, as with our earlier observations the system must also ensure that it does not disadvantage early movers in the domestic sector who already have implemented schemes and thereby be discouraged from future innovation. Furthermore, with the proposed “deeming” system in place there is no encouragement for occupants of buildings to manage their energy use via non-technical means – e.g. by awareness raising to vary heating program timings periodically to reflect the different heating demands at different times of the year.


This is an important issue and with the long legacy of insulation in buildings it is important to ensure developers do not use the RHI as a loop hole. The critical issue is the heat loss coefficient. For compliance in new buildings, it would be sensible to ensure at the outset that buildings completed after 2011, but before 2013, would only receive the full tariff if they met the 2013 standards at the outset. Otherwise the tariff would be scaled according to the actual heat loss coefficient compared to that expected for the equivalent one in 2013. From 2013, the equivalent basis, but using 2016 should then be used.

Question: Q11

Research at the University of East Anglia demonstrates that the heat loss assessments based on SAP calculations or equivalent can give very misleading results when referring to an individual property. Over 110 properties were surveyed for detailed SAP calculations and compared to actual energy performance. There was generally good agreement i.e. within 2.0% if the aggregated overall energy consumption of all 110 houses was compared with the aggregated SAP computed values. The following graph shows the response of each of the 110 houses. Where the plotted value is 0% this indicates the computed and actual performances for that house were identical. Where, for example the value is 100%, this indicates that the actual consumption in that house was double that predicted theoretically. Where the percentage figure is negative, the actual consumption was less than that predicted. There is a large variation from one property to another with one exceeding the predicted value by over 150%, while another only consumingless than 50% of the predicted value. [Comparative graph provided.]

“Deeming” energy consumption as the basis of a tariff by whatever calculation method will be flawed for the reasons given above, and will do nothing to reward those who are conscientious in reducing heat demand by non-technical energy management strategies. There are also other serious deficiencies with such a scheme. It will not:a. Ensure that the heating appliance is performing effectively,b. Allow for periods when the property is unoccupied,c. Ensure that the basic heat requirements continue to be the same throughout the qualificationperiod.d. Reflect the different heating requirements from one year to the next (i.e. colder or warmerwinter).Furthermore, such a “deeming” scheme will lead to unnecessary bureaucracy in the assessments that are needed. Such assessments will be needed to be checked regularly for each property every few years to ensure that the property still complies with the requirements of the RHI.LCIC prefers a system which would actual energy readings to demonstrate actual benefits through the use of meters as is the case with FITs.It is true that there might be a risk of over-generation, but this is unlikely to be significant in the “domestic” sector. Indeed monitoring actual performance will almost certainly be less prone to problems of potential abuse than the proposed “deeming” approach which as shown above could be up to 150% in error and fail to address the issues highlighted in (a) – (d) above.Heat meters are now compact and reliable and in a small/medium size building at the University East Anglia has no fewer than three such meters installed for sub-area monitoring. There is no reason why these could not be linked in with smart metering for remote recording – thereby minimising administration. In the case of electric heat pumps, a special dedicated electricity meter attached to the heat pump could be used as an alternative to a heat meter.With a meter, it would be easy to monitor overall performance and check for any deterioration and also correctly adjust for climatic variations from one year to the next. Thus the energy data from the meter would provide information on the heat loss coefficient for the premises by plotting the actual consumption against mean external temperature and allowing for the heat appliance efficiency. A solution to minimise any possible issue of over-generation would be to do a single initial SAP assessment and compare the actual and SAP computed heat loss coefficients at the outset.


See comments above.

There must be a rational method for assessing buildings and SAP or equivalent could form the basis of overall checks, but the use of the “deeming” process is flawed for reasons shown in response to Question 12.


Regarding heat meters - reliable heat meters are now available and compact and indeed a single small/medium size building at the University East Anglia has no fewer than three such meters installed for sub-area monitoring. There is no reason why these could not be linked in with smart metering for remote recording.

Question: Q14

22 June 2010 Page 1198 of 1348

We have no reliable data on which to objectively comment. However, it is essential that further scrutiny is done for such schemes. It would be perverse for an individual large scale heat only biomass scheme were to be implemented if this meant that a biomass CHP district heating scheme was precluded in the area because the network uplift support was insufficient. See also comments to Question 20.

Question: Q15

We disagree with the “deeming” approach in the determination of the RHI entitlement. Other schemes to promote the Low Carbon Economy (e.g. RO, RTFO, CRC, FIT ) are based on performance, and this is what is important also for RHI to minimise bureaucracy and inappropriate values being used.We also find the worked example with reference to solar hot water heating unhelpful and potentially misleading. Our research summarised in the graph below is not consistent with the implication that 2200 kWh might be generated from such a system. We have surveyed a number of two panel and three panel systems and the actual system output (i.e. including storage) is significantly less than 50% of that figure. We accept that the figure might be purely illustrative, but it would be misleading to continue to use such a figure in future documents.The estimate of actual heat energy required in a building is very approximate as indicated in the comments to question 12. However, the estimate of useful solar energy gained is even more inaccurate and it is highly dependent on the amount of water use and the time of that water use.Furthermore it also depends on the settings on the programmers for the backup fossil fuel boilers. Thus data obtained by the University of East Anglia from several monitored solar hot water systems, show that the average useful energy gained can vary by a factor of 2 as indicated by the arrows in the graph. The research showed that if a house holder had the same setting for hot water on the boiler programmer for both summer and winter then the solar gain in summer was significantly (up to 50%) of that which was obtained if the programmer was turned off in summer and only used by manual override when absolutely needed. Any “deeming” of energy provided would be very inaccurate and unfairly penalise those who attempt to get the most out of their system. Most solar hot water systems do have a meter panel indicating solar energy gained and this, via a remote meter reading system should be used to monitor actual performance and provide the basis for RHI support and NOT a system based on “deeming” proposed.

[Graphical information provided.]

For reasons given in comments to Question 12, we do not believe “deeming” to be appropriate at any level for space heating, and that the potential problems from deliberate heat dumping are less of an issue than the significant inaccuracies from a proposed “deeming” scheme. There is no reason why Smart Meters could not be used with Heat pumps to plot consumption data against external temperature to provide a very simple was to identify the heat loss coefficient. This is derived directly from the gradient of the trend line for energy consumption values. The same would be true for small heat meters for biomass boilers. If necessary this measured heat loss coefficient could be compared with a SAP computed theoretical value as an overall check. The key issue here is that once installed the regular monitoring would allow the heat loss coefficient ot be continually checked and to some extent this would identify if in subsequentyears deliberate heat dumping was occurring.“Deeming” heat produced will do nothing to encourage better management or incentives to improve the fabric performance of a building. In fact the proposed scheme is likely to do completely the reverse.If as suggested above, a scheme allows regular automatic monitoring of the heat loss coefficient, then immediately any deterioration would be identified. However, if an owner of the building invested in better insulation or control, then this would be reflected in a reduced heat loss coefficient. In this case less heat would be actually generated or used. As such a reduction would improve energy security and reduce carbon emissions, such efforts should be rewarded and this could be achieved by scaling future tariff rates by the ratio of the original heat loss coefficient to the new lower one. i.e. in this case a lower overall renewable heat demand would receive a higher unit tariff.


Generally agree.

A dedicated boiler is essential for biomass as otherwise the certification of the exact amount of heat provided from renewable sources would become difficult to verify.

Question: Q19

We agree that there should be the opportunity for uplift, but only as proposed if the district heating network is constructed at the same time as, or after, the construction of a biomass power station or biomass heat only facility. We agree that it should not be available to existing networks unless these are extended. It is important that a correct balance is provided between individual renewable heat provision in individual properties and that provided by a more centralised scheme via a district heating network.In many cases a district heating system, particularly if associated with a biomass CHP plant will generate higher CO2 savings than nearby individual medium/large scale biomass schemes. The uplift support for a particular district heating network which can demonstrate that it would provide greater CO2 savings should be set at a level to ensure it is financially more attractive than a cluster of individual schemes.

AgreeQuestion: Q20

22 June 2010 Page 1199 of 1348

YES to eligibility for all networks and NO to the exclusion of external customers.

It is important to include an uplift for new network developments but consideration should be given to differentiating between those which are heat only and those which involve CHP. For those which are associated with biomass CHP, then even premises relatively close to the power station should be considered in any additional tariff as it is important to encourage CHP as a more effective way of using renewable energy and reducing CO2 emissions than separate biomass schemes. If there is no such encouragement for close premises, then there may well be an unintended consequence that such premises opt solely for a stand alone additional biomass boiler rather than effectively exploiting theheat from the CHP station. A criterion for determining uplift should be such that it would be asufficient incentive for nearby customers to opt for connection to the CHP network rather than goingit alone.The impact of any uplift tariff in any area should be a commercial matter between the heat providerand the client, but to encourage CHP use in preference to other individual schemes, uplift incentiveswill be important. There should be a simple way of assessing these uplift tariffs and scope forvariation in this uplift from one area to another should be available probably via a banded scheme.The basic identification as to which uplift band a scheme falls should address the issues of heatdensity and pipe length distance and could readily be determined as a heat load – distance moment asfollows:

[Formula provided.]

Such a parameter M would provide a means, via banding, to provide a higher uplift for those schemeswith more distant customers and would be preferable to a single uplift tariff. Furthermore, thoseschemes with high heart loads close to the power station will have a lower M value as would thosewhere only a small percentage of the heat from the power station is used.A refinement of this scheme in large networks would allow for zoning within a single network whereuplift charges could vary from one zone to another.


Disagree.

In principal we are not in favour of a fixed tariff as while we accept that a major attraction forpossible motive for move towards renewable heat would be a reduced exposure to fossil fuel pricefluctuations this should not be a prime reason for keeping the incentive at a fixed level.If indeed it is proposed that a fixed level should be grandfathered then the risk to investors would besignificantly lower than other investments for energy reduction such as insulation etc which would beaffected by fossil fuel price fluctuations. As a result, the rate of return should be reduced by reducingfrom the outset the level of the support tariffs.A preferable way would be to index the annual payments for heat pumps according to the weightedaverage wholesale price index over a period of say 2 years thereby minimising anomalies from shortterm price spikes. While we accept that short term fluctuations in wholesale price will notnecessarily reflect short term consumer prices, the issues are much less significant when averagedover periods of two or three years.A general problem with rational long term decision making in energy is the price volatility of fossil fuels and it may well happen that a future government might introduce more certainty by smoothing out prices through temporary taxation during low prices and equivalent rebates at times of high prices. RHI support which was not fixed would be in line with a more rational approach to overall supply and consumption of energy.If the RHI is indeed fixed, despite the comments above, we do not favour seeing it index linked.

Question: Q22

There are many uncertainties at present and introducing specific degression tariffs for new installations from the outset would not be helpful and might have unexpected consequences of an undue rush into certain technologies. We believe that the principal of degression is important and should be reviewed at an early stage, but that actual degression tariffs should not be declared at the outset. Instead, there should be a qualitative indication as to whether the Government is mindful to introduce degression or not for each technology separately.

AgreeQuestion: Q23

There needs to be flexibility here and consideration of integration – e.g. using surplus solar thermal energy for accelerated ground heat recharge or a store partially heated by solar as the source for a heat pump. Equally it is important that innovation should not focus solely on renewable generation and should not have the perverse effect of reducing attempts at energy conservation. Thus if a householder installs enhanced insulation his heat load would go down. Instead he should be rewarded by the inverse of the heat load difference as explained in the response to question 18 paragraph 6.

AgreeQuestion: Q24

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1. Make the installation of solar panels mandatory for all new houses (unless physical conditions prevent this).

2. Motivate local authorities to organise clusters of interested householders to install solar panels in existing houses. This was done successfully in the BroadSol project in 2004 where 50 householders in Broadland signed up to install solar panels as one group thereby enabling components to be bought in bulk, and the installation costs to be reduced as there was a steady work stream for the installer.

3. Explore ways to integrate solar thermal heating to enhance the source temperature of heat pumps and thereby improve the coefficient of performance.

Question: Q25

Agree in principle.

While we are concerned about the short time frame from the time of inception of RHI and a review in 2013, coordination of timing of reviews is important so that other opportunities can also be explored – see also response to Question 29. We also believe that though we favour metering from the outset if this proves impossible initially, then this should be seriously considered routinely in all reviews.

AgreeQuestion: Q26

A potential issue could arise where an emergency review might be needed if there is a surge in demand for biomass for electricity generation only stations/ RTFO and the sustainability of use of such fuels comes into question. See also the response to Question 1.

Question: Q27

Our comments to Question 7 largely cover this point, but are restated here for completeness.

In the non-domestic market, the proposal of the cut off of 15th July 2009 is sensible as any business will tend to make investment decisions based on prevailing financial costs. However, in the domestic market this is very much less so. There should be an option available for domestic consumers only who installed systems prior to 15th July 2009 to have the option of receiving the RHI benefits provided that they repaid any capital grants they had previously received for the scheme within a predetermined timeframe – say 2 years. This would be a one off choice and many may prefer not to bother.On the other hand there are schemes which were installed by motivated householders and which did not receive capital grants. These should be eligible for retrospective support – perhaps at a reduced level. It is precisely these people who have been motivated in the past – not by financial motive but by altruism to be at the forefront of innovation, and yet they miss out. The danger is that such people become disillusioned and are become reluctant to take initiatives in the future. A case in question relating admittedly to feed in tariffs relates to 1A Gilbert Road, Cringleford, Norfolk where a PV array was installed at significant cost by the owner before any grants were available. He is now so disillusioned by missing out yet again that he is unlikely ever to take initiatives in the future. We must reward early movers in the domestic sector and encourage them to take further measures. They are, after all, the people most likely to encourage others to take advantage of renewable energy ventures.


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Yes.

The issue of “deeming” is potentially open to serious problems as it has been shown in responses to Questions 12 and 18 that the theoretical performance may deviate significantly from actual performance, and unless there is an annual reassessment of each property by a qualified assessor covering all aspects, this could lead to serious abuse. Annual checking would impose a significant administrative burden. On the other hand if the appliances were metered, particularly by automatic remote smart meters this would provide an easy method to minimise abuse. We strongly believe that the potential abuse from over-generation is much less of a problem and potential abuse of the “deeming” approach. It would seem unlikely that the necessary annual checks would be implemented in a “deeming” system. Installing dedicated remote meters for heat pumps presents no problem, and most solar installations already have some form of metering.It is accepted that some development in heat meters for biomass boilers may be needed, although we have had reliable experience of such meters at UEA, but the aim should be to ensure metering is in place just as it is with FITs for electricity generation. A compromise for such appliances might be the provision of an initial capital grant with the proviso that adequate metering is also installed and that the per kWh incentive then cuts in after a period of say 1 – 2 years.It is hard to see that a “deeming” process will really achieve the required objective of renewable generation except from a “Tick Box” approach which would not provide the correct objective information and is likely to be counter-productive to these objectives in the long run. The “deeming” process is a form of capital grant – albeit spread over many years. With its long time span, there would be no controls to ensure that non-renewable heating sources are not installed as some point within the qualifying period and thereby negating the effort done under the incentive. As indicated above, a small initial capital grant to cover cost installation of an adequate meter might be a way forward.To simply administration, the opportunity should be taken at the next review of RO etc to explore the possibility of a single integrated organisations which would be applicable ONLY to large organisations – i.e.. the size of establishment covered by EU-ETS/ CRC. In particular the opportunity for these large organisation to have an integrated obligation/commitment covering the RO, RTFO, RHI etc. For small consumers, the separate initiatives where the RO is the responsibility of the electricity supplier are sensible, at least in the next decade.For large consumers, they should be given the option for compliance in an integrated way to ensure that a given OVERALL percentage of their energy comes from renewable energy rather than separately from electricity or heat, and this is more in tune with the EU directive. Thus they could comply from their OWN renewable electricity generation (not a renewable tariff), their own renewable heat initiative, or their own renewable transport initiative, but it would be up to the organisation itself to explore the most effective solution in their own situation. In this way, an integrated obligation approach could be devolved to the large company which may offset this obligation by a more coherent deployment of renewable heat or vice versa. A system of recycling of certificates/buy-outs as currently part of the RO could be used, with relevant differential tariffs for heat and electricity.

Question: Q29

Many of our comments have been included in response to question 21, but are included here again forcompleteness.

It is important to include an uplift for new network developments but consideration should be given todifferentiating between those which are heat only and those which involve CHP. For those which areassociated with biomass CHP, even premises relatively close to the power station should beconsidered in any additional tariff as it is important to encourage CHP as a more effective way ofusing renewable energy and reducing CO2 emissions than separate biomass schemes. If there is nosuch encouragement such premises, then there may well be an unintended consequence that suchpremises opt solely for a stand alone additional biomass boiler rather than effectively exploiting theheat from the CHP station.The impact of any uplift tariff in any area should be a commercial matter between the heat providerand the client, but to encourage CHP use in preference to other individual schemes, uplift incentiveswill be important. There should be a simple way of assessing these uplift tariffs and scope forvariation in this uplift from one area to another should be available probably via a banded scheme.The basic identification as to which uplift band a scheme falls should address the issues of heatdensity and pipe length distance and could readily be determined as a heat load – distance moment asfollows:

[Formula provided.]

Such a parameter M would provide a means, via banding, to provide a higher uplift for those schemeswith more distant customers and would be preferable to a single uplift tariff. Furthermore, thoseschemes with high heart loads close to the power station will have a lower M value as would thosewhere only a small percentage of the heat from the power station is used.


622 Centre for Sustainable Energy NGO

CHP; deeming;


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Organisational experienceCSE is a Bristol-based national charity which this year celebrates 30 years of developing, deliveringand evaluating initiatives which enable households, organisations and policy-makers to developeffective responses to climate change and the misery of cold homes.The Centre for Sustainable Energy (CSE) worked with the DECC Energy Prices team to develop theDistributional Impact Model for Policy and Strategic Analysis (DIMPSA). This model is used toestimate the distributional impact of policy funded through energy bills. It has been used in thepolicy development process, particularly when analysing the impact and fairness of polices in the UKLow Carbon Transition Plan.The DECC Energy Prices team uses this model to provide quantitative analysis of the distributionalimpacts of policies. The input data for this model is sourced from different policy teams within DECCand the Energy Prices team runs the model internally and disseminates results.The following areas of our work are of particular relevance to this consultation:1. Roberts S with V White and I Preston (2009) Production of the DIMPSA model to assess thedistributional impacts of the Low Carbon Transition Plan: Internal analysis by CSE to theDepartment of Energy and Climate Change.2. Preston I, Anderson W and Vicki W (2009) Generating enthusiasm: Implementing a feed-intariff for small scale renewables. A report to Consumer Focus and Friends of the Earth3. Roberts S with V White, I Preston and J Thumim (2007) Assessing the Social Impacts of aSupplier Obligation: A study for Defra, CSE, Bristol. Seewww.cse.org.uk/downloads/file/pub1085.pdf4. WWF (2008) Waste Not, Want Not: Energy Tariffs for Sustainability, Report by CSE for WWFUK,WWF, Godalming. See http://assets.wwf.org.uk/downloads/energy_tariffs_report_1.pdf5. Thumim, J. and White, V. (2008). Distributional impacts of Personal Carbon Trading. A report tothe Department for Environment, Food and Rural Affairs. Defra, London. Seewww.cse.org.uk/downloads/file/pub1106.pdf6. Preston, I., Moore, R., Guertler, P. (2008). How much? The cost of alleviating fuel poverty Areport to Eaga Partnership Charitable Trust, CSE and ACE, Dr Richard Moore. Seewww.cse.org.uk/downloads/file/pub1110.pdf7. Centre for Sustainable Energy (forthcoming). Moderating the distributional impacts ofPersonal Carbon Trading. A report to the Institute for Public Policy Research, IPPR, London.8. Centre for Sustainable Energy, Association for the Conservation of Energy and Moore, R.(forthcoming) Improvement Prophet: Modelling the impact of future changes in fuel prices,incomes and energy efficiency. A report to EAGA Partnership Charitable Trust, CSE and ACE,Bristol.Our responseWe welcome the opportunity to respond to the Government’s consultation on the proposedRenewable Heat Incentive (RHI). The consultation sets out the Governments plans to meet anambition for renewable heat generation as part of our overall renewable energy strategy and targetunder the EU Renewables Directive. The renewables strategy and targets themselves will also beintegral to the delivery of our wider carbon emissions targets to 2020 and 2050.However, as discussed in our response, we believe the proposals fail to ensure the RHI will be bothrenewable and low carbon. In addition, the costs of the scheme will be recovered from consumers’energy bills who may or may not be able to benefit from the scheme itself. It therefore raisesimportant issues of equity and fairness which may need to be addressed if the policy is to commandsustained public support.Our overall concerns focus on:• the additional cost to energy consumers• the prioritisation of renewable heat over energy efficiency• the failure to focus on off-gas communities that rely on carbon intensive fuels• the need to better integrate the RHI with other policies to ensure low income householdscan also benefit from the scheme• the need to ensure district heating networks are strategically deployed in large urbanconurbationsIn our response to the consultation we have answered the questions in the order in which they areposed in the consultation document. Our response has focused on those aspects of the consultationwhere we have recently undertaken relevant analysis and/or have relevant knowledge andexpertise.


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Technological challengesThe RHI focuses on heat generation as a way of rewarding the installer of a technology i.e. movingfrom grants to incentives. However, further consideration needs to be given to the incentivesprovided to encourage the production of bio fuels and biomass fuelled CHP. In the case of CHP thebarriers are often related to the complexity of developing a local structure to support the schemesdevelopment i.e. reducing the risk associated with managing heat loads to several different sectors(see Q15).The document has not addressed the grid infrastructure issues associated with delivering heatpumps in off-gas areas. The economics of heat pumps are considerably more favourable in homesheated by electricity, oil, LPG or coal. In off-gas areas, the electricity distribution system is also likelyto be of lower standard i.e. single phase supply with lower rated distribution cables. The installationof heat pumps is therefore likely to require some grid re-inforcement which could incur significantextra costs (not currently acknowledged within the impact assessment for the RHI) and lead to DNOsblocking installations in order to sustain network integrity. The Low Carbon Networks Fund hasrecently been established by Ofgem with a view to helping DNOs to meet these sorts of challenges,but at present there doesn’t appear to be a clear like between the RHI and this Fund.

FundingCSE recently developed the Distributional Impacts Model for Policy Scenario Analysis (DIMPSA) onbehalf of DECC. The DIMPSA model provided the evidence base for distributional impacts shown inTechnical Annex A of the Low Carbon Transition Plan (LCTP). CSE would urge the Government toconsider the use of taxation to fund policies as this is a more progressive way of raising revenue.Our recent analysis of individual policy impacts (Figure A - see p.3 in PDF) show that the RHI and RO1 result in the greatest increase in household energy bills: without the insulation measures available from otherpolicies, which protect households from price rises, the RHI and RO result in an average increase of7.5% on the counterfactual bill. However, the RHI does appear slightly progressive in nature,resulting in a greater percentage increase for the higher income households. This is related to thedistribution of different heating fuels: lower income households rely to a greater extent onelectricity for heating and therefore receive less of the policy cost pass-through of the RHI (which isnot recovered through electricity bills).The combined LCTP policies (including the RO32, EU ETS, Smart Meters, RHI, FIT, Supplier Obligation,CERT, CESP, Product Policy) result in an overall change increase of 8.5 – 8.6% on the counterfactualbill. The behavioural and insulation based schemes therefore help protect consumers from the policycosts associated with the RHI, RO32 and EU ETS.CSE has also examined the distributional impacts associated with the recovery of policy costs viaincome tax. The average household bill would show a decrease of £136 in 2020 if policy costs wererecovered from general taxation. This is 16% lower than the counterfactual bill. Figure B (see p.4 in PDF) shows the annual income reductions vs. change in fuel bill for the recovery of policy costs from energy bills and income tax.The recovery of costs via income tax therefore has significant benefits to fuel poor households in2020, who would stand to benefit from an overall positive change in disposable income, whilstmiddle income deciles see little change in ‘disposable’ income and all upper deciles see a netdecrease.


Yes, in the case of third party financing options where by the householder receives the technology(i.e. the fuel poor) and the installer then receives the payment (i.e. a local authority), thehouseholder needs to see a reduction in their bill. For heat pumps installed in homes using gas this isunlikely to be the case (see Q7).

Question: Q02

Yes

AgreeQuestion: Q04

Yes

AgreeQuestion: Q05

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The Centre for Sustainable Energy welcomes the proposed CoP threshold of 2.9 for heat pumps.However, the performance of heat pumps relative to their stated efficiency is still a relativelyunknown area. In addition, the costs of fuels used to heat homes at present and following theinstallation of technologies are likely to increase at different rates. The two issues are interconnectedand as such they have been discussed together here.Performance of heat pumpsThe efficiency of heat pumps is dependent upon a number of inter-related factors, namely the heatpumps design, the heat distribution system used and the thermal efficiency of the property. Heatpumps perform best when the property is well insulated and a low temperature heat distributionsystem is used. The coefficients of performance assumed in the RHI assessment for GSHPs andASHPs would suggest a well insulated property and a suitable heat distribution system e.g. theretrofit of larger radiators or under floor heating for GSHPs. If these conditions are not realised withthe heat pump installation, the assumed CoPs will not be achieved and the presumed carbon savingsand renewable energy benefits will be significantly lower than projected in the consultationdocument.Savings achieved by the householder - financiallyThe consideration of technologies suitability in the future needs to be based on both thecounterfactual change (i.e. the change that would occur naturally due to infrastructure investmentsand global price trends) and the cost associated with the delivery of climate change policies. Thecounterfactual rise for gas and electricity is estimated by DECC of 18.51% and 17.14 % andrespectively. The additional cost of climate change policies is likely to add 4.63 p /kWh to electricityand 1.1 p/kWh to gas (based on figures derived from the Distributional Impacts Model for PolicyScenario Analysis developed for DECC). If you also add the costs of Carbon Capture Storage to the billthen electricity is set to rise by more than 5 p/kWh.If you assume a relatively old gas boiler is replaced (80% efficient) by a heat pump, Figure 2 showsthat a heat pump needs to have a CoP of 2.45 or higher to achieve a reduction in energy bills wheninstalling a heat pump in a home currently heated by gas i.e. as proposed by the RHI at present.However, if you add the policy costs on to the bill to match the real world trends for fuel prices then a heat pump needs to have a coefficient of performance (CoP) of 2.7 to achieve a net saving in thefuture (N.B. this doesn’t include the RHI payment which is income potentially to contribute to theinstallation cost rather than a fuel cost saving).In terms of the implications of the above, if third party financing of RHI measures is an option for thefuel poor (see question Q2 about appropriate financing) then you would need their energy bills to godown. If the bill does not reduce then the local authority (or the financier) gets the payment but thehousehold gets a higher bill i.e. exacerbating fuel poverty further. Arguably, no government policyshould support a technology that results in an increase in fuel poor consumers’ energy bills i.e.Meaning ASHPs should not be eligible in homes heated by gas.The RHI assumes relatively generous CoPs for heat pumps which need to be reviewed as soon asdata is available from the EST’s Heat Pump trials. However, the efficiency of the technology that isbeing replaced also needs to be considered when assessing the suitability of any technology. Forexample, if a householder replaces an ‘A rated’ gas condensing boiler with a heat pump the CoPneeded to achieve a reduction in bills increases to 3. The CoP for a GSHP retro-fitted with radiators islikely to be close to this figure and as such no heat pump should be installed where a gas boiler isless than 5 years old.Savings achieved by the householder - carbonCSE has repeated the calculations required to contrast the emissions associated with a home heatedby a gas boiler and a one switching to a heat pump (using DECC carbon emissions assumptions to2020). To achieve a carbon saving in a home with an old gas boiler the CoP needs to be 2.15, with anew ‘A rated’ boiler the CoP needs to be 2.5.In addition to the above we would also like to raise some issues across the overall housing stockissues associated with the deployment of heat pumps. The following has been taken from ourconsultation response on the Household Energy Saving Strategy (HESS) and is repeated here.The future carbon intensity of electricity is fundamental to the selection criteria we apply to lowand zero carbon technologies (LZC). If we are unable to extensively decarbonise grid suppliedelectricity then the Government should only incentivise the installation of heat pumps if they replacea fuel with a high carbon intensity i.e. electricity or coal. In this instance, areas supplied by gasshould be encouraged to develop heat distribution networks households for combined heat andpower. It is important to note that a heat network developed for gas CHP in the short to mediumterm could be used in the future for other fuels i.e. biomass or hydrogen.The graph above (see pa. 8) shows the relative carbon intensity per kWh for CHP and heat pumps depending upon relative performance i.e. assume system efficiency. The lowest carbon heat would be a heat pump with high coefficient of performance (CoP) and low grid electricity.CSE delivered the ‘How Low?’ study on behalf of WWF UK3. The study examined the combination ofmeasures required to reduce residential emissions by 80% in 2050. Scenario 2b facilitated therequired 80% reduction in emissions with the inclusion of 27.2 million LZC technologies (6.9 millionof them heat pumps). ‘How low?’ extrapolated linearly the projected carbon intensity of deliveredelectricity (2008 to 2020) to estimate a 2050 carbon factor of 0.059 kgC/kWh. It is important to notethat UK electricity demand increased and carbon emissions fell as a result of the measures deployedunder scenario 2b i.e. the carbon intensity of electricity was low enough to warrant the inclusion ofheat pumps. The deployment of heat pumps is therefore dependent on the decarbonisation of our


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grid electricity; CSE therefore suggests prioritising their initial deployment in households thatcurrently use high carbon fuels i.e. targeting off-gas areas until electricity itself becomes lowcarbon ‘enough’ to be confident that it will deliver carbon savings in substituting for gas.

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The process of deeming and encouraging energy efficiencyYes, for all domestic technologies the low cost measures need to be installed to ensure that:A) Heat, whilst renewable, is not wasted.B) The technology is not over sized un-necessarilyOur response to Q7 highlights how important system efficiency is in the delivery of financial andcarbon savings. For example if a heat pump is to achieve a reasonable CoP (above the 2.9 required)then it needs to be installed in a well insulated property, or the heat pump itself will be larger thannecessary i.e. placing an undue burden on the policy’s total cost.CSE would recommend using a SAP (or BREDEM-12) based assessment of the property to both:• Assess the suitability of differing technologies for the household applying i.e. a technologyassessment• Establish the size of the deemed payment after the installation of energy efficiencymeasures i.e. assuming the householder has installed energy efficiency measures (see laterdiscussion on the required level of energy efficiency)The householder will then need to be encouraged to install these energy efficiency measures, byeither regulation or incentive. The Energy Saving Trust’s own evaluation of the Low Carbon BuildingProgramme has shown that 40% of households required to install basic energy efficiency measuresfailed to do so.If so regulated, the householder would be legally bound to install the measures with a number ofhouseholds being subject to random checks as means of verification. The alternative would be anincentive, whereby the first years RHI payment would be a voucher entitling them to the low costenergy efficiency measures for free i.e. loft insulation, cavity wall insulation and /or heating controls.The householder would then have a year to redeem the voucher which would itself then allow DECCand Ofgem to track the deployment of measures i.e. the voucher has been reclaimed.The hard to treat, solid wall properties would still pose a potential problem as the cost of themeasure prohibits a voucher to the value of the first years RHI payment. In this instance we wouldfavour the technology assessment ruling out those measures that would not be suited to a largepoorly insulated dwelling. For example, the CoP of a heat pump that isn’t suitably sized for a largesolid wall property is likely to be poor; where as a small solid walled cottage may be appropriate ifthe overall floor area is low enough. Whilst this may seem overtly prescriptive, it is important toremember that the RHI is moving beyond the early adopters and any inappropriate deployment oftechnology is likely to undermine the future market potential of technologies.The technological assessment should also consider the overall carbon saving potential of aninstallation, to ensure the RHI delivers both renewable heat and carbon savings. The deployment oftechnologies in homes heated by electricity, gas, oil and LPG is therefore likely to generate thehighest savings and we would urge DECC to prioritise these homes to 2020. In reality, the technologyassessment may become to onerous with little standardisation between installers. CSE wouldtherefore recommend developing an eligibility matrix for standard house types i.e. by built form,wall-type and property size.In addition to the assessment discussed above, the proposed minimum energy efficiency measuresneed to be improved, we suggest:• The provision of additional tariff uplift for householders who install solid wall insulation toenable the basic level of energy efficiency needed for a heat pump i.e. to ensure the CoP isabove the necessary 2.9.• For loft insulation the proposals are for 125mm to be assumed in the modelling. Werecommended the minimum 270mm as required by building regulations• The inclusion of floor insulation. Heat pumps work most efficiently when the heat isdelivered by under floor heating as this requires a lower level of heat consistent with thatprovided by the heat pump. If the floor under the heating system is not insulated then muchof the heat will dissipate into the ground and the heating system will not produce thedesired results for the householder.We would therefore recommend:• Deem the payment level to meet that of a well insulated property• Use a suitability matrix OR the SAP assessment to select the most appropriate technologyoptions for each home i.e. limiting the deployment of heat pumps to insulated properties• Provide the first years payment as a voucher to be deemed against any required insulationmeasures (if not already installed)• Prioritise the deployment of measures to achieve both high carbon savings and renewableheat i.e. homes heated with electricity and/or off-gasWe are also particularly concerned that installed heat pumps may start to be used to provide coolingin summer. Such usage would represent not a substitution of one heat source for another but anentirely additional – and completely unnecessary – additional energy use. Indeed, we are aware thatsome ASHP manufacturers use this as a selling point for their products. It is not clear if this has beenfactored in to the impact assessment and yet we see it, unchecked, as a potentially significantnegative result of the RHI stimulating mass take up of heat pumps. We believe there should be somemonitoring to prevent this and an approach of reducing RHI payments to compensate for thisadditional profligacy.

Question: Q10

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CSE would not allow new housing to benefit from the RHI as the planning system should ensurethese gains i.e. through compliant construction.

Question: Q11

In the case of heat pumps the amount of electricity used could be monitored to set the paymentlevel i.e. using the CoP assumed in the RHI Heat Assessment. We would however recommendreviewing these CoPs before the final publication to ensure they better reflect the results emergingfrom EST’s heat pump trials. In particular the assumed CoP needs to reflect the heat distributionsystem used.

Question: Q12

Yes, see our response to Q10. In addition we would encourage DECC to use a modified standardheating regime to ensure the deemed payment doesn’t encourage over consumption (see graph in p.12 of PDF).The graph above shows average consumption and energy need for both heat and power. The figuresfor energy need have been derived from the 2006-07 EHS and assume a standard heating regime4.The figures for energy consumption are derived from the LCFS. The LCFS totals for gas and electricityhave been adjusted to ensure the summary statistics match the total supply figures published in theUK Digest of Energy Statistics. The graph shows a significant gap between actual energyconsumption and energy need i.e. suggesting the majority of people do not heat their homes to21oC. Furthermore, the chart also shows a relatively clear correlation between low incomes and lowenergy consumptions.If the deemed payment is itself based on a SAP type methodology and a standard heating regime it islikely that the RHI will overpay the household i.e. to generate heat they wouldn’t normally consume.CSE therefore suggest reducing the deemed payment’s heating regime settings by 1 oC, to 20 oC inthe main living space and 17oC elsewhere. This reduction would match both DECC and the EnergySaving Trust’s own messaging to reduce heating settings by 1 degree.4 For the modelling of fuel poverty the demand temperature of all dwellings within the primary zone isassumed to be 21ºC, the secondary zone is assumed to be heated to 18ºC and the temperature of theunheated zone relates to the external temperature and therefore varies depending on the local climaticconditions.


No. We need to be sure that the heat generated is both used and necessary.We can see no evidence in the consultation document to explain why the risk of overgeneration inthe large-scale installations is “low”. It may potentially be more attractive to overgenerate tomaximise your RHI payment, and any business designed to generate profit will do so. For largercommercial / domestic installations it would be sensible to first pre-calculate heat demand toprovide a deemed requirement or need. The RHI would then set an upper and lower bounded limitfor each installation. The installations that exceed the upper limit on a frequent basis would then besubject to an audit from Ofgem, if the audit deems the heat necessary then the payment thresholdcould be raised accordingly.

Question: Q14

The deployment of biomass CHP, particularly in mixed sector situations, requires additionalmechanism to overcome additional financial barriers. The risk associated with managing several heatloads that are the responsibility of different organisations often precludes the extension of a schemeto additional beneficiaries. For example, a hospital with a large base load may not want to take onthe additional complexity and risk associated with a local school and / or block of flats.If the heat distribution network could be developed and managed by a third party, then the hospitalcould plug into this network and sell its heat to the local grid with householders benefiting fromlower cost heat. The incentive therefore either needs to be set at a level that enables mixed sectordevelopments, or a separate national policy needs to be implemented in parallel to develop theinfrastructure needed to support large scale biomass CHP.We would also urge DECC to place a duty on large urban councils, such as Birmingham, Manchester,Liverpool, Bristol, Cardiff, Glasgow, Edinburgh and Leeds etc. to strategically support heat networks.The London Development Agency and GLA have performed detailed mapping of heat throughoutLondon to underpin the development of a heat network i.e. the pipes required to distribute heat.The heat network will be supported with seed funding to ensure the existing waste heat is usedeffectively, and to allow others to connect and either use or distribute heat. The strategicallydeveloped network removes a proportion of the risk from any CHP development i.e. enabling localinstallations. The RHI could provide the funding for the development of heat networks and in turnsupport this process, possibly in the same way as the Low Carbon Networks Fund is providing DNOswith the potential to fund smarter electricity network solutions as funded by consumers through thelatest Distribution Price Control.

Question: Q15

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The tariff for solar water heating may not be high enough to encourage investment from RegisteredSocial Landlords and local authorities. Social housing providers have expressed interest in solarwater heating as this technology requires less management by the householder i.e. is relativelyautomated. However, the rate of return is lower at 6% which may not then exceed their interest rateon any loan to fund the measures.

Question: Q18

We do not know how to calculate this but uplift would certainly help. See also our answer toQuestion 15 which suggests the potential to create a fund to support district heating distributioninfrastructure.

Question: Q20

Yes

Question: Q22

Yes

AgreeQuestion: Q23

Yes

AgreeQuestion: Q24

Yes

AgreeQuestion: Q26

Possibly, we would recommend a review of the proposed compliance and auditing procedures tominimise the risk from over generation.

Question: Q27

Yes

AgreeQuestion: Q28

See Q27.

Question: Q29

623 Newport Environment Group Other

RHI should only be paid to places removing their fossil fuel sources of heat. Otherwise there is a risk that the renewable equipment is not kept, or does not reduce fossil fuel use. Heat pumps are not a wise move for heating unless there is surplus electricity from renewables. EVen then they reduce heat in ground or air to some extent. Totally agree with solar, biomass and gas from waste, provided the sources are sustainably managed. This is critical. Whole life cycle carbon and energy costs of the fuel production and delivery should be assessed to certify fuels as sustainable. This may limit uptake due to limited quantity of sustainable fuel. This doesnt apply to solar thermal. Great idea, great dynamism, hope you can adjust to take on board the risks.Avoid any scenario which penalises people who opt to live on very little fuel of any kind.Not sure that annual maintenance bills are best way to ensure working equipment. Best to ask for checks that equipment is in good order, as many appliances can be home maintained.


624 Edistone Limited Private Company

We are a quality wood fuel supplier based in mid-Wales.

Overall opinion of RHI Scheme is positive, apart from exclusion from stoves.


22 June 2010 Page 1209 of 1348

No

Question: Q01

No

Question: Q02

Yes

Question: Q03

No, not for stoves, as it will be too cumbersome/cost prohibitive. The existing HETAS accreditation scheme ought to be sufficient and provide adequate safeguards


Yes

Question: Q05

Yes, HETAS operates a Competent Persons Self-Certification scheme and a list of Approved Appliances

Question: Q06

22 June 2010 Page 1210 of 1348

No.We agree that open fires should be excluded from the scheme due to their low efficiency, but we believe that wood burning stoves (in both log and pellet form) should be included as long as all the following criteria are met;-(1)The stove conforms to the relevant UK national standard for efficiency. In the case of wood-log stoves this is BS EN 13240 and for wood-pellet stoves it is BS EN 14785. These standards impose a minimum efficiency pass level. For pellet stoves it is currently 70% and for wood-log stoves it is 65%.

AND(2)The stove is registered as a DEFRA exempted appliance under the Clean Air Act 1993. This currently represents the best legislative measure in the UK for ensuring low emissions from small wood-burning appliances.

AND(3)The stove is operated with wood-fuel that conforms to a national quality standard, such as the HETAS Solid Biomass Assurance Scheme. This can easily be verified by requiring the appliance owner to produce copies of their fuel invoices at the time of the proposed annual RHI claim. The adoption of this criterion has the merit of supporting existing Government initiatives, such as the UK Renewable Energy Strategy, and also of accelerating the supply of high-quality wood-fuel producers onto the UK market.

The adoption of all the above criteria would, we believe, result in the promotion of the best performing stoves and wood-fuels currently available on the market and this should have a small and manageable impact on air quality, and actually improve local air quality when replacing open fires, oil or coal heating appliances.

Moreover, we believe that the cost of administering the above scheme would be low as we support the proposal to use a deemed basis for “small schemes”. We suggest the following figures as typical for the annual energy produced by a nominal 5kW wood stove;-•Approx 2,000 kWhrs/year for a wood-log stove•Approx 4,000 kWhrs/year for a wood-pellet stove. The greater annual output compared with a wood-log stove is derived from assumed longer operating hours possible due to additional features such as automatic ignition, automatic feed and an on-board fuel hopper.

By adopting wood-stoves into the RHI scheme, the scheme would gain greater credibility with the UK public since for most existing houses, and especially where outside space is at a premium or the roof is not pointing south, a wood-stove may be the only practical renewable energy option for the householder. Excluding wood-stoves from the RHI scheme effectively disenfranchises such householders from taking part in the decentralised, locally produced green energy shift which the Government is seeking to create.best legislative measure in the UK for ensuring low emissions from small wood-burning appliances.

AND(3)The stove is operated with wood-fuel that conforms to a national quality standard, such as the HETAS Solid Biomass Assurance Scheme. This can easily be verified by requiring the appliance owner to produce copies of their fuel invoices at the time of the proposed annual RHI claim. The adoption of this criterion has the merit of supporting existing Government initiatives, such as the UK Renewable Energy Strategy, and also of accelerating the supply of high-quality wood-fuel producers onto the UK market.

The adoption of all the above criteria would, we believe, result in the promotion of the best performing stoves and wood-fuels currently available on the market and this should have a small and manageable impact on air quality, and actually improve local air quality when replacing open fires, oil or coal heating appliances.

Moreover, we believe that the cost of administering the above scheme would be low as we support the proposal to use a deemed basis for “small schemes”. We suggest the following figures as typical for the annual energy produced by a nominal 5kW wood stove;-•Approx 2,000 kWhrs/year for a wood-log stove•Approx 4,000 kWhrs/year for a wood-pellet stove. The greater annual output compared with a wood-log stove is derived from assumed longer operating hours possible due to additional features such as automatic ignition, automatic feed and an on-board fuel hopper.

By adopting wood-stoves into the RHI scheme, the scheme would gain greater credibility with the UK public since for most existing houses, and especially where outside space is at a premium or the roof is not pointing south, a wood-stove may be the only practical renewable energy option for the householder. Excluding wood-stoves from the RHI scheme effectively disenfranchises such householders from taking part in the decentralised, locally produced green energy shift which the Government is seeking to create.




No

The RHI scheme needs to encourage consumer take-up from the outset and not to discourage it.If the take-up rate is deemed excessive then policies can be introduced later at review times to dampen down demand.


22 June 2010 Page 1211 of 1348

Yes

AgreeQuestion: Q12

No, we are not convinced that SAP, SBEM or the EPC adequately calculates the energy contribution from “so-called” secondary heat sources such as wood-burning stoves.


Yes.

Question: Q18


Yes, fully fixed

Question: Q22

Yes

AgreeQuestion: Q23


Yes

AgreeQuestion: Q26

Yes

AgreeQuestion: Q28

625 MRS. MARJORIE J. LEWIS (individual) Other

•The impacts of the different types of energy to be subsidised on climate, people and the environment has not been considered. More subsidies for biodiesel and wood pellets will lead to more tree and 'energy crop' monocultures, which have serious impacts on biodiversity, ecosystem destruction, communities, soils and freshwater. •Lower incentives for solar heating than for bioenergy are proposed, which makes no sense in terms of addressing climate change. Solar heating offers real carbon savings, unlike biomass. •Biomass and biodiesel burning will worsen air quality when air pollution, according to the Environment Agency, already causes 50,000 deaths a year in the UK. •Need for significant investment in insulating homes and strict regulations for building only the most efficient ones – reducing energy use this way would also make it much easier to meet renewable energy targets, and would be a cost-effective way of cutting carbon emissions.

Question: Q01

22 June 2010 Page 1212 of 1348

I have read the Department's published consultation document on a Renewable Heat Incentive (RHI). Although support for passive solar energy and heat pumps is proposed, the proposed legislation would primarily create new subsidies for large-scale bioenergy expansion, including imported wood pellets and biodiesel blends with heating oil. Even without the RHI, there are plans for burning over 27 million tonnes of biomass in the UK, most of it imported woodchips and wood pellets.

At present, 90% of biodiesel feedstock used in the UK is imported, with soya being the main feedstock, much of it from South America, particularly from Argentina where over 200,000 rural families have been displaced by soya plantations already, where the biodiverse semi-tropical Chaco forest is being destroyed for soya and where pesticide poisoning is widespread. Palm oil use for biodiesel is expected to increase significantly in the UK.

There is likely to be industry lobbying for new subsidies for burning pure vegetable oil, too. Blanket support for biogas is also proposed which is likely to incentivise not just biogas from waste but also from dedicated monocultures. In Germany, maize expansion for biogas is linked to serious biodiversity losses. Another concern with the proposal is that it neglects energy efficiency – households will be able to get subsidies for wood boilers or biodiesel burning, without having to insulate their homes and often without the financial support to do so.

---•Bioenergy should not be eligible for subsidies. Current biofuel and biomass use and plans are already unsustainable; creating yet another demand will be harmful for climate, biodiversity and people. •Genuinely climate-friendly and sustainable renewable energy should be supported, together with energy efficiency. Large-scale bioenergy is neither sustainable nor climate-friendly – they are a quick fix which can have significant and long-term negative implications.


•There should be no subsidies for bioliquids. Waste vegetable oil only accounts for 4% of biofuels used in the UK at present – creating yet another biofuel market through the RHI will primarily mean more soya and palm oil imports with a disastrous impact on forests and peatlands and climate, on biodiversity and on indigenous peoples, forest communities and small farmers.


•Following industry lobbying, the government now proposes much laxer standards for emissions than planned. This will cause more air pollution and serious health impacts.


•Much more emphasis on energy efficiency is needed. •Households should have to install energy efficiency standards – and more financial support should be made available for this.


•Payments should depend on climate impacts. This means higher support for passive solar – but no support for bioliquids.

Question: Q18

•See above – biofuel use is not sustainable, whether on its own or blended with heating oil.

Question: Q19

626 Dr Julie White (individual) Other

•The impacts of the different types of energy to be subsidised on climate, people and the environment has not been considered. More subsidies for biodiesel and wood pellets will lead to more tree and 'energy crop' monocultures, which have serious impacts on biodiversity, ecosystem destruction, communities, soils and freshwater. •Lower incentives for solar heating than for bioenergy are proposed, which makes no sense in terms of addressing climate change. Solar heating offers real carbon savings, unlike biomass.•Biomass and biodiesel burning will worsen air quality when air pollution, according to the Environment Agency, already causes 50,000 deaths a year in the UK.•Need for significant investment in insulating homes and strict regulations for building only the most efficient ones – reducing energy use this way would also make it much easier to meet renewable energy targets, and would be a cost-effective way of cutting carbon emissions.

Question: Q01

22 June 2010 Page 1213 of 1348

To summarise, I am opposed to virgin biofuels (ie palm oil or crops grown specifically to prodice ethanol). These are not climate neutral, and there are considerable other issues, including land use, human rights issues, habitat and biodivesity issues and most importantly, aggravation of the world food shortage. I do not believe biofuels should be subsidized, but I believe truely renewable energy (such as wind and solar) should be.

---

•Bioenergy should not be eligible for subsidies. Current biofuel and biomass use and plans are already unsustainable; creating yet another demand will be harmful for climate, biodiversity and people.•Genuinely climate-friendly and sustainable renewable energy should be supported, together with energy efficiency. Large-scale bioenergy is neither sustainable nor climate-friendly – they are a quick fix which can have significant and long-term negative implications.






•Much more emphasis on energy efficiency is needed.•Households should have to install energy efficiency standards – and more financial support should be made available for this.



Question: Q18


Question: Q19

627 Ashwell Engineering Services Ltd Installer

I am writing to voice my deep concerns regarding the proposed MCS accreditation scheme which looks likely to be the requirement to access the RHI on both domestic and now commercial sized boilers.

My main concern is that biomass boilers are already well controlled by the European Standard EN 303/5 and ISO 9000.The Energy Technology list also carries out a thorough check including these same standards.Why do we require another layer of accreditation to again inspect standards accepted throughout the rest of Europe.

This will only be in the interest of the multi-national boiler manufacturers who can fund yet another raft of testing/ accreditation costs and help them eliminate the opposition of smaller manufacturers such as ourselves who are one of only two manufacturers.

I do agree that we need regulation with the installation side of the business but again this must be a sensible cost efficient way of training to be adopted.

Question: Q04

628 Linda Forbes (individual)

Subsidies for biodiesel and wood pellets will result in widespread monocultural plantations – similar to Wogan’s Woods in Caithness in the 1980s – and which will produce serious impacts on biodiversity, soils and water. Requirement for heat can be reduced through increased insulation of buildings during construction and refurbishment. Subsidies must encourage lower fuel use not reward displacement from fossil fuel to an environmentally harmful response such as biomass.Air quality will diminish with extensive use of biomass and biodiesel fuels – the killer smogs of London in the 1950s are one example of potential impacts. Although these arose from the burning of coal, trees (biomass) are an underlying constituent of coal albeit over a long period of time.The premise that trees (or other plant materials) will absorb and recycle carbon dioxide ignores the fact that they grow at a much slower rate than they are consumed by fire. The areas required to meet increasing demand will be multiples of available land – most of which already has other crops growing on it either directly as food or as feedstock for animal protein. There is little unused land other than unproductive biodiverse areas awaiting slash and burn to clear – subsidies may be the financial incentive multinational companies require to undertake these clearances.

Question: Q01

22 June 2010 Page 1214 of 1348

No: accreditation under MCS distorts the market in that householders, especially those on limited incomes or who are capable of DIY, are doubly deterred from carrying out improvements in energy efficiency to their homes due to high costs of using these suppliers. It would be better to reduce the taxation on energy efficiency products (insulation, solar panels, etc etc) rather than link subsidy payments directly with installers.

The aim is ultimately to reduce our energy use not deter action – possibly evidence of installation (with invoices) should be sufficient to confirm eligibility for subsidy, and electricity/gas heating meter readings confirming reduced energy use from previous year/same period would be required before subsidy paid.


No.


No, large scale bioenergy is not sustainable. If we are to provide subsidies then only certified and traceable crops grown in the UK should be eligible.


No subsidies should be paid on imported bioliquids; certified chain of custody scheme must be implemented to avoid oils cultivated for human nutrition being displaced into fuel cycle.

Question: Q08

No, much laxer standards for emissions have been proposed than originally planned. This will cause more air pollution and may have serious health impacts, given the already increasing levels of asthma in the UK.


Yes, if RHI is to be introduced then it must be linked to energy efficiency of homes – the lower the energy demand, the easier it is to meet. Funds available as subsidies must be spent on energy efficiency improvements on a directly related basis.


Figures on sea water heat source pumps of 1MW capacity are available.

Question: Q17

No, if money is available for subsidies it should be spent on improving energy efficiency of buildings, and supporting renewable energy technologies that do not impact on the biodiversity of the environment or have potential to cause human famine by taking land out of food production e.g. passive solar design of buildings, solar thermal, solar PV, and concentrating solar.

Question: Q18

The cost of installing district heating networks is high, while infrastructure and systems are best installed at the time of construction of an estate (housing or industrial). A minimum housing/building density is essential otherwise efficiency is compromised; but the manufacturing energy requirements are significantly reduced if a single heat source pump (or boiler) can service many dwellings. I would agree an uplift should be provided: possibly linked to a minimum threshold for energy efficiency of dwellings/pipeline infrastructure.

Question: Q20

When installation is retrospective then costs are higher – the uplift should therefore be linked to overall percentage reductions in energy use by properties being connected, with a minimum level of improvement in insulation being mandated before subsidy can be claimed.

Question: Q21

I disagree with subsidies for bioenergy and believe that a fixed rate would be even more detrimental to biodiversity over the long-term. Grandfathering has proven to be flawed and subject to corruption in emissions trading schemes – this technique should not be employed in any subsidy scheme as it further distorts the market and rewards those who have been the least effective in addressing energy efficiency in the past.

Question: Q22

22 June 2010 Page 1215 of 1348

Further research into solar-powered Stirling engines should be encouraged, while the potential for large-scale water heat source pumps (using carbon dioxide, ammonia, or other gases) needs to be explored (examples abound in Europe).

Question: Q25

Suggest you speak to Neville Martin at Shetland Heat and Power in Lerwick re district heating system there. MSc thesis on district heating network for Stromness in Orkney is available if you contact me directly.

Huge experience in Scandinavian countries including use of sea water heat source pumps to drive networks, extension out into rural areas, etc.

Should not be a one-size-fits-all approach: perhaps uplift should be based on degree days which allows for wind chill in different parts of the UK.

Question: Q30

629 A.J. Wells & Sons Ltd Manufacturer

Company background:AJ Wells & Sons Ltd manufactures the Charnwood range of wood burning stoves.We also have a vitreous enamel business which manufactures signs and cladding forLondon Underground and other companies. We are a family business located onthe Isle of Wight employing around 180 people. We are proud to manufacture ourproducts exclusively in the UK and where possible we aim to use UK suppliers forour raw materials. We export throughout Europe and other overseas markets.

Question 4, 5 & 6

The MCS, while a valid scheme does not necessarily work in the case of wood burning stoves.There are currently very few installers and MCS approved products. One of the issues formanufacturers is that MCS requires a standard – such as EN13240 for wood burning stoves andboilers – but also process control. It is deemed that ISO 9001 isn’t suitable for this purpose andan additional audit is required. While for an established manufacturer such as ourselves this maynot be an issue it does seem unfair to the smaller manufacturers to require an ‘extra’ or nonstandardapproval mark.

Our suggestion: In place of the MCS requirement we would instead ask for all products to beHETAS listed (this ensures EN13240 compliance and the appliance to meet minimum efficienciesas outlined in Building regulations.) – see http://www.hetas.co.uk/pdfs/Part_1_Appliances.pdfWe would also suggest that the appliances are manufactured in an ISO 9001 accredited companyto ensure consistency.

With regard to the qualification for installation we would suggest that the HETAS competentperson scheme is used – for list see: http://www.hetas.co.uk/nearest_member. This scheme iswidely used and has proven to be effective.


See 4.


See 4.

Question: Q06

22 June 2010 Page 1216 of 1348

Question 7 & 12:

It is stated that ‘wood burning stoves, air heaters, open fires and similar applications’ areexcluded. Firstly we believe that wood burning stoves should not be classified with these otherspace heating alternatives. For example while a wood burning stove has efficiency in excess of70%, an open fire is only around 15% efficient.

We would dispute the primary/ secondary classification of heating systems for renewables. Webelieve that no one renewable is the ‘golden bullet’. For example wind power only works then it iswindy! – Solar only when it is sunny – wood burning is no good in the summer as it produces toomuch heat – ground source heat pumps need another back up heat source when the temperatureis very cold. For example wood burning in conjunction with solar or a ground source heat pump isideal – with the stove producing the heat when the temperature is low and there is no sun, butthe solar panels or ground source heat pump producing hot water when the climate is too warmto have a stove running.

Within the ‘wood burning stove’ category there are different options which we believe should betreated separately: boiler stoves – for heating space and water and non-boiler stoves which arepurely space heating. It is our view that both merit being included in the RHI scheme. Howeverthe case for boiler stoves is compelling.

Boiler Stoves:Boiler stoves are used to heat water which can then be used for so called ‘primary heating’ or canbe linked into a heat store with other renewables. They are hand fed and will generally be usedwhen the householder is in residence, although they can burn for up to 12 hours withoutreloading. As explained above they are often now combined with other renewables to create aseasonally balanced system which gives hot water and heating all year round (the stove being usedmainly in the cold months when the heating system needs ‘topping up’). During these cold monthsthe boiler stove will do the majority of the heating. While not automated like a pellet boiler or alarger auto-feed wood burning boiler, boiler stoves are much better suited to the UK marketwhere most householders do not have large out-houses or cellars that can accommodate theselarge unsightly boilers. Instead the boiler stove will form a centrepiece in a living area beingaesthetically attractive while providing a carbon-neutral heating source. There are ‘wood burningonly’ boiler stoves available on the market. There is a small risk that the householder may burncoal products on these stoves, however in reality this is unlikely given the comparative cost of coalbased fuels (that will be accentuated when the RHI tariff is applied), the manufacturers handbookwhich invalidates the guarantee and the inherent resistance of such a householder who puts in acarbon-neutral system to start burning fossil fuels.

Wood burning boiler stoves can come in 3 main categories: Integral boilers, add-in boiler and flueboilers. Integral boilers are built in and the stove is tested as a complete unit. For add in boilersand flue boilers these are added to a dry stove and generally do not produce such high outputs.

There is now ‘HETAS approved’ wood available from Certainly Wood and CPL which meetscertain standards. However there are also a large number of local fuel suppliers who can supplywood of varying quality which should not be ignored as this local production has largeenvironmental benefits.

Our Suggestion:We would strongly urge that wood burning boiler stoves are included in the RHI scheme.Otherwise we may find ourselves in difficult position of householders installing a true carbonneutralsystem with solar and a wood stove a while not being able to claim the RHI because thestove does not qualify. We believe there is a legitimate case of reducing the RHI available forwood burning boiler stove given their lower purchase price and their consequently lower paybackperiod – however to exclude them would be in our view grossly unfair, and would give a wrongimpression that somehow wood burning boilers are not ‘green’.

We would suggest that for in order to make the system easy to administer that a deemed yearlyRHI payment is made in regard to the stove (based on kW output) this could be an amount to bepaid out alongside the rest of the system which could be more accurately measured.

We would suggest that the definition of a boiler stove is any stove which is connected to thewater heating system. This would include integral, add-in and flue boilers. For the latter 2 thepayment would be reduced due to their lower heat output.

Non-boiler stovesNon-boiler stoves heat space only. While they may be considered to be ‘secondary heating’ ineffect they will actually often provide the majority of the heating while running and the ‘primaryheating’ will be turned down to compensate. They are often used in conjunction with groundsource


22 June 2010 Page 1217 of 1348

heat pumps which are unable to provide enough heat in cold conditions. Wood burningonly versions are available – often with grate which allows easy ash removal.

Dry wood burning stoves actually provide a very ‘quick-win’ in reducing carbon based fuels. Theiraesthetic desirability has meant that many have been recently installed and their obvious fuel costsaving benefits mean that they are normally regularly used.

Our suggestion:We would recommend that a nominal deemed RHI payment is made per wood burning stove.We recognise that this could prove to be expensive, but wood burning stoves do provide a veryreal and effective method for households looking to reduce their carbon emissions. While the casefor including dry wood-burning stoves is not as conclusive as wood burning boiler stoves webelieve there is a huge environmental benefit in doing so.

We would endorse a particulate limit be place on dry wood burning stoves. It would make senseto use the same standard as used for the DEFRA exempted appliances. However we believe thatfor wood burning boiler stoves this standard may be too harsh as currently there are no boilerstoves on the market which meet both minimum efficiency levels for the HETAS guide and alsomeet the DEFRA exemption standards for particulates.

Question: Q09

See Q7.

Question: Q12

If the case for mixed biomass liquids is accepted then it would also seem fair to include the casefor mixed biomass solid fuels. For example the CPL ‘ecoal’ is 30% organic matter and 70% coalderived matter. For some households (especially those in the ‘fuel poverty’ classification) a mixedbiomass/ coal fuel could provide a very practical method of heating solely with solid fuels whilestill emitting less carbon dioxide than the most efficient oil condensing boiler. We believe that thispoint should be noted, although are also aware of the administrative difficulties involved.

Question: Q19

630 Paul Barker (individual) Potential generator

I disagree with the view that "refurbishment, repair orconversion of equipment would not create any RHI entitlement beyond thatwhich was in place before such works were carried out." This is likelyto lead to non-RHI entitled plant that becomes redundant (due tounforeseen circumstances) being scrapped and new equipment purchasedinstead as it would carry the RHI tariff payments. This is obviously awaste of resources and should be removed allowing refurb equipment toreceive the RHI. For example Bristol City Council (BCC) has a containerised biomassboiler system that was installed at a school. The school has now beendemolished and is being redeveloped with a larger biomass boilers aspart of the Buildings Schools for the Future programme. The containerised biomass boiler could be used at another site, howeveras the civil and M&E costs associated with installing the boiler atanother site are relatively high, it is financially more viable for BCCto install a new biomass boiler (that can receive RHI payments) ratherthan install the existing containerised biomass boiler.


22 June 2010 Page 1218 of 1348

I am broadly in support of the RHI tariff levels except inregard to a cap of 500kW for payments of the 6.5p tariff rate to biomassboilers as this will prevent the installation of larger, moreappropriate biomass boilers as these units will not receive a suitableRHI tariff to be considered. Instead all biomass boilers should receivea 6.5p/kWh for the first 500kW of load and a lower 2-3p/kWh for loadsabove 500kW. This would enable larger units to be installed that aremore suitable rather than the potential for smaller, inappropriate andless carbon saving installations to be installed. I understand fromGermany that due to a 1MW maximum tariff rate, few boilers are installedin the 1 - 1.8MW rate.For example, Bristol City Council are looking to install a 900kWbiomass boiler to heat a number of buildings in conjunction with theUniversity of the West of England. The cost of the system would be£790,000. Based on the new RHI we would now only install a 500kWsystem with a larger accumulator tank at a much higher cost of £910,000.The RHI limit of 500kW for the 6.5p/kWh tariff rate would therefore leadto a smaller and less cost effective system being installed.

Question: Q18

Yes district heating should receive additional support. Thiscould be through a separate mechanism to the RHI as Gas CHP districtheating networks should also receive support. This could be done on acase by case basis but particularly for retrofit district heating whichis more expensive due to the costs of hard digs.

Question: Q20

See above response. Eligibility should not be done on a simple minimumnumber of external customers as for commercial district heating theconnection of only an additional 1 or 2 commercial properties could havesignificant assoicated carbon savings due to the heat loads involved.

Question: Q21

22 June 2010 Page 1219 of 1348

Limiting RHI availability to installations after July 2009 islikely to have a detrimental effect on those organisations thatinstalled biomass boilers prior to this date. It is very likely that theRHI will result in increased demand for wood fuel which will increasethe price of wood fuel. Projects installed prior to July 2009 and basedon a relatively low wood fuel price are likely to see increased woodfuel prices resulting in the economics potentially not stacking up tothe point where biomass boilers will be switched off.

In Bristol for example, we had initially based the installation of onebiomass boiler on a wood fuel price of 1.5p/kWh which was consideredaverage at the time (2006) compared to gas at 2.5p/kWh. The price ofwood fuel is now closer to 3.2p/kWh so the paybacks from theinstallation of this biomass boiler are non-existant, potentiallyresulting in the city council switching off the biomass boiler to savemoney. If this biomass boiler could be provided with a 2 to 3p/kWh fuel onlyRHI tariff then the biomass boiler would remain in operation.

In Bristol a number of schools have biomass boilers that were installedbefore July 2009. Bristol City Council currently pay 2.3p/kWh for mainsgas and wood fuel is around 3p/kWh. Biomass boilers were installedpartly on the assumption that fossil fuel prices will rise and that woodfuel in the medium term wouldn't. There is now a disincentive to use thebiomass boilers while wood fuel is higher priced than mains gas. If alow RHI rate of 3p/kWh was paid to these exisitng biomass boilers,schools would continue to use the biomass boilers rather than switchingback to mains gas. Furthermore, we are now finding out that theservicing costs are much higher than we anticipated when firstinstalling biomass boilers (biomass boiler installers were veryoptimistic as to these costs). Early adopters of this technology aretherefore also having to deal with higher service costs furtherimpacting on the cost of retaining the use of biomass boilers.

Finally, Early adopters of renewable heat technology who havetrailblaised this technology should not be penalised for their foresightbut rewarded by receiving the RHI as new installers. This may encourageearly adopters to look at other renewable energy systems that are 'toorisky' for other less risk taking organisations.


631 Heinz Stoehr (individual) Other

22 June 2010 Page 1220 of 1348

Having come across your Initiative on the Internet I feel compelled to transmit a few findings collected in this country, which might help sharpen the initiative and make it really cost effective and lasting. The items listed below have either been neglected or ovelooked. Most strikingly, there is no mention of energy saving as the key energy efficiency factor. Above all, avoid red tape and keep it as simple as possible.

For further deatails you may wish to access German and Swiss legislation.

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5. Energy saving measuresBefore replacing nonrenewable fuels by renewable ones, proper incentives addressing energy saving should enjoy highest priority. The Incentive document evidences that in the UK 47% of the energy is used for heating. In Switzerland this figure stands at 33% only. The remaining 2/3rds go to industry and transportation in equal shares. You may also be interested to learn that here, at this point in time, some 50% of new homes are built using renewable energy for heating and lighting, called the "Minergie Standard". A very important consideration here is that building improvements are job machineswhereas alternative energy plants are capital intensive in the first place.

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3. Environmental controlAppropriate environmental controls shall be implemented as each one of the sources affect the environment in different ways: solar panels – the aspect, obstruction, etc wind turbines – the aspect, low frequency noise, disturbance of the fauna, manure and other organic fuels/waste - construction site comaptible with population, emissions.

There is no mention of off shore wind energy farms, a mighty important future source of renewable power. Here, sea traffic, accessibility and other factors need to be properly evaluated.

Environmental aspects and grid stability shall be the only elements limiting or capping the size of a plant. Biogas shall be used on site only and not be fed into a piping network.

Question: Q01

4. Source of organic fuelsThis item has been left aside completely. It should be required that organic fuels, especially wood chips and oils of all sources shall be home grown only. No imports allowed, as this would ultimately foster production of oils in developing countries. In addition, further devastation of forests would be supported instead of being curbed. Domestic wood usage also needs to be regulated to avoid home forest depletion and foster reforestation, and to keep it sustainable. Further, the price of renewable fuels, whichever, should be left to the open market as the best regulator of all.


See also Q1.

2. MeteringOnly metered energy shall be refunded, no deemed values accepted, as this may lead toarguments and even litigations. Thus, proper metering at the interface with the open gridis required.

Question: Q12

22 June 2010 Page 1221 of 1348

See also Q1

1. Energy tariffsThe tariff for heat or electricity fed to the grid should be equivalent to 10p/kwh or BTUequivalent, equal for all sources of renewable energies, and not less. In Switzerland thisfigure is 0.16 Fr/kWh. All other energy generated or consumed shall not be funded in anyone way. This should suffice as it will promote the most efficient methods first.

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6. Incentive fundingIncentive funding should in all instances be limited to a one time nonrefundable amount ofmax. 20% of the project cost or some tax allowance limited in time to the owner, who maybe an individual or a legal person. No further funding, depreciation allowance or any othertime distributed support shall be granted, as these only amount to a never ending redtape.

Incentive funding should also be granted for energy efficiency improvements in buildingsand insulation. Here, some 20 to 30% energy can already be saved. 10-20% of cost willalready make a big difference. Insulation improvement and renewable energy subsidies may or may not be tied together. The writer believes that each one standing for itself provides sufficient incentive andflexibility to cover most individual aspects.

Question: Q18

632 Biomass CHP Supplier

Our plants have between 300-600kW heat output (or multiples of that up to 1.5MW) and the current proposals under the Biogas classification only provides support of plants up to 200kW. We are also not aware of any other gasification plant suppliers which have sustems generating less than 200kW heat output. So it seems that current RHI proposals are at best confused as dar as gassification planst are concerned. In addition we feel it is inappropriate to combine togerth very different technolgogies with different cost structures since the level of incentives required to promote adavancement of technologies very. For example gasification of biomass and anearobic digestion are fundamentally different chemical processes and relate to different markets and business models.

Solid Biomass category

Our standard system provides between 300-600kW heat output and therefore falls across the 500kW 'cliff edge' where it is currently proposed that the RHI value flass from 6.5p to 3.5 p. We perceive 6.5p as realistic level of support whereas 2.5p would be insufficient to bring forward investment in biomass gasification as it does nto correlate to our cost base. In addition we see no justification for banding 500 kW in relation to our technology as the costs do nto change at this point. The efficeincies of scale as regards gasification only appear above 1.5 MW of output where different methods become viable. This may be different for biomass combustion and so reinforces the need for properly calibrated support for biomass gasification.

Consideration needs to be given to the greater efficiency of gasification compared to anearobic digestion and biomass combustion for the purposes of CHP and the Rhi should provide support for biomass gasification as a speciofic category. We believe the elements of this should be 6.5p RHI up to 1.5MW heat output alongside 2 ROCs for the electicity output.


633 David and Jacqueline Parfitt (individual) Existing generator

Key arguments against no support for existing generators 1. Have helped the industry to grow -> so not fair2. Investment made based on availability and affordability of biomass wood fuel -> RHI will drive costs up


634 PAUL COALES (individual) Potential generator

22 June 2010 Page 1222 of 1348

One form of heat wastage which could be discouraged by including it under the RHI funding mechanism is the practice of placing electrical heaters over open doors in retail outlets. I don't know how you would incorporate it into such a scheme but if a suitable mechanism should arise, its inclusion should be considered


635 Ken Maurice (individual) Other


Question: Q01

•Bioenergy should not be eligible for subsidies. Current biofuel and biomass use and plans are already unsustainable; creating yet another demand will be harmful for climate, biodiversity and people. •Genuinely climate-friendly and sustainable renewable energy should be supported, together with energy efficiency. Large-scale bioenergy is neither sustainable nor climate-friendly – they are a quick fix which can have significant and long-term negative implications.






•Much more emphasis on energy efficiency is needed. •Households should have to install energy efficiency standards – and more financial support should be made available for this.

Question: Q10


Question: Q18


Question: Q19

636 Martin Crane (individual) Other

The issues regarding wood stoves are a personal view, the district heating comments reflect my work for a utility developing commercial DH schemes.


Yes

The RHI on a large district heating schemes will result in the removal of gas fired CHP – CHP on a large DH is economic and generates potentially larger CO2 savings than renewable heat. The challenge for the development of large scale DH (with or without CHP) is the cost of the DH network which the RHI won’t help – unless the economic CHP is substituted with a highly subsidised renewable technology.

Question: Q02

22 June 2010 Page 1223 of 1348

Yes

There should be scope for a DIY installers / installers in training etc to have installations certified on the basis of an inspection of the installation by a MCS approved person.

AgreeQuestion: Q04

No

Heat pumpsOperating heat pump efficiency is very dependant upon installation and control settings as well as the pure device efficiency. I think some form of ongoing monitoring should be required to demonstrate the actual efficiency in practice. I would be concerned that over time heat pump efficiency may fall due to changes in controls, fouling of heat exchangers etc

Biomass –wood burning stoves for the domestic marketWood burning stoves use logs and waste wood. Surely any policy measure should be encouraging the use of these genuinely local and genuinely waste fuels. In terms of scope for generation of local employment the set up costs are very low, there a many woods that would benefit from thinning and removal of fallen trees etc- It seems the aim is to miss this biomass resource and local employment opportunity and focus on pellets which have much higher environmental impacts, require much bigger businesses to stand the required capital costs in plant, feed stock and final pellet logistics and much longer transport distances. Most pellet is imported – is the ambition to subsidise imports and ignore the local biomass sources? Clearly wood chip boilers can use local wood – but wood chip boilers are not appropriate for most domestic situations and as the scale gets larger again the scope to utilise the very local biomass may be lost.

Virtually all pellet stoves are imported and these will be subsidised, wood stoves for which there are many UK manufacturers will not be subsidised. The RHI should support wood burning stoves with back boilers to heat domestic hot water and radiators (ie stoves that are not just secondary heat sources) , the back boilers in these stoves could be heat metered to demonstrate their effectiveness. The heat meter reading could be factor up to account for direct space heating from the stove. The supported stoves should meet better emissions standards – which a few do ( eg Dunsley Heat ‘s Yorkshire stove achieve the required standard for operation in a smokless zone) – but then the RHI could additionally drive innovation and improvement in this market and generates business for UK manufactures.


Yes

There must be requirements for energy efficiency measures and these should not ignore other currently unsubsidised insulation measures such as solid wall insulation, improved glazing, even air pressure testing and undertaking remedial measures in existing housing.


Where heat is deemed the use of hot fill appliances should increase deemed amount, as hot fill domestic appliances do generate CO2 savings. Heat metering need not be too expensive if integrated into equipment eg in to solar controllers, so shouldn’t necessarily be ruled out.

Question: Q12

Biomass CHP at scales below around 5MW thermal output are all currently high risk technologies which the low ESCOs rates of return cannot support. The larger biomass CHP technologies are likely to be the ones technically commercialised first but to be implemented successfully will need a large heat demand. What support is there to start developing district heating infrastructure that will be large enough in a few years time ( when the biomass CHP technology is improved) to distribute the heat that one of these biomass CHPs generate? Without out a heat load there is no scope for biomass CHP. 5MW of thermal output will supply of the order of 5000 houses. DH schemes of such size take years to develop.

Question: Q15

District heating needs support – the development of this infrastructure with a life of up to 60 years opens up the opportunity for many renewable technologies that work more reliably, economically and with lower CO2 at scale eg biomass CHP, AD. DH is not a ‘renewable’ technology but without it the scope to effectively apply the full range of renewable technologies is severely restricted. The long life of DH means is can serve a range renewable technologies over it’s lifetime.

Question: Q20

The is a fudging the actually issue that DH infrastructure needs support, DH with CHP over 1MWe can be lower carbon and far lower cost to UKplc than DH based renewables. In the short / medium / long term these DH networks can, and will, easily shift from being gas based to renewable based.

Question: Q21

637 Kate Corder (individual) Other

22 June 2010 Page 1224 of 1348

•The impacts of the different types of energy to be subsidised on climate, people and the environment has not been considered. More subsidies for biodiesel and wood pellets will lead to more tree and 'energy crop' monocultures, which have serious impacts on biodiversity, ecosystem destruction, communities, soils and freshwater. •Lower incentives for solar heating than for bioenergy are proposed, which makes no sense in terms of addressing climate change. Solar heating offers real carbon savings, unlike biomass. All buildings should have solar panels attached or solar tiles, plus rain harvesting. Also heating from the earth should be used. •Biomass and biodiesel burning will worsen air quality when air pollution, according to the Environment Agency, already causes 50,000 deaths a year in the UK.•Need for significant investment in insulating homes and strict regulations for building only the most efficient ones – reducing energy use this way would also make it much easier to meet renewable energy targets, and would be a cost-effective way of cutting carbon emissions. Double or triple glazing needs to be introduced many older homes do not have it.

Question: Q01

•Bioenergy should not be eligible for subsidies. Current biofuel and biomass use and plans are already unsustainable; creating yet another demand will be harmful for climate, biodiversity and people. All Bioenergy needs to be truly organic without the use of pesticides and any other chemicals. River dams are not good for the environment either hydropower should only be used when it is not effecting wildlife natural habitat.•Genuinely climate-friendly and sustainable renewable energy should be supported, together with energy efficiency. Large-scale bioenergy is neither sustainable nor climate-friendly – they are a quick fix which can have significant and long-term negative implications.






•Much more emphasis on energy efficiency is needed.•Households should have to install energy efficiency standards – and more financial support should be made available for this.



Question: Q18

•See above – biofuel use is not sustainable, whether on its own or blended with heating oil.•Nuclear power is not answer.

Question: Q19

638 Rural Development Initiatives Ltd.

Rural Development Initiatives Ltd. (RDI) develop and manage rural development projects on behalf of UK Public Sector clients, including DEFRA, the Forestry Commission and Scottish Enterprise. We operate in a number of sectors including forestry, biomass and community resilience (flooding and wildfire). We manage projects relating to workforce and business development, supply chain facilitation and market acceleration. RDI is a not-for profit company and operate across the UK. Further details are available at www.ruraldevelopment.org.uk

Broadly speaking we welcome the proposals and recognise them as having the potential to create a step change in the scale and impact of the biomass sector in the UK. We encourage the government to move ahead with the RHI and ensure its implementation as soon as possible.


22 June 2010 Page 1225 of 1348

The potential exists for the RHI to dramatically increase the market for wood from British woodlands. We believe it is important that adequate sustainability standards are put in place for the RHI is introduced in order to ensure this increased demand has a beneficial impact (which it can be, as recognised in various government strategies e.g. England Woodfuel Strategy).

We believe there is a need for clarification on the state aid implications of the RHI, as larger schemes or users with more than one installation could find themselves limited by this

We are concerned that the proposal to not fund the RHI through a levy on fossil fuel operators could introduce a limit on available funding which is subject to the vagaries of ongoing public support. It is essential to the success of the RHI that it is adequately resourced so that applicants know they stand a realistic chance of obtaining funding, otherwise they will not proceed with installations (as happened with e.g. LCBP). Also, we feel that a fossil fuel levy has the advantage that it adds an extra disincentive for the use of fossil fuels, as there would undoubtedly be an increase in fossil fuel prices. However, we recognise the possible implications of a fossil fuel levy on fuel poverty which would need to be addressed, possibly via a separate tariff rate for fuel poverty cases which was front loaded in order to cover the high capital costs? (Similar to the domestic plan we have outlined below in Question 3, but with a higher percentage at the outset e.g. 80-90%)

Question: Q01

Given the identified problems with capital costs of renewable heat installations, we recommend pump priming of smaller installations (e.g. domestic) where the owner is less likely to be able/willing to be involved in complicated finance arrangements to be paid a lump sum up front. This could be on the basis of e.g. 50% at the outset and the remainder spread over a deemed period

Q3 & 4; At present the MCS accreditation of boiler costs about £10-£20k per boiler in new testing in the UK and takes many months to achieve. This will hold up people installing boilers at the moment as there are very few boilers on the MCS list (and those are log boilers). There are existing European Standards which relate to efficiency, emissions and safety of these boilers such as EN 13240: 2001 for example. Most of the boilers already have this certification so why duplicate? It is in our opinion an unnecessary cost and time, both of which will result in boilers that are eligible for the RHI costing more (rather than the decreasing which DECC predict).

Question: Q03

At present the MCS accreditation of boiler costs about £10-£20k per boiler in new testing in the UK and takes many months to achieve. This will hold up people installing boilers at the moment as there are very few boilers on the MCS list (and those are log boilers). There are existing European Standards which relate to efficiency, emissions and safety of these boilers such as EN 13240: 2001 for example. Most of the boilers already have this certification so why duplicate? It is in our opinion an unnecessary cost and time, both of which will result in boilers that are eligible for the RHI costing more (rather than the decreasing which DECC predict).

Question: Q04

We recognise that some wood stoves and open fires are not appropriate to be funded through the RHI, but we do believe there is a case to be made for stoves where they are linked to water heating and radiators and which meet EN 13240: 2001, especially where they are the only source of heat in a property. As it is, as far as we understand it, the only eligible domestic biomass technology for most small properties, would be pellet stoves with back boilers. The firewood market – which whilst it is not known the exact quantities involved is thought to be one of the largest renewable heat markets at present - drives the sustainable management of much of the UK’s woodlands – especially smaller broadleaf woodlands in the lowlands which have high landscape and biodiversity value - and a significant consumer move from firewood to pellets (which are primarily sourced from waste or imported materials) could have a very serious impact on this market. We urge the reconsideration of this issue as a well intentioned proposal could have a very significant negative effect on the sustainable management of the UK’s woodlands.

Question: Q07

We understand that for the small and medium systems (everything up to 500kW) the expected annual use will be deemed using approved SAP/ SBEM methodology in order to remove the possibility of dumping heat to increase RHI payments. This SAP methodology is very detailed and a lengthy and costly procedure. For the small installations (below 45kW) the proposals could be prohibitive (we assume it is the same method as is used for the Energy Performance Certificate as part of the “Home Owners Information Pack” that is now compulsory for people selling a house). We believe that most installers are not qualified for this at present (although it is a requirement under the MCS) and this would put an extra cost onto the installation and also a greater burden on already overburdened installers. Would it be possible to use ‘rule-of-thumb’ figures based on building volume and a well insulated building e.g. 20 watts per cubic metre and an average FLHE e.g. 1000hrs?

Question: Q13

We believe that the higher rate tariff for district heating schemes is most needed for residential district heating where the individual properties heat load is disproportionate to the cost of the network, unlike larger user networks connecting e.g. factories schools and hospitals where economies of scale will occur. The alternative is individual systems in each property, the consequences of which in terms of delivery vehicles and carbon emissions is worse. We recommend that a limit is set so as only that part of the network which has individual properties deemed below e.g. 40,000 kWh/yr would get the higher tariff.

Question: Q21

We believe that the proposal to split the biomass tariff into one component which is fixed and another component for the fuel which is variable with biomass price could take away one of the key attractions of biomass – price stability, and deter investors and developers.

Question: Q22

22 June 2010 Page 1226 of 1348

Regarding the proposed introduction of a yearly deflation in the RHI (degression), we query what evidence there is for this potential reduction in capital costs? Most woodfuel boilers are sourced from countries which have already undergone the expansion of the market that is envisioned as a result of the RHI, and are producing the large numbers of boilers. Therefore we should be benefitting already from the economies-of-scale which means the price of these boilers is unlikely to reduce much further (not withstanding exchange rate and steel price vagaries).

Question: Q23

The proposed certification of eligible equipment and installers is going to be through a modified Microgeneration Certification Scheme, which although it exists at the present time has few boiler manufacturers registered. As the RHI is valid on any installation after July 15th 2009, if the boiler or installer were not registered at the time of installation (which is the case for most of them) but get registered in the mean time will that installation then become eligible for RHI? If not, then any company or make of boiler not registered now will not get any business until they become registered, resulting in a very large demand for registration which the MCS may not be able to service.

We understand that it is proposed to not consider funding installations before July 15 2009 as you have no evidence that these installations would fail soon if they received no funding. Whilst we would agree with this in most cases, we aware of a limited number of cases where a biomass boiler has been installed as part of the planning permission (e.g. Part L building regs, Merton Rule etc...) but has never been utilised as gas is cheaper. In the absence of willingness to enforce planning regulations, these boilers may be switched on if they got the RHI.

Question: Q28

We agree that the danger of “deemed” installations not ever being used is real for cases where the fossil fuel price is less than biomass – especially real for pellet installations in the gas network. We understand you intend to police this through audits and spot checks but we question whether this is manageable for the number of small and medium installations predicted. We would recommend shifting the “deemed” installations only to small boilers (45kW and less), and making the medium installations (45-500kW) use deemed and metering combined, which is an option at present, giving the deemed element to prevent heat dumping and the meter to provide evidence that it is being used.

Question: Q29

We acknowledge the shortage of evidence of costs for District Heating and the implications this has for setting additional payment rates to district heating schemes. Consequently we will encourage partners and clients who has had detailed designs and quotes prepared submit them to yourselves.

Question: Q30

639 North Yorkshire County Council Local Government / A

No. This is because only new equipment installation will be eligibility. We have few coal and oil boilers that can be convert to biomass boilers. Comparing to new installation, boiler conversion is much more cost effective and more sustainable as we don't have to dismantle good condition boilers which will likely end up in our waste stream. Therefore, I suggest boiler conversion should also be eligible to the incentive.


640 Dr K. J Forster (individual) Other

22 June 2010 Page 1227 of 1348

I would like to respond to Q7 chapter 2 in the RHI consultation document relating to the eligibility of the different types of energy sources that might qualify for RHI. I can understand ( and I agree with ) the proposed exclusion of wood burning stoves due to difficulties in guaranteeing their use exclusively to burn wood. However I hope that this does not exclude the dedicated log burning boiler technologies that are available for use with accumulator tanks.This technology is typically housed outwith the main heated building with service pipes running from the boiler house through thermally insulated ducts to the domestic dwelling.The dedicated log burning design negates against the use of coal as the relatively high ash contents in the coal cause major operational problems. As this type of technology is used as the main space heating energy source, the observation made in the consultation document that wood burning stoves are rarely the main energy source becomes invalid when considering this type of configuration. The emphasis placed on pellet and wood chip technology is understandable but it would in my opinion be wrong if the dedicated log burning technology described above was excluded from eligibility. I have no commercial interest in the types of technology described.My comments are based on the belief that renewable fuel sources that are most readily available, offer the greatest cance of growing consumer uptake for renewable heat generation.Log supply chains are traditional and therefore established, wood chip and pellet although offering much for the future are embryonic at this time.

----In response to further information request from RHI team (If you have any more information about this system and particularly how much of the heat load of the property it meets and what other heating systems it is used in conjunction with, please send it to us):

Systems are available in the range 20-40kW for domestic applications, as such they are capable of providing all the space heating requirement for most types of domestic property. Realistically I would expect most users to wish to have an additional focal point heating source within their dwelling for aesthetic reasons and the probablity would be that in most cases this would be a wood burning stove or indeed an open fire. This wish for a focal point heating source would of course also be likely for anyone choosing wood chip or pellet boiler technology. There may be an argument that anyone using log burning boiler/accumulator tank systems for their space heating and domestic hot water requirements would be more likely to stay with the single fuel source of logs alone ( i.e not burn any coal ) for their focal point stove when compared with someone using chip or pellet. I would re-emphasise that I have no commercial connections with any heating supply organisations. I am including a link below to a site describing one commercial system range which I trust will supply further information.Http://www.perge.co.uk/products-log-fired-boilers.php


641 Commission for Rural Communities NGO

I fundamentally disagree with the principle that schemes installed prior to the publication of the Renewable Energy Strategy in July 2009 should be ineligible for access to the RHI. The cut-off date cannot be justified on budgetary grounds and effectively penalises all those people and businesses who, in recent years, took the decision to install renewable heating systems, in most cases at considerable cost to themselves and motivated primarily by environmental concerns, but nonetheless contributing to the Government’s targets. In short, it’s a “penalty against the pioneers”.

I think it is grossly unfair to use taxpayers money to reward “some” but not others for the generation of renewable heat and find it inconceivable that two neighbours deploying the same technology (e.g. solar thermal systems) might find themselves in the position where one receives a government-funded incentive whilst the other receives nothing! This will inevitably stir up considerable ill-feeling, more so if the costs of the scheme are then passed on to consumers. Perversely, some of those consumers will continue to generate renewable heat but find themselves paying for others to do so! How crazy is that? Incentives for generating renewable energy are needed for those with existing technology, as well as for new schemes, to maintain their commitment to ongoing generation of renewable heat, and reward them for stimulating action by others and leading the way! As the proposals for accessing RHI currently stand, it actually creates a “disincentive” for those with renewable heating schemes to maintain them into the future. Evidence strongly suggests that meeting the target is ambitious. Therefore, losing the goodwill and cooperation of existing renewable heat generation schemes, including their role as local champions of new technologies within their respective communities, could be expected to have a detrimental impact on efforts to meet the target.

Therefore, I recommend that the RHI changes its eligibility for the scheme to include existing installations, pre July 2009, to incentivise the generation of renewable energy.


642 Mark Meyrick (individual) Other

22 June 2010 Page 1228 of 1348


Question: Q01

•Bioenergy should not be eligible for subsidies. Current biofuel and biomass use and plans are already unsustainable; creating yet another demand will be harmful for climate, biodiversity and people. •Genuinely climate-friendly and sustainable renewable energy sources should be supported, as should energy efficiency. Large-scale bioenergy is neither sustainable nor climate-friendly, and at the worst end of the scale, uses land which has been deforested, removing significant carbon sinks, releasing significant volumes of CO2 into the atmosphere (along with other particulates from land clearance fires), destroys biodiversity and animal habitats as well as land and homes for indigenous peoples. The RHI does not differentiate between bioenergy from, say, jatropha, which can be growth on waste lands, and palm oil, which has destroyed most of Malaysian and Indonesian Borneo •Biogas- Whilst we agree with the principle of using biogas from agriculture and sewage sludge which are true waste products, the RHI may inadvertently encourage food waste to continue to be disposed of without proper consideration of the alternative uses for perfectly good and edible food, and to continue to apply a wasteful approach; depending on the tariffs, it may actually encourage the use of high quality food which should be either sold or given away. A reference for consideration which may be useful is a text by Tristram Stuart, “Waste – Uncovering the global food scandal”


•There should be NO subsidies for bioliquids. Waste vegetable oil only accounts for 4% of biofuels used in the UK at present – creating yet another biofuel market through the RHI will primarily mean more soya and palm oil imports with a disastrous impact on forests and peatlands and climate, on biodiversity and on indigenous peoples, forest communities and small farmers. •The RHI should aim at all times to be cogniscent of the massive public pressure against the use of bioliquids such as Palm oil. The EU is the second largest importer of palm oil despite scandals such as that involving Unilever http://www.timesonline.co.uk/tol/news/environment/article6952288.ece •Driving demand for biofuels will be disasterous for carbon stocks worldwide. The environmental externalities of such a scheme are not taken into account with this proposal, which may reduce UK emissions but increase global emissions to a much greater degree than any reduction could offset.


•Following industry lobbying, the government now proposes much laxer standards for emissions than planned. This will cause more air pollution and serious health impacts. Particulates must be regulated, particularly in urban areas, as this may encourage greater health and environmental problems than the use of biomass will allow •Collectively, biomass boilers may encourage unsustainable deforestation in countries where regulation is not strong enough to prohibit illegal removal of stocks or land http://www.illegal-logging.info/index.php or where concessions are granted legally but through weak governance systems. Unless biomass import into UK & Europe is regulated by such measures as the US Lacey Act http://www.illegal-logging.info/item_single.php?it_id=2753&it=news this will be encouraging imports of cheap biomass to fuel a supposed “green” heat source

Question: Q09

•Much more emphasis on energy efficiency is needed, and more support to enable easy access to information. Having recently applied for a grant to install Solar Panels, the process of finding out who provided grants, eligibility, terms, who would be accredited to install the panels, and other aspects of the process, there is no doubt that there is a maze of information sources which do not provide a coherent approach or enable access easily. Without clear access, householders cannot be blamed for giving up. •Households should have to install energy efficiency standards – and more financial support should be made available for this.


•Payments should depend on climate impacts. This means higher support for passive solar which is currently expensive even with the increased domestic tarrifs – but no support for bioliquids.

Question: Q18

•See aabove – biofuel use is not sustainable, whether on its own or blended with heating oil.

Question: Q19

•District heating should be encouraged to address inefficiency in individual dwellings and address fuel poverty in government-owned domestic dwellings.

Question: Q20

643 David Pearce (individual) Existing generator

22 June 2010 Page 1229 of 1348

I understand from the newsletter received from Ice Energy Heat Pumps that the government is considering bringing in an RHI subsidy for Heat Pumps. While I welcome this news my concern is that like a number of others I purchased and installed a Heat Pump in 2008. I understand the the dates that subsidies will apply for Heat (and Air Pumps) are for those installed and commissioned after July 2009.

While it is true that I and others received a one-off payment of £1500 for installing the Heat Pump, the level of the proposed subsidy for electricity use will far outweigh this grant.

Surely it should be possible, to devise a more comprehensive grant that takes this and the earlier installation in to account, so that those who heeded the Government's wish to introduce renewable sources of heating well in advance of the scheme are not unfairly penalised.


644 Oliver Williams (individual) Existing generator

I gather from Ice Energy, our heat pump installer, that there are proposals to give householders with heat pumps incentives of some 7p/Kwhr for power used for heating. I understand that the proposal will be dated from July 2009 - why such an arbitrary date? I had a ground source system installed in October 2008 and yet I would miss out, just because we started to be green earlier? Surely all owners of heat pumps should be given the same 'reward' ? Perhaps this should be added to the consultation period - please start fairly, even if the incentive is set lower to cater for more systems.


645 Kevin Ardagh (individual) Existing generator

I put in a ground source Heat Pump last year beacuse I wanted to be green and save energy. I thought (and still do) that the Government was quite right to urge people to save energy, and tio get on and do so as soon as possible. I understood at the time that the Government would be granting incentives and that these would be back dated. As I understand it you are backdating feed in tarifs to 2008 ( as I would have expected) but for Heat Pumps the proposal is not to do so until July 2009. This does seem very unfair. In my case it would mean that I would get nothing because we commissioned our Heat Pump on 25 March 2009. I realise that there has to be a cut off point but it seems to me that given the circumstances and encouragement given by the Government what is right for feed in tarifs should be right for heat pumps and I would urge that both are back dated to 2008.


646 WWF NGO

22 June 2010 Page 1230 of 1348

thank you for allowing WWF-UK a short extension and please find attached WWF-UK's response to DECC's consultation on the RHI proposals. WWF-UK would be happy to meet DECC officials to discuss our main points and concerns regarding the current RHI proposals. Please contact my colleague, Zoe Leader, and myself in due course to arrange such a meeting. Please accept the attached paper as WWF-UK's formal response submission to DECC's RHI consultation.

IntroductionWWF-UK welcomes the opportunity to respond to this consultation on the Government’s proposals for the introduction of a Renewable Heat Incentive (RHI) covering the UK from April, 2011. WWF-UK has considerable experience and knowledge of the UK power, transport and housing sectors and we have responded to many previous consultations on energy policy and climate change issues.

WWF-UK regards climate change as one of the most serious threats facing the planet and human development, and one which demands urgent global and national action. To give a reasonable chance of keeping the rise in average global temperatures to less than 2oC above pre-industrial levels – a threshold above which the risk of severe and irreversible tipping points in the climate becomes increasingly likely – the world’s emissions of greenhouse gases must peak no later than 2015 and then start to fall steeply.

Global emissions will need to fall by at least 80% below 1990 levels by 2050, and developed countries like the UK need to be essentially net-zero emitters by that date. Near term reductions are vitally important, and developed countries in aggregate need to reduce emissions by some 40% below 1990 levels by 2020, with the vast majority being achieved through domestic action. Reductions of this order of magnitude cannot be achieved without a radical rethink of policy frameworks to spur a revolution in energy demand reductions and the deployment of sustainable, low-carbon renewable energy technologies.

It is possible to reduce energy consumption by one third or more through a combination of behaviour change and use of currently available technologies. This should be a cornerstone of all energy strategies – reducing the amount of energy we consume is the quickest, most effective means of reducing carbon emissions and energy bills, strengthening energy security by reducing the UK’s dependence on imported fossil fuels, and creating new and skilled jobs.

WWF-UK therefore welcomed the upfront inclusion of these issues in the Renewable Energy Strategy (RES) published by DECC in July 2009, because reducing final energy demand in the UK would also make the UK’s 2020 renewable energy target much easier and cheaper to achieve.

Finally, WWF-UK welcomes the Government’s stated commitment to deliver a ‘step change’ or revolution in energy efficiency and renewable energy build – and we believe that this is overwhelmingly the best approach to meet objectives on climate change, sustainable development, energy security and new job creation whilst coming out of the recession. The critical issue is now to deliver urgently and convincingly on these overall ambitions with the support of well-thought out policies.

ConclusionTherefore, in summary, whilst we support the goal of the RHI as proposed by DECC - to expand twelvefold the amount of heat generated from renewables in the UK over the next 10 years - there are several obvious and serious short-comings which we ask DECC to consider and address urgently before finalising and introducing the RHI in the UK.


- From the detail contained in the consultation document WWF is concerned that there has been little thought to how the RHI will be communicated to householders. There is no linking made to the universal advice service that will be provided through HEMS and this is another missed opportunity. Communication is going to be key if we are to win hearts and minds on improving people’s homes to be much more environmentally friendly and successful communication will require Government to join up across those policies that impact people in their homes. We recommend that the Government make clear links across the RHI and HEMS to ensure continuity and clarity of service to householders.

- It is odd and doesn’t make sense for Government to consult on the RHI proposal without setting out how Government intends it to be funded. Proposals on this important issue - financing - need to be assessed and presented now, in this consultation, and not later, as this could have negative impacts on several participant groups, such as the fuel poor, if the financing of the RHI is not properly thought through and assessed at an early stage in policy development. As a result it is also difficult for stakeholders to respond properly to the proposals set out in this consultation for the introduction of an expensive new financial incentives scheme when no indication is given of how and who will be paying for it.

Question: Q01

22 June 2010 Page 1231 of 1348

- We recognise fuel poverty, and government’s failure to solve it over the past 10-15 years is a very serious social policy issue and we’d like government to ensure that fuel poor households are not excluded from participating in the new RHI scheme next year. We note the Fuel Poverty Advisory Group (FPAG) has concluded and stated several times that the only way to eradicate fuel poverty is to ensure energy efficiency measures, as well as renewable energy technologies, are both part of the solution/s to protect people form future energy price rises. WWF also recognises that the RHI could be instrumental in reducing emissions from homes in rural communities and not least because it will assist fuel poor households. However, we are concerned that the Government is considering making boilers that switch to a blended heating oil from 100% heating oil eligible for the RHI. By the Government’s own admission the cost to convert a heating system to use blended oil is £250 to £300 and can hardly be considered as a high upfront cost when compare to the fully renewable systems. WWF believes this measure is not in the spirit of the RHI and cannot be considered a renewable heat source. We therefore recommend that it is removed from the final RHI policy.

- It is not reasonable that the proposed RHI policy may have the unintended consequence of allowing new and/or efficient gas boilers (potentially subsidised recently by the taxpayer as part of the scrappage-scheme) to be replaced by heat pumps or biomass boilers. Heat pumps and biomass boilers have a role to play, but if Government is serious about cutting CO2 and improving access to clean energy, then perhaps properties that are not on the gas network and using expensive diesel/oil to heat their homes should be targeted first.

Question: Q07

- In the case of bio-energy (i.e. biofuel for transport, biomass for electricity or biogas) WWF-UK considers only the options that are environmentally and socially sustainable should be promoted, through a standard & certification scheme. Non-certified fuels should not be promoted in any support measures such as the RHI. WWF believes mandatory sustainability standards for all bio-energy applications are required and should not just be introduced for biofuels.

Question: Q08

WWF-UK strongly supports the important recommendation from the Committee on Climate Change that by 2030 the UK power sector needs to be almost fully decarbonised and we also welcome the UK Government’s commitment to meet its EU 2020 Renewable Energy target incorporating heat, electricity and transport sectors. Following on from this, though only 1% of heating in the UK comes from renewables sources at present we welcome the goal of the proposed RHI to expand twelvefold the amount of heat generated from renewables in the UK over the next 10 years.

We believe that in order for the Government’s energy and climate policy package to be credible, any energy policy and/or financial incentive introduced must also ensure as much energy conservation and energy efficiency has taken or takes place as possible. Then, in the case of incentivising the use of renewable heat, energy demand reduction and cutting energy wastage will not be forgotten or undermined by the renewables revolution – indeed, they will make delivery of this revolution easier to achieve.

This is important to get right because in the UK energy production and consumption together account for about 95 per cent of all CO2 emissions and it is possible to reduce energy consumption by one third or more through a combination of behaviour change and use of currently available technologies. Therefore, energy demand reduction should be a cornerstone of all current and future energy strategies in the UK – as reducing the amount of energy we consume is the quickest, most effective means of reducing carbon emissions and energy bills, strengthening energy security by reducing the UK’s dependence on imported fossil fuels, and creating new and skilled jobs.

Renewable energy and energy efficiency can work well together to tackle related problems such as climate change, fuel poverty and energy security, but only if the policies are properly thought through and sensibly designed by and across the relevant government departments, such as DECC, DCLG and DfT.

WWF-UK believes the Renewable Heat Incentive (RHI) as proposed in this consultation has not been very well-thought through by DECC, is too narrow in its purpose and misses some clear opportunities. As a result we ask DECC to look at the design of this policy again and correct some fundamental flaws we see, which are;

- It is very disappointing to read the consultation rejects a requirement for mandatory energy efficiency standards in buildings in order to be eligible to receive the RHI. These minimum standards must be in line with current building regulations as a minimum and include solid walled properties. This is a clear missed opportunity by Government and we recommend that DECC seriously reconsiders its position on this and amends the RHI accordingly. DECC and CLG have stated in the recently launched HEM Strategy that the Government’s ambition is to have all loft and cavity walls insulated by 2015 and by 2020 for 7 million homes to have received more substantial improvements such as solid wall insulation. Therefore, it makes no sense for the RHI not to support the policy laid out in the HEM. If the Government is to deliver on its targets under the Low Carbon Transition Plan for a 29% reduction in carbon emissions from homes then we must have joined up thinking across Government.

- We ask Government to also include a requirement in the RHI that all homes, including solid-wall properties, must be insulated if they are to receive the RHI payment. Therefore, in response to Question 10 of this consultation, we believe the RHI should require householders to install minimum energy efficiency measures and meet set standards as a condition of receiving payment from the RHI. As the more a property is insulated, the less heat escapes and the less heat energy is needed to keep the property at a reasonable temperature – thus saving energy and carbon.

- WWF also has some concerns around the use of “deeming” to determine the RHI payment for households. While we understand the thought processes behind this are to prevent over-sizing of systems and wasting heat there are also some very real issues with deeming as an alternative. Deeming will be based on the use of SAP to establish the sizing of a system and currently there are very real concerns as to the robustness of this system. The proposal that EPCs could also be used is even more alarming as this is based on rdSAP which itself is more assumption based than SAP so could pose some very real issues with sizing. WWF recommends that the Government look in more detail at how this issue could be resolved perhaps using a hybrid system that allows a combination of metering and deeming to size and monitor the system. We also recommend that the Government considers fully alternatives to SAP in order to ensure systems are sized correctly.


22 June 2010 Page 1232 of 1348

Also, WWF-UK believes that the tariffs in the RHI should be set at a sufficiently high level to establish a good amount of take-up. If the take-up is seen as too high in a given renewable technology then the tariff levels can be adjusted downwards after an official review. However, similar to feed-in tariffs (FITs) for electricity, if the tariff levels in the RHI scheme are set too low then this will be another missed opportunity as the rate of installation of renewable heat technologies won’t be as high as is possible.

Question: Q18

647 Geothermal International Ltd

About Geothermal InternationalGeothermal International is the UK market leader in the installation of commercial and residential ground source heat pumps (GSHP). We were established in 2000 to design and install ground source heat pump systems and we have been involved with the design and implementation of well over 1500 installations, ranging from small, individual homes with a 6kW heating requirement, to large scale commercial ventures requiring Megawatts of heating and cooling. In total we have installed over 140MW of GSHP heating and cooling capacity in the UK.We believe we are uniquely placed to provide commercial insight into the current market for GSHPs, and the way in which the proposed tariffs set out in this consultation are likely to impact on that market. We strongly support the ambition behind the RHI and believe that it is the right approach to deliver real transformation in the market for renewable heat energy – provided the tariff levels are sufficient to drive both commercial as well as domestic demand.


22 June 2010 Page 1233 of 1348

The objective of the RHI is to drive a step change in the uptake of renewable heat technologies, which in turn will make a critical contribution to the 2020 Renewable Energy Target. In order to achieve this aim, it is essential that the subsidy framework delivered by the RHI is set at a level which will drive demand amongst commercial as well as domestic consumer groups. Up to 75% of the total benefits of renewable heat production will come from non-domestic installation.Unfortunately, the tariff levels for medium and large installations proposed in this consultation are set at a level significantly below where they would need to be in order to generate commercial demand.We believe this is due, in part, to a flawed assumption around the installation costs of GSHP systems. The consultation assumes an average installation cost of £500 per kW, when in reality installation costs for heating system installations runs at approximately £1,000 per kW.In addition, we believe that the proposed breakpoint between the tariff bandings for ‘medium’ and ‘large’ installations (350 kW for GSHP) is set too low and that creating such a dramatic tariff threshold at this point may have distorting effects on the market that may undermine the overall objectives of the RHI.Further detail on these concerns is set out below, alongside market data which we believe supports our position. This data is commercially sensitive and should be treated as confidential.We would be delighted to meet with officials to discuss any aspect of the response and remain committed to providing whatever support we can to ensure that the RHI is successful.


22 June 2010 Page 1234 of 1348

ConclusionThe objective of the Renewable Heat Incentive (RHI) is to drive a step change in the uptake of renewable heat technologies, taking demand from 1% of total heat demand to a level of 12%. If that 12% level is going to be met, then a significant increase in demand for larger commercial installations will be critical.We believe three things need to happen in order to successfully stimulate the market as the Department intends;1. The tariff level for large scale installations should increase significantly in order to stimulate the market response required. Our experience of the current commercial market indicates that the RHI would need to increase by a factor of four to 6 p/kWh in order to properly incentivise commercial investors and truly reflect the costs of installation.2. The break point between medium and large scale installations should be increased to 500kW to prevent the potential of market distortion. Having similar break points with other low carbon heat technologies would also help to eliminate market distortion.3. The Department should explore the possibility of revising the payback period, balancing the need to incentivise the market whilst keeping costs under control.It is essential that the RHI is a course the Government continues to pursue, and that the tariffs are calculated correctly to stimulate demand. We believe the evidence we have set out in this consultation response provides a compelling case that the current levels are not sufficient. We would welcome further engagement with the Department to help make the RHI the most effective that it can be, meeting the Department’s objectives and making the policy a success.

See original email for ROI graphs.

649 Roger Adams (individual)

fuel poverty, deeming, authorised suppliers


22 June 2010 Page 1235 of 1348

Dear RHI Team,Thank you for the opportunity to attend the RHI Consultation at CAT on 10th March. It was hugely informative and the fact that the audience brought variety to the agenda was of great value. I have attached answers to the series of questions in the body of the RHI document. I would like to highlight some general points.PioneersThe exclusion of those individuals who have pioneered the use of renewable technology fails abysmally to recognise the role they have played in reducing the impact of climate change. Their numbers cannot be so great that it would break the Exchequer. The government have bailed out banks with tax payer’s money and have permitted those banks to continue to give staff ‘incentives’ for just doing their jobs. The least government could do is to make the new system inclusive. CAT for example, if its role was recognised would receive a substantial increase in revenue to fund its work.DeemingThe whole concept of rewards for renewable heat poses several problems because it is difficult to meter and regulate. It would have been understandable if government had dismissed it as a reward too far and unmanageable. It is to their credit that a system has been formulated to encourage this form of carbon reduction.Wood BurnersIt is appreciated that there are difficulties in including open fires burning wood in the RHI. However, the exclusion of the class of ‘efficient wood burning ovens/ stoves’ which incorporate boilers for household heating, using timber which has not incurred the cost of further processing cannot be justified. These stoves are rated in Kilowatts and built to European Standards and therefore allow for the calculation of a reasonable level of annual heat generation. The government is still offering grants of up to £2,500 for households to convert from open fires to oil or gas. As a Community Champion for Age Concern, I am increasingly faced with cases of elderly people unable to afford to fill their oil tanks. They are specifically denied the opportunity to convert to a wood burner even though the fuel supply is easily available in rural areas, is cheaper and sustainable. Greater flexibility in the area would greatly benefit the elderly and those in fuel poverty.Authorised SuppliersA major thrust of government initiatives is to create jobs and new home based industries. The accreditation process must strike a careful balance between the exclusion of the cowboy element and putting up impenetrable barriers to genuine businesses. Sadly the UK has lagged behind Europe in this field. The installations I have in my house came from Finland and Germany. When I installed mine in 2005 using Clear Skies and the Energy Savings Trust everything worked very smoothly.However when I managed a project using European Objective 1 funding under the Low Carbon Building Programme Phase 2, I was alarmed at the detrimental changes that had taken place. My project was to rebuild a village hall and incorporate renewable technology. The procedures and deadlines imposed on retrospective funding meant that I could not qualify for grants under Phase 2. However, I obtained quotations for my project from the approved Phase 2 list of contractors of which there were only three and referred back to the Phase 1 list for a local supplier. It was apparent that British Gas, EonUk and Dimplex who would presumably have subcontracted the work, had incorporated the 35% grant into their pricing even though a grant was not guaranteed. The local supplier who provide an excellent service rendered the grant irrelevant. This throws into doubt who exactly are the ‘cowboys’! Fuel PovertyIn representing a Transition initiative our aim is to sustain our rural communities which are under increasing threat from the closure of services and amenities. It is essential that the RHI recognises the need to help those in fuel poverty. I have already mentioned the danger of favouring wood chip and pellet technology when wood burning stoves are prevalent in rural areas. Our woodland group is working to increase the amount of sustainable timber to provide a cheap fuel source. The present imbalance in the RHI could lead to log suppliers diverting their product into pellet production with damaging consequences for the poorer members of our communities.

RHI RatingUnlike Planning and Building regulations where local building inspectors play a vital role in monitoring and providing helpful advice with housing development,The RHI relies on the principle of centralised control, an accreditation system for suppliers and equipment and self certification, with little on site inspection. The impact of new building regulations in September poses questions on how RHI can dovetail in with their implementation. Renewable TechnologiesVery few renewable technologies are stand alone systems and usually require alternative or back-up power or heat sources. Indeed it is often recommended the when converting to a renewable system the original fossil fuel source is retained as a standby. The RHI must take account of this and be inclusive.

I wish to express my appreciation to DECC for the effort that has gone in to this detailed and comprehensive document.


Q1. Government has a primary interest in these measures to create new businesses and new jobs. As a Transition organisation our motivation is to sustain the rural communities in our area by moving them away from an economy based on fossil fuels. Some of the incentives favour the government aims in such a way that the lack of balance could result in ‘simple’ renewable technologies i.e. log burners being disadvantaged. The fact that wood burners are popular and there is a well established market should not justify exclusion from the new tariffs.

Question: Q01

Q2. We plan to operate a similar scheme to the Green Valleys project and obtain grants to help both communities and individuals to make greater use of renewable technologies. The success of the Brecon Beacons initiative shows that the return on such projects is sound business and this should overcome any reluctance on the part of banks and other agencies to support projects. The Pay as You Save facility is a most welcome addition to the renewable incentive armoury. However, the time period over which payments are guaranteed is critical if such contracts are to succeed.

Question: Q02

22 June 2010 Page 1236 of 1348

AgreeQuestion: Q03

Q4. Yes but the disastrous situation created in the Low Carbon Building Programme Phase 2 must be rectified. The lack of competition resulted in a cartelInflating prices to absorb the grants. The accreditation process became cumbersome and discriminated against small businesses.

AgreeQuestion: Q04

AgreeQuestion: Q05

We should not be wasting resources on feasibility studies and the testing of established technologies. These equipments have been manufactures to European or UK standards and that should suffice to qualify for the RHI.

Question: Q06

Q7. We strongly oppose the exclusion of efficient wood and log burning ovens/stoves, especially those incorporating back boilers for household heating, from the RHI. This distorts the balance of the initiative in favour of wood chip and pellet technology which adds to the cost of fuel production. This would penalise rural communities who rely more on this type of heating because sustainable wood fuel is cheaper and readily available. There is also a danger that log suppliers would be encouraged to divert their product into pellet production thus making logs less accessible to those in fuel poverty.


Anaerobic Digestion. We need to encourage the use of this technology by our farmers and your proposals appear to facilitate this.Q8. Generally agreed.

AgreeQuestion: Q08

Q9. Not qualified to comment


Q10. It is fundamental that high standards of insulation and heat conservation should be prerequisites of any incentive scheme and SAP ratings will apply. However, many old rural properties are notoriously difficult to insulate and some flexibility in applying the RHI is essential.


Q11. Surely this must be the responsibility of the planning authorities to prevent abuse.

Question: Q11

AgreeQuestion: Q12

See Q10

AgreeQuestion: Q13

Q14. The principle of providing an assessment of what would be a reasonable annual level of heat generation for each qualifying installation based on the characteristics of the site and equipment rating is sound and fair. If there were efficient heat generation meters there would be no need to deem.

Question: Q14

NO

Question: Q17

Q18. We agree with the way RHI tariffs are set, the structure and rates of return.

Question: Q18

Q19. That seems reasonable.

Question: Q19

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AgreeQuestion: Q20

Q21. In rural areas, which are our main interest, it is considered that the minimum number of external customers for a district heating system should be five. A property that has a complex of several buildings that would be a suitable site for a district heating system should also qualify.

Question: Q21

Q22. We agree and support the inclusion of bio-energy tariffs and the fuel element of those tariffs.

Question: Q22

Q23. We agree in as far as ant review, which establishes that installation and equipment costs have become cheaper, would apply only to new applicants.

AgreeQuestion: Q23

Q24. This brings us back to the matter of rewards for pioneers. Anyone who has seen the film ‘Garbage Warriors’ will understand that innovators have to be allowed to make mistakes in order to discover the sustainability of a system’s design. At what stage does it become mainstream and not DIY? I strongly advocate that establishments like CAT at least have earnt the right to benefit from the new tariffs.

Question: Q24

Q25. I refer back to the problems of Phase 2 of the LCBP where the reduction in the numbers of approved suppliers created a cartel which resulted in price increases which absorbed the grants. There we witnessed completely the reverse trend where smaller businesses were hindered by bureaucracy and the punitive cost of registration. The RHI accreditation should make it easier for small businesses and increased competition would keep prices down and improve regional access to local suppliers.

Question: Q25

AgreeQuestion: Q26

Q27. New innovations and developments inevitably will occur and DECC will no doubt evaluate their impact on the market place. It is for DECC to determine whether that impact requires an urgent RHI review.

Question: Q27

Q28. We do not agree that installations completed prior to 15 July 2009 should be excluded from the RHI or Feed-In-Tariff systems. The new tariffs are going the provide a much needed stimulus anyway so why penalise those who were at the forefront of development of present day technology. There are not so many that it would break the exchequer.


Q29. The application of the RHI is based on a ‘reasonable assessment of annual heat generation’. It relies on the validity of the assessment but so long as that is sound there is little scope for abuse. It should be backed up by some degree of random on site inspection.

Question: Q29

650 Helix Agencies

22 June 2010 Page 1238 of 1348

Proposal 1) Revision of the Tariff Structure is required.Proposal 2) Schemes that displace existing plant can access a small premium.

Comments:

Observations by Angus Perry, (Vital Energi)It is not clear how the proposed tariffs are going to be applied across the proposed plant banding and how is district heating going to be treated to provide additional support for network investment.

Observations by Howard Roche (Helix Agencies)

Given the scale of the target it is clear that relying upon new build will not deliver the required 1.8million GB homes, or the 287,000 in Scotland required to convert to renewable energy in the 2020 time frame. The consultation offers little guidance as to the inevitably higher cost of installing renewable heat into the existing built environment, compared to new build. By way of example, an existing boiler house proposing to covert from oil to biomass may need to undertake additional works to remove the existing plant.

The financial modelling with district heating in mind and in particular shows no consideration as regards replacing dry electrical systems to wet renewable systems. This is explored further in our response.

In the main we concur with the response by “Scottish Renewables”.

Question: Q01


Comments:





In the main we concur with the response by “Scottish Renewables”.

See original email for graph.


Proposal 1) Ofgem certify early support of schemes as evidence to financiers.Proposal 2) Proof of operation is given to Ofgem in support of RHI operational claims.Proposal 3) Claims should be possible as an “online” process. Comments:

Observations by Angus Perry, (Vital Energi)For medium and larger installation developers need to have a clear understanding of the level of RHI that would be paid for any scheme to secure finance. Therefore a step should be added to the process where Ofgem can (based on information delivered in a simple format) provide the developer with confirmation of payment level for the proposed scheme (Additional step between the current first and second step).


The issue of keeping projects operational and reporting is a valid one. Given biomass should be regularly maintained would it be appropriate the competent person, (such as MCS installers or qualified engineers in larger schemes) issue an annual service certificate? An alternative would be to make it a condition of RHI that projects may be subject to audit and proof of fuel supply should be maintained, much in the same way VAT is self administered. It could be a simple internet process.

Question: Q03

22 June 2010 Page 1239 of 1348

Proposal 1 ) MCS accept equivalent other accreditations as proof of competenceProposal 2) MCS be tasked to streamline product approval into one form.

Comments:

Observations by Angus Perry, (Vital EnergYes

Comments: However it is important that the number of accredited installers is sufficient to ensure effective supply and competition in the market.


There is widespread concern over the efficacy of the MCS scheme. We believe it is viable but will need simplification if it is to hit its targets. Other accreditations could be offered as means of proof of competence, using the doctrine of equivalence. Thus as “Gas Safe” Accreditation might equate to automatic MCS accreditation if only on a provisional basis.

Manufacturers are both UK and overseas are tiring of continuing and varying approval processes. We see little advantage in not accepting certain overseas standards as being acceptable here. Most European , USA and Japanese standards should suffice. In US patent law they have developed the concept of “equivalence” that is; it is not the same but equivalent. (If it looks, talks and walks like a duck then it is a duck). We are of the view it would be a worthwhile piece of work for MCS to align what EU standards are acceptable under the MCS accreditation scheme. This would add to the desire for a single market. We are minded to support the others in the industry’s view that EN303-5 is adequate for biomass boilers.

Presently we have the Smoke Control Orders, the remnants of Clear Sky, and now MCS. Each accreditation has cost time and money. This is now proving a barrier as some manufacturers and smaller installers consider they have other priorities.

Equally for financiers to support schemes they will need some peace of mind that the equipment they are financing is fit for purpose, thus we support the MCS process but do recognise a need for increasing the pace of accreditations and reduction in costs. We suggest that Gemserv who are the MCS licensee under take an urgent review of what accreditations already in place can be directly considered equivalent and accept that as evidence of competence and issue the appropriate MCS accreditations swiftly.

Question: Q04

Q5: Where MCS product and installer certification is extended beyond this limit, do you agree that we should introduce the requirement of using certified installers and equipment for eligibility for the RHI? Proposal 1 ) MCS adopt other accreditations as proof of competenceProposal 2) MCS be tasked to streamline product approval into one form.Proposal 3) Firms operating to accredited British Standards can self assess product.Proposal 4) Appropriate EU standards accepted as being equivalent to British Standards

Comments: Observations by Angus Perry, (Vital Energi)This depends on the volume of installations expected, if the volume is high it maybe more appropriate to increase the accreditation limit for installers, if the volume is low then an accredited body could be used to sign off installations. The point at where the threshold is set is important for installations, however all equipment should be accredited (i.e. meet minimum standards).


There is a risk to constraining the market in plant and equipment as MCS accreditation can take time and be costly. Certain EU manufacturers are already crying foul. We would seek a streamlining of Smoke Control accreditations under the Statutory Instruments (Orders) within the Clean Air Act 1993 as a strategy to remove a barrier to the market at no cost to government or consumer.

As in the previous question we would like to see that a harmonised standard across the EU be adopted and propose a recognition by DECC, DEFRA and MCS that accreditations used by other EU countries can be accepted as proof of competence in design and manufacture here without the need for further testing.

We understand that advice on what standards could be recognised as equivalent is available from, for example, those Consultants who already assist DECC on related matters.

There is a sensible case to argue that if a manufacturer has certain standards already in place, then they can “self assess” designs and new products.

We suggest this will maintain standards and open the market to further competition and encourage innovation.

Question: Q05

We are only qualified as far as to suggest EN303-5.

Question: Q06

22 June 2010 Page 1240 of 1348

Proposal 1) Ground Source heat be required to contract “green electric” to qualify.Proposal 2) Absorption Chilling be an eligible use for Renewable Heat. Proposal 3) Where cooling is considered only the heat energy supplied be counted.Proposal 4) RHI extend to existing schemes but at a lower rate. Comments:Observations by Angus Perry, (Vital Energi)

Ground source and air source heat pumps should not be classified as renewable technologies as they are driven from electricity (with can be brown or green).

Observations by Matthew Tidmarsh (DC21)

Ground source heat pumps – eligibility criteriaFrom page 29 – Eligibility: We need to ensure that we only support useful renewable heat generation…

The eligibility of heat pumps is defined using the criteria in the EU Renewable Energy Directive. This criteria means that the minimum energy saving across the full energy cycle (electricity generation and heat pump) is only 17%, i.e. to get 1kWh of ground source heat requires 0.87kWh of natural gas supplied to a power station, where as a gas boiler at 95% efficiency would require 1.05kWh of gas to supply 1kWh of heat.

Considering the proposed tariff the heat pump incentive is disproportionate to the reduction in CO2 emissions, calculated below at £1.68/kg of CO2 saved. By comparison biomass fuelled heating systems have the potential for much greater reductions in CO2 and at much lower cost £0.39/kg CO2 saved.

It is suggested that the tariff level is maintained, but that a more stringent target should be set, such that only those installations achieving more significant savings are encouraged. It is suggested that the following criteria are adopted:•SPF = 1.5 / power generation efficiency

This would mean that the actual energy used to produce each kWh of heat would drop to 0.67kWh of gas, and the cost of the CO2 emissions reduction would fall to £0.79/kg – still double that of biomass heat. In real terms this would equate to a 37% energy saving compared to heating with natural gas.

Of course should the heat pump be powered with renewably produced energy, then the above argument does not apply. However, in such a scenario the power produced has more than likely already benefited from an incentive (FiTs or ROCs). Methodology The following methodology is based on a simplistic analysis of the systems concerned; a more thorough analysis may give a more “accurate” answer, but the general outcome would remain. The system boundaries are based on a natural gas fired power station and a natural gas fired boiler.

System 1: Building heated by a ground source heat pump Q0 = Qe×SPFminSPFmin = 1.15 / Q1 = Qe / Therefore: Q1 = Q0 / 1.15

System 2: Building heated by a gas boiler Q1 = Q0 /

Comparison of System 1 to System 2Gas energy saved Q = Q1 – Q2Energy efficiency improvement, Q / Q0 = (1/) – (1/1.15)Given: Q1 = Q0 / and Q1 = Q0 / 1.15Reduction in CO2, CO2 = gcCO2 × Q/ Q0 Therefore: Q = Q0 ((1/) – (1/1.15))CO2 = gcCO2 × ((1/) – (1/1.15))Cost of CO2 reduction, costCO2 = RHI / CO2 = RHI / gcCO2 × ((1/) – (1/1.15))The gas emitted from combustion of natural gas, gcCO2, is 0.1836 kg/kWhThe proposed tariff for medium scale (45-350kW) heat pumps is 5.5p/kWh. A typical gas boiler will be 95% efficient. Therefore the cost of the emission reduction is £1.64/kg of CO2.

Comparison to biomass heatBiomass energy generation using fuel from sustainable sources is reported to have a CO2 efficiency of over 95%. Little data is available for medium scale heat only systems but a figure of 80% would be a reasonable assumption. Using a similar methodology to that outline above for medium scale systems (45-500kW) the cost of the emissions reduction would be £0.44/kg of CO2.

Comparison to solar heatHarvesting heat from the sun is not entirely energy free, power is needed for circulation pumps and control systems. However, for the purpose of this calculation an efficiency compared to gas of 100% is assumed. Using similar methodology to that outline above for medium scale systems (20-100kW) the cost of the emissions reduction would be £0.88/kg of CO2.

Proposed adjustment of the heat pump eligibility criteria

Question: Q07

22 June 2010 Page 1241 of 1348

Bringing the cost of CO2 emissions reduction more in line with that for solar heat would be achieved by increasing the minimum SPF by adjustment of the eligibility equation to:SPF = 1.5 / power station efficiencyThis would mean that the actual energy used to produce each kWh of heat would drop to 0.67kWh of gas, and the cost of the CO2 emissions reduction would fall to £0.79/kg – nearly double that of biomass heat. In real terms this would equate to a 37% energy saving compared to heating with gas.The implications of this change would require higher SPF performance from the heat pump, and/or more efficient power generation – i.e. a power efficiency of 50% would require an SPF of 3 or greater.

Cooling technologiesFrom page 30 - CoolingThe RHI is designed to support the generation of renewable heat, but there is also the important question of renewable cooling technologies. As the purpose of the scheme is to support the generation of renewable heat, the RHI will not support renewable cooling.

Whilst it would be perverse to incentivise electrically driven air conditioning, the same does not apply for Absorption Refrigeration systems driven with Renewable Heat.

The UK has 1000’s of large distribution centres with refrigerated compartments; each typically consumes several MW of electrical power. Today the refrigeration for the majority of these facilities is provided using electrically driven compression technologies such as “direct ammonia”.

An alternative technology, Absorption Refrigeration, when driven using Renewable Heat, has the potential to make a significant reduction in the UK’s CO2 emissions. The combination of Absorption Refrigeration and Renewable Heat reduces CO2 emissions from refrigeration by over 80%.

Why should renewable heat for Absorption Refrigeration be included in the RHI? •The “user energy” concerned with refrigeration is heat, that is the removal of heat. Traditional refrigeration uses high value electricity to generate mechanical rotation, which in turn provides the compression of gases/vapours for use in evaporative cooling. An alternative is to use a lower value energy source; i.e. heat, to drive an absorption process for refrigeration.•Unfortunately Absorption Refrigeration plant is more expensive to purchase than compression driven plant – the refrigeration process is more complex. Unless there is a viable and economic heat source, this drives engineers to select compression driven plant for their refrigeration projects.•Onsite power generation using CHP technology often produces more heat that can be easily used. Absorption Refrigeration provides a significant heat load that improves the overall efficiency of CHP systems. There is also an advantage in balancing summer cooling loads with winter heating loads. Biomass boilers could also supply renewable heat for absorption refrigeration.

The typical carbon foot print of a 1MW state of the art direct ammonia refrigeration system would be 1,826 te CO2 per annum. The equivalent 1MW state of the art absorption refrigeration plant driven with a biomass boiler using sustainable wood chip would produce just 319 te CO2 per annum, a reduction of over 80%, as illustrated below.

Direct ammonia refrigeration plantAbsorption Refrigeration plant with Renewable HeatRefrigeration load1000 kW1000 kWCoefficient of performance30.65Compressor power demand333 kW-Heat demand-1538 kWAncillary power demands50 kW50 kWTotal power demand383 kW50 kWAnnual power demand3,355,080 kWh438,000 kWhCO2 emissions from electricity1,826 te/an238 te/anBiomass heat efficiency-90%Annual biomass heat demand14,969,867 kWhCO2 emissions from biomass combustion-82 te/anTotal CO2 emissions1,826 te/an320 te/an

Space heating of large commercial buildingsFrom page 31 - Wood burning stoves, open firesWe propose excluding wood burning stoves, air heaters, open fires and similar applications from the RHI……

Many large industrial buildings are heated using indirect gas fired and heat recovery air heaters. It would be appropriate to include these in the RHI where the energy is provided with a qualifying fuel source such as biomass – it is unclear from the consultation document whether such technology would be included. A significant reduction in CO2 emissions could be achieved if end users are encouraged to adopt biomass technologies for these applications.

Tariff for solids biomass – effect of scaleThere are two issues with the proposed tariff structure: firstly the large drop when going from medium to large scale; secondly the manner in which facilities will be scaled, is this peak or average, potential clash with deeming.

The significant drop from 5.5p/kWh to 2p/kWh from medium (45-500kW) to large scale (>500kW) has the potential to warp the market. For example there would be many 500kW systems and no 550kW systems. This could potentially lead to topping-up with fossil fuel power systems and not arriving at the best solution for reducing CO2 emissions.

The method used to determine the scale of the system needs careful consideration, particularly when considering it’s interaction with deeming. Particularly in commercial systems a high peak capacity may be required to serve the nature of particular business operations. It is recognised that

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turn-down can compromise efficiency, but that can be corrected with the use of “summer” and “winter” boilers.


The consideration that eligible useful heat being as heat that is used for: space heating, water heating, cooking, low to high temperature industrial processes, drying and separating is in our submission, defective in that it does not include the opportunity to displace a large emitter of carbon, being the industrial use of energy for cooling.

A developing technology is that of absorption chilling that can use low grade renewable heat such as may be derived from ground source heat, or heat recovery from biomass, district heating, CHP or surplus process heat.

It is appreciated that domestic refrigeration and the risk to double counting exists. (Such as using renewable electricity to cool)

Accordingly we propose to avoid that scenario by proposing electricity (power) for cooling be excluded and that claimants wishing to use heat for cooling demonstrate to the regulator that this is “heat derived as a bi-product of power generation or heat directly created from renewable sources” .

That is; by means of metering it can be demonstrated RHI has NOT been claimed for that heat at a higher temperature further upstream. This can be done by way of simple line heat flow diagram to the regulator at point of scheme approval, then by supplying meter data of heat meter that shows the flow of heat to heating (a) and a heat meter to cooling (b) and heat meter at point of generation (c) . With the obvious audit formula = a + b < c

We agree that in principle that any increase in capacity would be eligible for RHI support as if it were a new installation.

However we do see a number of practical issue that may dissuade operators from increasing the capacity in a way that minimizes overall embedded carbon impacts and issues of fairness in the wider community particularly in the “target group” when a Responsible Social Landlord (RSL) such as housing association comes to setting tariffs in existing schemes.

By way of example, a scheme in Western Scotland is seeking to extend the existing scheme to displace electric heating using spare capacity in the existing district heating scheme by way of a new extension.

The extension may attract RHI as presently set-out, however residents on the existing scheme will be paying a much higher rate as they were part of a pioneer estate and as a result will be paying a higher tariff to person potentially next door using heat derived from the same biomass source.

It also raises the question of how does the operator apportion of the heat generated which was used by the extension. If on the other hand a new pipeline was to be taken from the existing boiler house then the cost under any support scheme would render it; not viable.

Equally, a further non desirable option would be build another boiler house and attendant plant to handle the 35 additional homes increasing the embodied carbon in scheme substantially.

It is suggested that so few of these scenarios exist due to the small amount of existing biomass schemes that are actually in operation then RHI could simply apply to all biomass district heating schemes, albeit at a lower rate.

Thus we are of the view, so as to ensure fairness across the piece where an existing biomass district heating scheme be extended, then the RHI apply to the entire metered heat generated and exported onto the heating network be eligible with the proviso that the consumers be metered so as to ensure the heat is “usable” and not sent to waste.

There may be a beneficial side effect by this approach, this may encourage existing operators appraise ways they may make existing plant more efficiently and find novel ways to extend networks to new users such as a community hall or leisure centre, perhaps retailers so as to lower the daily demand variances. In this scenario it might be reasonable to stipulate the minimum anticipated amount of heat consumption the extension might reasonably be required in the design to take, so as to avoid perverse results of say adding a single consumer. It is suggested that this additional requirement be set at say 20% of the existing consumption levels. By way of example a scheme of 100 homes using 10Mw/h per annum per home, to qualify for RHI over the entire scheme would need to add at least a further 20 homes or perhaps single consumer who uses 200Mw/h per annum, or a combination of both.

Given what is known of existing biomass schemes that are in operation, these are few. It is known that early adopters of this technology have struggled to remain viable. We are aware of at least two schemes where the biomass has been either removed or mothballed with others at substantial risk to closure if as is anticipated the RHI exerts pressure on the supply chain. Given that scenario, electricity and oil becomes a viable option off the gas grid and gas becomes very attractive indeed where gas is to be found nearby.

It is presently a concern that the market will sustain a loss of confidence if the early adopters cease to operate. The cause of much of this operational difficulty appears in our view to arise from the absence in the Consultation of consideration of operation and maintenance.

We have data from numbers of schemes that demonstrate that operational costs of biomass are at least double that of say gas or oil. This arises from issues of storage, fuel movement into the boiler, condensates in the flame tubes and stack, the aggressive nature of the ashes and the predisposition of biomass to arch over or bind against augur systems.

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Therefore with the aim of simplicity of the overall RHI, there is a meritorious argument that providing schemes continue to operate on biomass then they would be supported. This will avoid the perverse outcome that they revert to fossil fuel in preference to investing in the existing scheme.

We would support a view that if such support was to be offered then it could be at the proposed lower level.

Proposal 1) Where bioliquids demonstrate they have not displaced food production then they be eligible.

Observations by Angus Perry, (Vital Energi)Comments: Bioliquids are not currently eligible for ROC therefore how can they be considered for RHI?


It depends on the sustainability standards, but given transport requires large amount of this material then on present technology this could be reserved for that purpose. The USA example of diverting arable food stocks to biofuel impacted on the price for basic foodstuffs across the globe engendering social unrest and widespread starvation. Obviously GB will wish to avoid that scenario.

This situation may change as advanced biofuels (such as derived from algae) enter the market at the commercial scale.

Algae fuel, also called algal fuel, algaeoleum or second-generation biofuel, is derived from algae Dduring photosynthesis, algae and other photosynthetic organisms capture carbon dioxide and sunlight and convert it into oxygen and biomass. Up to 99% of the carbon dioxide in solution can be converted, which was shown by Weissman and Tillett (1992) in large-scale open-pond systems. At present, such fuels remain too expensive to replace other commercially available fuel.

SRC Willow grows well on marginal land and on Brownfield sites as does Eucalyptus, particularly in parts of Scotland which is not used for arable farming. This material may well become attractive in the biofuel market should “3rd generation” process prove practicable.

We also see opportunities arising in the marine environment or indeed large scale indoor “greenhouse” type structures, such as demonstrated by DC21 in their Bluesky concept for the large scale manufacture of biofuel from Algae and Protozoa.

There is a case for restricting biomass and biofuel to marginal land. This also applies when we come to palm oil and the like. There are options though that could be encouraged in emerging economies, such as Jatropha which grows on marginal land in third countries and has the potential to distribute wealth to Southern African Countries and the Indian sub continent.

We are also aware of a technology that converts fish processing waste to a biofuel. Cellulosic ethanol is a biofuel produced from wood, grasses, or the non-edible parts of plants. Production of ethanol from lignocellulose has the advantage of abundant and diverse raw material compared to sources like corn and cane sugars, but requires a greater amount of processing to make the sugar monomers available to the microorganisms that are typically used to produce ethanol by fermentation. One of the benefits of cellulosic ethanol is that it reduces greenhouse gas emissions (GHG) by 85% over reformulated gasoline. By contrast, starch ethanol (e.g., from corn), which most frequently uses natural gas to provide energy for the process, may not reduce GHG emissions at all depending on how the starch-based feedstock is produced. It may be with time Renewable Heat could be used to displace the gas.Companies are producing enzymes which could enable a cellulosic ethanol future. The shift from food crop feedstocks to waste residues and native grasses offers significant opportunities for a range of players, from farmers to biotechnology firms, and from project developers to investors.In Europe, several plants are operational in Germany, Spain, and Sweden, we understand that a capacity of 10 million litres per year is under construction.We therefore propose that biofuels should be eligible providing they comply with a sustainability standard.

Question: Q08

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Proposal 1) A standard lexicon be used where possible.Proposal 2) A web based “emissions planning tool” be developed.Proposal 3) In rural areas the emission standard be relaxed.

Observations by Angus Perry, (Vital Energi)

Comments: Before introducing more stringent standards the additional cost needs to be considered. It may be a requirement to include extra plant (filtration and flue gas recirculation) to meet the levels. This will add cost to design, equipment, operation, space, etc and should be taken into account when setting the standard tariffs.

Also industry standard nomenclature and references should be used.


There is some debate between UK standards and other EU countries standards on the means of measurement of emissions. This leads to delay and cost on importing suitable equipment. It also rather depends on the location of the boiler. It is obviously less desirable to have a unit emitting 30mg with a low flue/stack height than it might be to have a larger unit in a rural area with a higher stack height. Given most off gas grid homes and businesses are in the rural setting

The recent the emissions evaluation tool developed by AEA technology if widely adopted by planners as the standard for approval would not only assist planners but also developers calculate the viability of a given site prior plans being submitted which would greatly reduce work loads and thereby shorten the planning process which we see as a priority given the size of the target and the timeframe in which it has to be achieved. See the “Biomass for London Report” at page 54 [see link below)

http://www.londoncouncils.gov.uk/tra$nsport/briefings/ReviewofthePotentialImpactonAirQualityfromIncreasedWoodFuelledBiomassUseinLondon.htm?showpage=-1)

The model while effective is not intuitive for designers and architects. We would propose that a free web based version that gives an definitive outcome or recommended course of action by linking post codes data with the emissions data already collated on be made available on either the Defra or Air Quality websites such as http://www.airquality.co.uk In the absence of a uniform model then we are minded to suggest 50mg PM2.5/Gj in rural areas and 30mg PM2.5/Gj in the urban setting and 150g/Gj for NOX overall. New technologies, such as the Hoval stack emissions filter add a complexity but should be considered when the air quality is very poor as an option that planners be obliged to consider.

Question: Q09


It would only complicate the management process and slow initial take up. Energy efficiency should be targeted by other means.


It could be a consideration when considering retro-fit to multi-home developments but the management of that process may be better addressed via CERT and CRC.

Question: Q10

Proposal 1) Homes planned to use low carbon heat could be given a partial derogation from the revised Part L building regulations or the low carbon heat element be counted towards the Energy Performance Certificates where buildings are obliged to show such a certificate.Observations by Angus Perry, (Vital Energi)Experience shows that developers design and build to the minimum standards applicable at the time of build. The current standards will prevent lower standards being adopted in the general property market. Observations by Howard Roche (Helix Agencies)The renewable heat sector is on the horns of a dilemma. On the one had we need to maximise the result from the finite renewable resources available to the planet and thereby reduce energy usage, but on the other low consumption, or more properly low revenue undermines the viability of schemes. By way of example compare 2 Housing Association schemes in Scotland using biomass heat. The first built 7 years ago averages a heat use of some 10,000kwh per home per year whereas a more modern site some 40 minutes away with an identical climate, averages less than 7,500kwh per home per year with the same overhead. The dilemma lies in that the lower uptake of heat sales undermines the viability on the operation of the scheme as cash income from heat sales is lower when the homes are better insulated. Accordingly DECC may wish relaxing the building regulations for new homes that are to be built using renewable sources and tightening the regulation on new homes that are to be built using fossil fuels as the primary heat source. This method would encourage, at little cost to the pubic purse, that more homes are built using low carbon energy sources.

Question: Q11

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Proposal 1) Further banding rates be implemented.Proposal 2) Where deeming is preferred, usage of the equipment deemed should be demonstrated.Proposal 3) The tariffs be based on heat outputs not boiler size.Proposal 4) Consideration of the “Cascade” method. Comments: Observations by Angus Perry, (Vital Energi)

The RHI tariff banding (cut off payments based on installed capacity) will focus development to the higher tariff bands (e.g. biomass < 500kW receives 6p/kWh >500kW receives 2p/kWh). A more sensible structure would be payment against a tiered tariff structure (e.g. gas and electrical billing). This would require metering to be in place or alternatively energy bills could be submitted for smaller users.

Example:Tier one RHI payment = metered heat kWh x 6p/kWh Where possible metering should be used against a tiered tariff payment structure for all technologies.

Tier 1 – A p/kWh up to Y kWh/annum (Base on investment return)Tier 2 – B p/kWh > Y kWh/annum < Z kWh/annum (Base on investment return)Tier 3 – C p/kWh > W kWh/annum (Base on investment return)

e.g Solid Biomass

Tier 1 – 9 p/kWh up to Y kWh/annum (Base on investment return)Tier 2 – 6.5 p/kWh > Y kWh/annum < Z kWh/annum (Base on investment return)Tier 3 – 1.6 p/kWh > W kWh/annum (Base on investment return)


The precipice from 45kw to 500kw is too constrained at 500kw and would result in perverse outcomes.

Experience shows that the 500Kw level will only service, maybe, 75 homes on a district heating scheme, which taken in the historical setting would have meant that schemes such as Oban Glenshellach would never have been built under the proposed regime.

By way of example, take two schemes, one of which has 50 homes using a 460kw biomass boiler (Scheme 1) and some 40 miles away similar project with 100 homes using a 600kw boiler (Scheme 2). Here consider that both schemes fuel costs are the same and that if both built today would have been built to the same standard. For this theoretical model assume they both use 7,500kwh per home per year and the overhead is the same at both sites, with the heat exchanger, metering and pipeworks costs to each home being equivalent. The larger scheme needs a larger fuel handing machinery and storage so can be considered equivalent on a “per home” basis. The only real variable is the boiler. Let assume, the boiler cost maybe £30,000 more to upgrade from 460kw to 600kw. In basic terms the outcome is shown on the table below, which excludes capital repayments and operational costs and maintenance. (It assumes fuels cost 2.5p/kwh and sales at 7.5p.kwh.) homesusgage kwhGenerationFuel CostsalesRHIGross Marginper homeScheme 150750010000£12,500£28,125£30,000£45,625£912.50Scheme 2100750010000£25,000£56,250£15,000£46,250£462.50It is clear that the former scheme has much more revenue per home than the latter. What marks the difference here is that the latter scheme is twice as big as the former. This outcome also tends to support our view that the proposed single step at 500kw is not sophisticated enough to reflect reality. Scheme 1 if built today with 50 homes would potentially have a larger income than one twice its size even though it was less efficient and Scheme 2 probably would not be built. Accordingly we suggest there is merit of a new rate between 500kw and 3mw of perhaps 5p and a further rate of 3.5p between 1mw and 5mw. Metering is preferable to deeming and should be mandatory for district heating.

We also believe there may be a more flexible and commercial robust methodology. We have termed this “The Cascade Method”. The philosophy is akin to that used in certain “Appellation Controllee” areas for wine.

Consider a pile of champagne glasses and the wine is poured in the top, this then overflows and fills a number of glasses in the tier below until they fill, and over flow to the next tier down with even more glasses on the tier and so on. The highest tier has the highest value per glass, and lower tiers, lower values per glass and so on as the wine descends the cascade.

Rather than relying on upon the notional size of any given boiler, which may lead to perverse out comes and have undesirable effects on the cost of certain boilers sizes (i.e. under 500kw) and the overall sizing of projects, or the inclusion of fossil fuel boilers so as to keep the renewable element under the 500kw line, then we propose this “ Cascade method” (see below) which relies upon metered export of usable heat.

Below is a chart extracted from actual biomass boiler supplying domestic properties, showing its average heat generation over a year. Note the variance between what it could generate over what it did generate.

The variance arises from the design case to allow for the fact that in the winter the load is 4 times higher than the summer, then on top of that there is the peak load, such as first thing in the morning when people take showers and turn on the house heating. This further underlines the fact that a 500kw boiler being classed as large is faulty. As on average the probability is that it will only average perhaps 200kw at best.


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There is also another perverse outcome on the 45kw line. A 45 kw boiler may be able to support, say 5 homes. But if we were to put 10 homes on the scheme and a thermal store we can retain the higher 45kw 9p/kwh rate. There is also the matter of back up boilers, if biomass, being counted as installed capacity, resulting in biomass back ups not being installed. In considering the above there is in our view the “Cascade” is alternative methodology that may resolve these issues and is set out below;

A scheme could be pre-certified as to its maximum RHI entitlement. By this means the Exchequer may be able to budget what level in the forthcoming year the required levy to fund the RHI, which needs to be set in advance. Developers, can demonstrate a good indication as to his revenue stream to Investors and Financiers. The pre-certification may suggest +/- 10% for projects displacing existing fossil fuel installations and +/- 20% for new build based on the design case.

It might be that small schemes may not need to pre-certify. The pre-certification process might use a simple scale: using the presently proposed generation bands of 45kw, 45 to 500kw, 500kw and above.

Some schemes may not in their self assessment at pre-certification state an availability of 8760 hours, schools for example, they may suggest 2,400 hours. The pre-certification may well include a declaration as to the design case on efficiency, perhaps 85% with a diversity (average output) of 50%. Note this is similar in principle to the CHPQA concept. 8 scenarios are modelled below

There is a difficulty with this approach in that operators may be inclined to state longer operating hours and higher efficiencies so as to secure better funding. On consideration, however, this would be foolhardy for the operator as they may well not meet their commitments and it would not affect the actual RHI paid.By the means set out below note the tipping point between positive and negative outcomes is smoothed out over a much wider range.

The philosophy of the method is: Within each band there is an “generation entitlement”. In this proposed model any size boiler is entitled to claim up to 200,000Kw/h at the entry level, a level that is modelled to equate to the presently proposed 45kw band. Further generation of the heat then runs on the central level until 1,000,00Kwh have been produced and further generation falls to the lower level.

We are aware that DECC is concerned about over production, it could be possible that the Regulator when approving the pre-certification considers what might be the reasonable “RHI Entitlement” is within each band, based on perhaps SAP or similar calculations or on the design case. We consider this would introduce an undesirable level of complexity at the present time. The pre-certification concept is not for the actual claim but as a means of demonstrating to investors what the potential income may be.

In the BRE Standard House Set shown in the Consultation a semidetached home might be assessed at 9,674kwh per annum. Operational experience shows this may reasonable. We also suggest that 100 homes on a district heating homes need an installed capacity in the region of 500 to 600kw (that is to say, 6kw per home).

This suggests that the Consultation anticipates schemes would operate at 18% of potential capacity. We are inclined to agree which again reinforces the point that the 500kw line is inappropriate. The proposed levels in the bands are:

On the first rung at 45kw rate = 9p/Kw/h with a 200,000kwh maximum entitlement.On the second rung at 500kw rate = 3p/Kw/h with a 1,000,000kwh maximum entitlement.On the third rung at 2,000kw rate = 2p/Kw/h with no maximum entitlement.

This chart compares the average support in pence per Kw/h, The blue/yellow columns being the support using the model in the Consultation the purple columns show the effect under the Proposed new model on various scheme sizes.The model allows simple facts to be determined, in the examples below, the boiler is assumed to be 85% efficient, and operates for 50% of the time (its diversity), fuel costs calculated as 2.5p/kwh. The “RHI support” cell show what the scheme would attract if implemented as drafted. The proposed tariff rates have been selected to smooth out the changes as boiler sizes increase, as a cascade, as opposed to in steps. The Nett Contribution is how the schemes fare after fuel costs are included.

Note the average how by this methodology the average RHI contribution across the range diminishes as scale increase but without the two precipices but joins the extremities set out in the Consultation.

Scheme 3 = 45kw8,000HoursEfficiency85%153,000Kwh Max OutputBrought down BandEntitled KwhClaimed KwhBalance RateClaim153,000kwh45200,000153,000-47,000Kwh£0.090£13,770-47,000kwh5001,000,00000Kwh£0.030£0-1,000,000kwh>50020,000,00000Kwh£0.020£0Fuel Cost £4,50050.00%TotalAverage Total ClaimRHI Claim as drafted £13,770Diversity153,000£0.0900Kwh £13,770Nett Contribution £9,270Nett Contribution £9,270Scheme 4 = 100kw8,000HoursEfficiency85%340,000Kwh Max OutputBrought down BandEntitled KwhClaimed KwhBalance RateClaim340,000kwh45200,000200,000140,000Kwh£0.090£18,000140,000kwh5001,000,000140,000-860,000Kwh£0.030£4,200-860,000kwh>50020,000,0000-0Kwh£0.020£0Fuel Cost £10,00050.00%TotalAverage Total ClaimRHI Claim as drafted £20,400Diversity340,000£0.0653Kwh £22,200Nett Contribution £10,400Nett Contribution £12,200Scheme 5 = 250kw8,000HoursEfficiency85%850,000Kwh Max Output

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Brought down BandEntitled KwhClaimed KwhBalance RateClaim850,000kwh45200,000200,000650,000Kwh£0.090£18,000650,000kwh5001,000,000650,000-350,000Kwh£0.030£19,500-350,000kwh>50020,000,0000-0Kwh£0.020£0Fuel Cost £25,00050.00%TotalAverage Total ClaimRHI Claim as drafted £51,000Diversity850,000£0.0441Kwh £37,500Nett Contribution £26,000Nett Contribution £12,500Scheme 6 = 500kw8,000HoursEfficiency85%1,700,000Kwh Max OutputBrought down BandEntitled KwhClaimed KwhBalance RateClaim1,700,000kwh45200,000200,0001,500,000Kwh£0.090£18,0001,500,000kwh5001,000,0001,000,000500,000Kwh£0.030£30,000500,000kwh>50020,000,000500,0000Kwh£0.020£10,000Fuel Cost £50,00050.00%TotalAverage Total ClaimRHI Claim as drafted £102,000Diversity1,700,000£0.0341Kwh £58,000Nett Contribution £52,000Nett Contribution £8,000 Scheme 7 = 600kw8,000HoursEfficiency85%2,040,000Kwh Max OutputBrought down BandEntitled KwhClaimed KwhBalanceRateClaim2,040,000kwh45200,000200,0001,840,000Kwh£0.090£18,0001,840,000kwh5001,000,0001,000,000840,000Kwh£0.030£30,000840,000kwh>50020,000,000840,0000Kwh£0.020£16,800Fuel Cost £60,00050.00%TotalAverage Total ClaimRHI Claim as drafted £40,800Diversity2,040,000£0.0318Kwh £64,800Nett Contribution -£19,200Nett Contribution £4,800Scheme 8 = 750kw8,000HoursEfficiency85%2,550,000Kwh Max OutputBrought down BandEntitled KwhClaimed KwhBalance RateClaim2,550,000kwh45200,000200,0002,350,000Kwh£0.090£18,0002,350,000kwh5001,000,0001,000,0001,350,000Kwh£0.030£30,0001,350,000kwh>50020,000,0001,350,000-0Kwh£0.020£27,000Fuel Cost £75,00050.00%TotalAverage Total ClaimRHI Claim as drafted £51,000Diversity2,550,000£0.0294Kwh £75,000Nett Contribution -£24,000Nett Contribution £0Scheme 9 = 1Mw8,000HoursEfficiency85%3,400,000Kwh Max OutputBrought down BandEntitled KwhClaimed KwhBalance RateClaim3,400,000kwh45200,000200,0003,200,000Kwh£0.090£18,0003,200,000kwh5001,000,0001,000,0002,200,000Kwh£0.030£30,0002,200,000kwh>50020,000,0002,200,000-0Kwh£0.020£44,000Fuel Cost £100,00050.00%TotalAverage Total ClaimRHI Claim as drafted £68,000Diversity3,400,000£0.0271Kwh £92,000Nett Contribution -£32,000Nett Contribution -£8,000 Scheme 10 = 2Mw8,000HoursEfficiency85%6,800,000Kwh Max OutputBrought down BandEntitled KwhClaimed KwhBalance RateClaim6,800,000kwh45200,000200,0006,600,000Kwh£0.090£18,0006,600,000kwh5001,000,0001,000,0005,600,000Kwh£0.030£30,0005,600,000kwh>50020,000,0005,600,000-0Kwh£0.020£112,000Fuel Cost £200,00050.00%TotalAverage Total ClaimRHI Claim as drafted £136,000Diversity6,800,000£0.0235Kwh £160,000Nett Contribution -£64,000Nett Contribution -£40,000 Scheme 11 = 5Mw8,000HoursEfficiency85%17,000,000Kwh Max OutputBrought down BandEntitled KwhClaimed KwhBalance RateClaim17,000,000kwh45200,000200,00016,800,000Kwh£0.090£18,00016,800,000kwh5001,000,0001,000,00015,800,000Kwh£0.030£30,00015,800,000kwh>50020,000,00015,800,0000Kwh£0.020£316,000Fuel Cost £500,00050.00%TotalAverage Total ClaimRHI Claim as drafted £340,000Diversity17,000,000£0.0214Kwh £364,000Nett Contribution -£160,000Nett Contribution -£136,000

Note that the revenue spike at the 500kw level is now smoothed out under the Cascade Model

These calculations could be further refined by incorporating elements of “deeming”. Some care needs to be used with deeming in that the deemed requirement of the property or business taking the heat will be lower than that generated to supply that demand due to transmission and generation losses. In district heating scenarios that is all the more so.

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By taking this approach operators may take a more realistic business model when designing schemes.

See original email for graphs.

Observations by Angus Perry, (Vital Energi)Comments: SAP or SBEM may be appropriated for domestic level and small scale commercial. Metered energy supply or energy input is a simpler and more manageable solution. It would also provide valuable actual building energy data against which to benchmark future scheme development.


We understand there is a new SAP being developed. Developers and investors and Installers would need to know what change that might entail. Also certain structures fall outside either method. We agree with the views set out by “Scottish Renewables” in that; “currently the SAP, SBEM and EPC’s are the best methods available to access building heat demand. However these methodologies do not account for regional climatic differences. Scottish Renewables feels that a multiplier should be included to take into account the use of heating degree days. This would give a more accurate interpretation for the specific heat needs of different parts of the UK.”

Question: Q13

Proposal 1) District Heating may be asked to offer supporting evidence of the usable heat.Proposal 2) Schemes outwith of MCS may be asked to offer supporting evidence of use.Proposal 3) Plant replacement be pre-certified by Ofgem based on previous heat consumptionProposal 4) New plant be pre-certified by Ofgem based on the design case.


Comments: Use of metering is the most appropriate method for all levels, for the larger schemes auditing can be employed to minimise any misuse of the system.


We agree there maybe a temptation to over generate heat and dump it when the heat is not required. In order to maintain the credibility of the RHI programme and protect the public purse methods need to be considered to avoid the waste of a valuable resource. With district hating projects a simple audit is available, that is the relationship between heat sales and heat generated.

We have supporting data that suggests the relationship is in the region of 60 % to 70% of heat generated is purchased. When claiming the RHI therefore supporting heat sales evidence could be required perhaps annually.

With non-domestic users we do see the risk that say a larger boiler may be run during times when the heat is not actually required. In discussions an option has emerged that may give peace of mind on this issue.

With the first application for an RHI claim, in the case on displacing existing plant, the claimant could supply evidence of the consumption in the previous years heat usage, by way of example; supply to Ofgem copies of the previous fossil fuel invoices.

Ofgem may then certify RHI that claims to the level +/- 10% of that disclosed would be met if evidenced. For a claim above that figure further evidence must be given that the heat was for usage. This might be done, for an example by evidence of perhaps an increase in production, new facilities having been built, or new connections. This might be referred to as the Ofgem RHI Approval Certificate. (ORAC)

A regards new build developments then we propose that the design case should be submitted to Ofgem for the RHI Approval Certificate (ORAC) which would allow for a margin for error being larger, perhaps 20% to reflect the higher risk to genuine error between the design case and actuality in the real world.

Thereafter Ofgem could certify based on actual claims.

By this pre-certification method investors can see what return a proposal may achieve and then go to the market to raise capital for that investment by using the ORAC with the added benefit to DECC of simultaneously protecting the public purse.

Metering risk is not serious issue as there is a recognised European standards for heat meters.

Question: Q14

22 June 2010 Page 1249 of 1348

Proposal 1) RHI be phased down from the 15 year end pointProposal 2) RHI have a wider range of bands. Proposal 3) Back up boilers not be counted as part of the installed capacity

Observations by Angus Perry, (Vital Energi)Renewable heat from large scale biomass means the use of district heating to distribute the energy over a wide area. District heating networks are expensive to install and the current incentives are proving insufficient in most cases.

Example – There are waste to energy schemes (with biomass component) currently operating with the original design allowing for inclusion of DH networks with potential users in close proximity and large scale biomass generation > 5MWe that operate as pure generation only.

The RHI must provide support to cover network investment and compensate for any RO loss in revenue due to reduction in electrical outputs associated with heat extraction.

Renewable CHP less than 5MWe has a higher capital and operating cost compared with comparable gas schemes. Due to the available technology they also have a high heat to power ratio so can only be practically considered linked to district heating or process which further increases the cost. To open the market for renewable CHP sub 5MWe the RHI must provide support to cover DH network investment.


The cost of District Heating is not a function of the energy generation plant but the distance and terrain between the plant and the consumer. This cost is in the region of £550 per metre installed. It can be seen that it does not take a long distance fro the DH to overtake the plant room costs. This is discussed further in the District Heating response.

We are of the firm view of setting “large scale” as being over 500kw will result in perverse installations on schemes that properly should be specified with larger plant to deal with peak demands, or the splitting of more efficient larger schemes into smaller units with the attendant higher risk of mechanical failure. (See diagrams at end of this response) As set out above, and so as to scale this problem and by way of example: Vital Energi operate a scheme of 50 homes with a 460 kw boiler and a 98 home scheme with a 600kw boiler both with oil back up. (Referred here as Schemes A and B)

Equally; being developed is a 350 home scheme with 4 x 500kw boilers, 2 of which are biomass backups. (Scheme C). As drafted scheme B would be penalised for being over the 500kw yard stick. If being brought forward under the proposed regime Scheme C could have been specified as 4 small schemes with 4 small boiler houses with an increased fossil fuel being used to pump the networks and do the biomass deliveries. This would clearly be unsatisfactory.

We are the firm belief that larger schemes are adversely affected by the present proposal which would result in a unsustainable demand of boilers under the 500Kw line and actively dis-incentivise the ambitions and vision of larger schemes with potentially a much larger reduction in carbon emissions plus a lack of take up in interconnecting schemes. It is suggested that an option developer could select and one that could easily be appended to the proposal would be to scale the RHI on the cost per home (or more properly unit) installed, but this may have an undesirable effect in artificially inflating scheme costs.

Question: Q15


Biogas CHP requires the installation of a system to generate biogas. These are available but expensive and specific to defined markets (municipal effluent treatment, process effluent treatment, farming, etc). The question is should these be supported by other means and drivers?

Question: Q16

Comments: Observations by Angus Perry, (Vital Energi)An air source heat pump is basically a refrigeration system working in reverse; they are not a renewable technology unless using green power produced from another technology!

Observations by Howard Roche (Helix Agencies)We would be concerned that power for which perhaps FIT has been paid is then used to create heat and so garner RHI. We believe this is a waste of the valuable resource of power and agree with the DC21 position as set out in Q7

Question: Q17

Observations by Angus Perry, (Vital Energi)As long as the RHI tariffs calculations take account of the true additional costs when compared against the standard carbon based alternative. The RHI tariffs calculation should include fuel price difference (where appropriate) the additional capital plant and cost, the additional operational and maintenance costs.

Question: Q18

22 June 2010 Page 1250 of 1348


How is it proposed to manage a scheme that uses gas as a back up, either as the prime mover or as a separate boiler installation? We would propose metering on each boiler output.

Question: Q19

22 June 2010 Page 1251 of 1348

Proposal 1) A fixed rate per Kwh will not be adequate.

Observations by Angus Perry, (Vital Energi)District heating is the only vehicle to open the door to biomass CHP and large biomass heat for domestic and commercial premises. However the cost of providing the networks is high so very few will be developed in areas where gas is available.

Observations by Howard Roche (Helix Agencies)As explored above in Q15 there may be a simple way to apply an uplift for the District Heating element based on the cost of the installation measured as cost per kilowatt delivered, as this is not predicated on the size of the boiler but a reflection of how costly and thus how far the consumer is from the source of the heat.

It should also be considered that there is an optimum distance depending on the quality of the heat as further the consumer is from the source the greater the losses (that is cost) in transmitting in both the capital and revenue terms. We have data in support of that proposition.

Below are two hypothetical examples but based on actual scheme data of costs and income streams. It assumes a sales tariff of 6.5p/kwh, (substantially more than using gas ) The sales tariff is nett of sales commissions due to the Point of Sale operator.

Scheme A shows outcomes for a 460 kw 50 home scheme and compared with Scheme B for 89 homes with a 600kw boiler. Note that neither scenario makes an allowance for the use of fuel oil back up which is double the price of woodchip. Scheme AUsing the 460kw boiler the scheme would be on the 6p rate under the RHI “as drafted” Under the “as drafted” scenario the payback is 19 years and under the cascade method 40 years.

The District heating premium required to reduce the payback to ten years the premium would need to be would be 3p/kwh as drafted and under the “Cascade Method” scenario the district heating premium would need to be 5p/kwh. See this response at page 41 for a possible solution using a cascade method.

WoodchipDampness35.00% Scheme A dataunitNumber of Homes50 Heat demand profile 100.00%Forecast Demand 36Gj/homeKwh/ home & scheme10,000.0570,824 Kwh required by DH78%641,026Kwh at Boiler68%942,685 Tonnage forecast 210.44tonnesCubage forecast779.39m3Estimated Deliveries30eachStock at end of month17.60m3 Sales at rate of£0.0627£31,350Maintenance & O&M £28,000Cost of Wood Fuel £98£27,847Margin-£24,497 Actual Diversity18% RHI£56,561£40,281Surplus£32,064£15,784Capital£625,000£625,000Payback in years1940

460kw8,760HoursEfficiency85%942,685Kwh Max OutputBrought down BandEntitled KwhClaimed KwhBalance RateClaim942,685kwh45200,000200,000742,685kwh£0.090£18,000742,685kwh5001,000,000742,6850kwh£0.030£22,2810kwh>50020,000,00000kwh£0.020£0Fuel Cost £0 TotalAverage Total ClaimRHI Claim as drafted £56,561 942,685£0.0427kwh £40,281

Scheme BUsing the larger boiler drops the rate under the RHI “as drafted” to such a level the payback moves out to over 100 years. Using the RHI “Cascade Method” it remains a long way out, but is at least in decades. (see page 41 for further discussion on this issue)


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Under the as drafted scenario to reduce the payback to 10 years then the District heating premium would be 5p/kwh. Under the “cascade” scenario the district heating premium would be 3.5p/kwh. What both examples show is there needs to be a divorce between the boiler and DH elements.

woodchipDampness25.00% Scheme B dataunitNumber of Homes89 Heat demand profile 100.00%Forecast Demand 27Gj/homeKwh/ home & scheme7500.0570,824 Kwh required by DH78%804,193Kwh at Boiler68%1,182,637 Tonnage forecast 237.00tonnesCubage forecast877.76m3Estimated Deliveries38eachStock at end of month216.20m3 Sales at rate of£0.0618£38,734Maintenance & O&M £28,000Cost of Wood Fuel £98£29,471Margin-£18,737 Actual Diversity23% RHI£23,653£40,281Surplus£4,916£21,544Capital£625,000£625,000Payback in years12729

600kw8,760HoursEfficiency85%1,227,022Kwh Max OutputBrought down BandEntitled KwhClaimed KwhBalance RateClaim1,227,022kwh45200,000200,0001,027,022kwh£0.090£18,0001,027,022kwh5001,000,0001,000,00027,022kwh£0.030£30,00027,022kwh>50020,000,00027,022-19,972,978kwh£0.020£540Fuel Cost £0 TotalAverage Total ClaimRHI Claim as drafted £24,540 1,227,022£0.0396kwh £48,540

When banding the boiler sizes in the RHI as drafted we see it is flawed when considered in a District Heating context. As set out Q12 generation capacity is required far beyond what the average demand is, in order to illustrate this, the chart below shows the diversity of a real life scheme. Whilst the demand varies widely, it is possible that all the residents will draw heat at the same time even if only for a short period. In a District Heating context the banding in the Consultation will result in schemes not being developed.

We have proposed similar cascade below (page 41) for DH but anticipate more detailed work will be required.

See original email for tables

Observations by Angus Perry, (Vital Energi)An uplift tariff needs to be set for all district heating that clearly defines what level of RHI payment is available and what the eligible criteria is. Without any definition development of district heating networks will be limited to say the least.

Observations by Howard Roche (Helix Agencies)By using a cost per unit installed mechanism then the RHI as set out in Q15 could be properly reflected in the project and would in turn give an element of case by case, as once that cost was calculated both developer and regulator would clearly be able to discern the efficacy of any proposition. However we do accept the DECC view that any mechanism needs to be simple and transparent.

As illustrated by Q20 then the level of support will need to be at the bottom rate of expectations be at least 3.5p/kwh. The capital cost shown in the examples was incurred before the collapse in Sterling exchange rates and the bulk of the capital cost is for pipelines and boilers imported from Europe. Early indications show the rang of support to be in the region of 6p/kwh to 9p/kwh if a rate of return of 12% is to be achieved.

Question: Q21

22 June 2010 Page 1253 of 1348


In the property market there is the principle in letting of upwards only rent reviews. In all studies there is shown to be only marginal risk of energy prices deflating. In the terms of Renewable Heat there is a further constraint on the economics. It should be recalled in the 17th Century the British Isles practically ran out of usable forestry due to the production of charcoal for iron production. It is inevitable that biomass prices will increase if only to follow the trends as set out in the Ofgem “Project Discovery” report.

Work done by DC21 and Andrew Nichol a chartered forester and work by the Forestry Commission has given clear indications as to restrictions on availability of existing forestry to supply what has the potential to be a burgeoning market.

The construction of some very large biomass power only generation plants are clear indicators of the stress the market will suffer. This will manifest itself in higher biomass prices which could easily undermine the ability to achieve the target penetration particularly since coal prices may well remain static.

There is a measurable risk that the market will stall if biomass prices get out of hand, there will also be pressure to take in supplies from sources that are not sustainable. Whilst is recognised that the EU is developing a biomass sustainability standard it is not clear how in the real world smaller operators can be made to comply.

It is a concern that individual home owners may take in supplies of biomass say from rain forest products unless DEFRA or others apply controls on the import of those materials. Reputable operators will wish to comply and be obliged to comply by way of contract.

Therefore we would be of the view that Government should make this promise: “The RHI is under constant review but guarantees the minimum rate will not fall below the original tariff accorded to a given project.”

This will encapsulate the better aspects of “grandfathering” but allows for Ofgem to vary the scheme rates if biomass inflation outstrips say coal and that avoids schemes either failing or convert back to coal.

We have a concern that at the end of the 15 year period discussed on page 47, as to how larger scale operators undertake the tariff transition without impacting on annual inflation rates as they move to a non RHI environment given that the equipment is by this stage beginning to age and from the data in the Consultation makes no allowance (as far as we can see) for sinking funds to replace the equipment at the end of its useful life but assumes a simple return on the capital invested of 12%.

See original email for graphs



It is unlikely that the capital cost of equipment used in heat generation will decrease as the inherent engineering does not allow for the type of mass production that printing solar cells might afford to the market or a reduction in the amount of material used in the equipment.

Question: Q23

AgreeQuestion: Q24

Observations by Angus Perry, (Vital Energi)Through degression Q23, as take up increases reduce future tariffs

Question: Q25

AgreeQuestion: Q26


Changes that may require a review may be large increases in fuel, energy or finance charges. A review may also be required in the event of large scale de-forestation.

Question: Q27

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Observations by Howard Roche (Helix Agencies)Existing early adopters are facing numbers of difficulties as they committed early before the market skills gave certaintity of outcome. Numbers of schemes have already been moth balled or removed entirely, such as the scheme in Orkney. Designs have in some cases been poor and assumptions over optimistic. What would indefensible is that schemes that are at risk are converted to fossil fuel. Notable examples are Orkney which is converting back to electricity and Wick in which the generation technology (biomass CHP) never worked though the DH network is working well, albeit on oil.

It is a concern that a project such as Wick, which now requires large scale “refurbishment” and “repair” would not qualify. This could be addressed on a case by case basis as there are few early schemes.This is a real risk as many of the early adopters are Housing Associations and other public bodies and have a duty to avoid loss or at the least not pass it across the organisation. It is these bodies that have allowed the market to develop its skill that the RHI now requires. We suggest it is not equitable or desirable to place these early adopters at a competitive disadvantage.Furthermore there then is the difficulty of how the RHI would manage an extension to an existing scheme and how it discriminates tariff between parts of the scheme that obtained RHI which offers a return on the investment capital and those parts of the scheme which may have been grant aided to no more than 50% of that capital cost. The edict that one can have either the grant or the RHI does not reflect the commercial reality that many of these schemes find themselves. They do not have the reserves to refund the grant and in any event they only ever got 50% of the original cost at best. A reasonable resolution and giving equity between the players would be to suggest, by way of example, if the project obtained (say) 40% of its capital cost by way of a grant in the past then it could qualify for 60% of the RHI. The duty would be on the operator to demonstrate to Ofgem that percentage rate.Guidance by EU commissioners on State Aid support states:Where the investment aid for renewable energy sources is to be given to SMEs, the aid intensity may be increased by 10 percentage points for medium-sized enterprises and by 20 percentage points for small enterprises, as set out in the table “Aid intensity for renewable energy sources”

Small enterprises 80 %Medium-sized enterprises 70 %Large enterprises 60 %

Where the investment aid is granted in a genuinely competitive bidding process on the basis of clear, transparent and non discriminatory criteria, effectively ensuring that the aid is limited to the minimum necessary for delivering maximum renewable energy, the aid intensity may amount to up to 100 % of the eligible investment cost as defined in points 105 and 106.

We suggest DECC may consider certifying existing schemes eligibility to RHI and a reduced rate or at a rate that over time refunds previous grants in order to comply with guidance.This should be a welcome fillip to existing schemes and defray claims between operators in general and consumers in particular at those schemes that the RHI has not warped the renewable energy sector in the favour of new entrants. This would also demonstrate to investors that the government is willing to reward risk equally. Schemes that we are aware of affected in this way are, West Highland HA at Glenshellach, Fyne Homes at Lochgilphead, Skye and Lochalsh HA at Portree, CHAP at Wick, Three Gardens Elmswell, Lasswade Road, Edinburgh. DECC might, on the basis of cost, require that to obtain the RHI supplement envisaged that there has to be domestic consumers on the scheme and that the operator addresses in part some of the criteria being part of the “target group” and there is a social housing element in order to qualify.

Question: Q28


Would suggest that the smaller units obtain payment on the supply of a copy that the annual maintenance has been carried out or fuel supply invoices. Perhaps these might be submitted at 5 yearly intervals but available for inspection on demand of the Regulator

Question: Q29

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Q30: Do you agree with our proposed overall approach to setting the level of the uplift? Can you provide evidence that would help us to determine the level of uplift? Observations by Howard Roche (Helix Agencies)

As explored above in Q15 there may be a simple way to apply an uplift for the District Heating element based on the cost of the installation, as this is not predicated on the size of the boiler but on how far the consumer is from the source of the heat.

It should also be considered that there is an optimum distance depending on the quality of the heat as further the consumer is from the source the greater the losses (that is cost) in transmitting in both the capital and revenue terms. We have data in support of that proposition.

We are of the view of setting “large scale” as being over 500kw will result in perverse installations on schemes that properly should be specified with larger plant to deal with peak demands, or the splitting of more efficient larger schemes into smaller units with the attendant risk of mechanical failure. To scale this problem and by way of example: If we refer above to the examples, Scheme 1 and 2 above, 50 homes with a 460 kw boiler and a 100 home scheme with a 600kw boiler both with oil back up.

A new Scheme 3 is a 350 home scheme with four 500kw boilers, two of which are biomass backups. The latter two schemes would be penalised for being over the 500kw yard stick. If being brought forward under the proposed scheme the latter project could have be specified as 4 small schemes with 4 small boiler houses with an increased fossil fuel being used to pump the networks and do the biomass deliveries.

It is suggested that an option that could easily be appended to the RHI proposal would be to scale the RHI on the cost per home (or more properly unit) installed.

This in turn would encourage newer technologies to take part as many of these in order to be technically viable are over the 50kw line, especially in the matter of biomass CHP. This could be achieved by open book disclosure to Ofgem but under a notice of commercial confidentiality.

By this means larger, but more ambitious schemes with larger carbon savings might be undertaken and found to be financeable as the revenue stream be based on the actual capital expended per unit rather than on the simple size of the boiler plant room and would cover projects that might consider exploiting low grade process heat that may need to travel a substantial distance by a pipeline to the consumer.

Using this model we might be able to contemplate taking heat from out of town (peripheral) Energy from Waste sites or power stations to urban conurbations. In these scenarios we make it viable to use the heat that would otherwise be simply dumped due to the cost of transmission infrastructure. For example: Assuming an annual take up in a domestic home at the 10,000 kwh per year (unit) we could consider using the presently proposed tier 1 in the following way to set a District Heating Premium (DHP);

Tier 1, RHI DHP of 9p per kwh generated should the installation cost exceed say £1 per Kwh of anticipated annual demand in that unit. (Installed cost exceeds £10,000 per consumer) Tier 2, RHI DHP of 6.5p per Kwh generated should the installation cost say £0.5 per unit and above. (Installed cost exceeds £5,000 per consumer)

Tier 3 RHI DHP of 2.5p per Kwh generated if it was to cost less than £0.5p per Kwh (£5,000) to install.

This could address the desire of the RHI to cover the actual capital cost rather than what the boiler might cost and encourage novel and more efficient use of existing generation plant and the development of new plant. This could be part of a cascade explored below having the advantage of being easy to manage by Ofgem and also giving Ofgem to develop models of best practice over the life of the RHI legislation.

Setting this premium could be achieved by open book disclosure to Ofgem but under a notice of commercial confidentiality. We appreciate DEC are constrained by the EU Guidance on acceptable state aid which for District heating is; Where the investment aid for energy-efficient district heating is to be given to SMEs, the aid intensity may be increased by 10 percentage points for medium-sized enterprises and by 20 percentage points for small enterprises, as set out in the table; Aid intensity for energy-efficient district heating using conventional sources of energySmall enterprises 70 %Medium-sized enterprises 60 %Large enterprises 50 %(123) Where the investment aid is granted in a genuinely competitive bidding process on the basis of clear, transparent and non discriminatory criteria, effectively ensuring that the aid is limited to the minimum necessary for achieving the maximum energy saving, the aid intensity may amount to up to 100 % of the eligible investment cost as defined in points 124 and 125.

An issue not widely addressed within the consultations is the cost of pumping and heat losses. We would suggest for modelling purposes heat losses in the Network based on operational data that it be set at 30%. Also Refer to Q20Can you describe typical district heating networks that would be appropriate as reference networks, and what are their network costs, heat loads, and customer numbers and characteristics? What proportion of the heat load of such networks is typically supplied to hard-to-treat properties? What proportion of the total network of the reference installation(s) supply heat to hard to treat properties? Should we choose one reference network and determine one uplift (in p/kWh) applicable to all sizes of networks, or should there be several based on a number of differently sized reference networks?Observations by Howard Roche (Helix Agencies)There is no direct proportion. Some projects are for wealthy homes, others not, some are easy to install others are not. Some use biomass, Energy from waste and gas By way of example from the Vital Energi Portfolio:Example 1 : 89 Home Social Housing Scheme, including biomass boiler house and HIU’sContract Value: £625,000


22 June 2010 Page 1256 of 1348

Timescale: Phase 1 - June - Nov 04, Phase 2 - July 06 - Feb 07Client: West Highland Housing Asso.Cost per dwelling £7,022Example 2: 225 Homes Social Housing Scheme, excluding boiler house work and HIU’sContract Value: £215,640Client: Oldham Metropolitan Borough Council Timescale: Sept - Dec 2002Cost per dwelling £958Example 3: 26 Homes, Social Housing Scheme including biomass boiler house and HIU’sContract Value:£245,000Client: Orwell Housing AssoTimescale: Apr 07 - Aug 08 Cost per dwelling £9,423Example 4: 49 Homes, Social Housing including gas boiler house, CHP and HIU’sContract Value: £425,000Client: Presentation Housing Timescale: Apr 06 - Oct 06Cost per dwelling £8,673Example 5: 80 Homes Social Housing including gas boiler house and HIU’sContract Value: £500,000Client: Countryside in PartnershipTimescale: Apr - Dec 03 Cost per dwelling £6,250 Example 6: 620 New Housing mixed use Development/ Biomass & CHP Energy Centre and HIU’sContract Value: £3,000,000Client: St James HomesTimescale: 2007Cost per dwelling £4,839

Example 7: 26 Homes, Social Housing Scheme including biomass boiler house and HIU’sContract Value: £925,000Client: Lochalsh & Skye HA Timescale: June 07 - Feb 09Cost per dwelling £7,227

Example 8: 358 Homes, Private Housing Scheme including biomass boiler house and HIU’sContract Value: £2,000,000Client: The Carvill Group Timescale: May 07 - Sept 08 Cost per dwelling £5,558

The indication is that the cost of adopting a district heat solution is a cost to the developer in the region on the above schemes excluding the Oldham small scale pipe only project is £7,000 per property.

Assuming a gas combi boiler is £1,000 and the additional boiler costs are £1,000 per property which is covered by the RHI directly the implication is the additional cost of the network and HIU’s (Hydraulic Interface Unit) is £5,000.

If we assume a life expectancy of 15 years and an annual consumption of 10,000kwh per annum, the cost excluding finance charges is 3.3p/kwh over the life of the scheme. It might be reasonable to suggest a flat rate District Heating Premium of 3.5p/Kwh including finance charges if the contract was “granted in a genuinely competitive bidding process on the basis of clear, transparent and non discriminatory criteria”, otherwise the rates would have to be reduced as set out in EU guidance table set out on page 35. However as explored on page 28 this is not attractive in at least 2 casesNote that these prices are taken before the fall in the Stirling/Euro exchange rate decline, estimated to have cost 35% additional cost on pipe works.

Comments on DH and Scheme Boundaries

The diagrams below, based on actual schemes, illustrate some issues that the RHI as drafted forms when combined with district heating by its reliance on a “stepped” rate, in particular the 500kw step.

The cascade concept may avoid part of this as it could be argued that the cascade starts at the point the first generator (boiler) joins to the network regardless of where the connection is made.

TeConsidering a District Heating CascadeAs discussed in Q30, the issue with District Heating is distance. An additional factor is population density. This is illustrated in the diagrams above. The blue line can be almost any distance between point of generation and the population. What is true is that the larger the generation point the

22 June 2010 Page 1257 of 1348

further it is from the population, often as a function of planning and environmental considerations.Also to note is very small schemes can use lower quality pipeworks. We have tried to reflect that at the 45kw level in a lower cost per metre. Larger schemes need more valving and stronger pipes (usually steel) and more insulation to compensate for the increased potential for thermal losses.The model explored on pages 43 and 44 uses the same generation levels as the tier points in the cascade as the boiler values explored on pages 20 and 21 but now include a district heating premium. What we have sought to achieve is a payback within 8 years so as to be attractive to investors and financiers. DC21 experience suggests commercial users of renewable energy require a payback within 12 years at the outer limit plus a return on capital. The graph below shows how many metres of pipeworks could be installed with a payback within 8 years, smaller and larger schemes payback more quickly, using a cascade of the following values:5p/kwh for the first 200,000Kw/h, 4p for the next 1,000,000 kwh and 3p thereafter. Note these values are measured at the point the heat leaves the energy centre.The costs align reasonably well with existing schemes and present costs.What the model shows is that energy centres on larger schemes could afford to be further from the population. 45kw8,000HoursEfficiency85%153,000Kwh Max Output

Brought down BandEntitled KwhClaimed KwhBalance RateClaimDHP rateClaim153,000kwh45200,000153,000-47,000kwh£0.090£13,770£0.050£7,650-47,000kwh5001,000,0000-1,000,000kwh£0.030£0£0.040£0-1,000,000kwh>50020,000,0000-20,000,000kwh£0.020£0£0.030£0Fuel Cost £4,50050.00%TotalAverage Total ClaimTotal ClaimRHI Claim as drafted £13,770Diversity153,000£0.0900kwh £13,770£7,650Nett Contribution £9,270Nett Contribution £9,270Homes on Network6Metres of pipe80Payback5.23Cost per metre500Cost of network£40,000Cost per home£6,667100kw8,000HoursEfficiency85%340,000Kwh Max Output

Brought down BandEntitled KwhClaimed KwhBalance RateClaimDHP rateClaim340,000kwh45200,000200,000140,000kwh£0.090£18,000£0.050£10,000140,000kwh5001,000,000140,000-860,000kwh£0.030£4,200£0.040£5,600-860,000kwh>50020,000,0000-20,000,000kwh£0.020£0£0.030£0Fuel Cost £10,00050.00%TotalAverage Total ClaimTotal ClaimRHI Claim as drafted £20,400Diversity340,000£0.0653kwh £22,200£15,600Nett Contribution £10,400Nett Contribution £12,200Homes on Network16Metres of pipe220Payback7.05Cost per metre500Cost of network£110,000Cost per home£6,875250kw8,000HoursEfficiency85%850,000Kwh Max Output Brought down BandEntitled KwhClaimed KwhBalance RateClaimDHP rateClaim850,000kwh45200,000200,000650,000kwh£0.090£18,000£0.050£10,000650,000kwh5001,000,000650,000-350,000kwh£0.030£19,500£0.040£26,000-350,000kwh>50020,000,0000-20,000,000kwh£0.020£0£0.030£0Fuel Cost £25,00050.00%TotalAverage Total ClaimTotal ClaimRHI Claim as drafted £51,000Diversity850,000£0.0441kwh £37,500£36,000Nett Contribution £26,000Nett Contribution £12,500Homes on Network42Metres of pipe500Payback7.64Cost per metre550Cost of network£275,000Cost per home£6,548500kw8,000HoursEfficiency85%1,700,000Kwh Max Output Brought down BandEntitled KwhClaimed KwhBalance RateClaimDHP rateClaim1,700,000kwh45200,000200,0001,500,000kwh£0.090£18,000£0.050£10,0001,500,000kwh5001,000,0001,000,000500,000kwh£0.030£30,000£0.040£40,000500,000kwh>50020,000,000500,000-19,500,000kwh£0.020£10,000£0.020£10,000Fuel Cost £50,00050.00%TotalAverage Total ClaimTotal ClaimRHI Claim as drafted £102,000Diversity1,700,000£0.0341kwh £58,000£60,000Nett Contribution £52,000Nett Contribution £8,000Homes on Network85Metres of pipe850Payback7.79Cost per metre550Cost of network£467,500Cost per home£5,500

600kw8,000HoursEfficiency85%2,040,000Kwh Max Output

Brought down BandEntitled KwhClaimed KwhBalanceRateClaimDHP rateClaim2,040,000kwh45200,000200,0001,840,000kwh£0.090£18,000£0.050£10,0001,840,000kwh5001,000,0001,000,000840,000kwh£0.030£30,000£0.040£40,000840,000kwh>50020,000,000840,000-19,160,000kwh£0.020£16,800£0.030£25,200Fuel Cost £60,00050.00%TotalAverage Total ClaimTotal ClaimRHI Claim as drafted £40,800Diversity2,040,000£0.0318kwh £64,800£75,200Nett Contribution -£19,200Nett Contribution £4,800Homes on Network100Metres of pipe1,000Payback7.31Cost per metre550Cost of network£550,000Cost per home£5,500

22 June 2010 Page 1258 of 1348

750kw8,000HoursEfficiency85%2,550,000Kwh Max Output

Brought down BandEntitled KwhClaimed KwhBalance RateClaimDHP rateClaim2,550,000kwh45200,000200,0002,350,000kwh£0.090£18,000£0.050£10,0002,350,000kwh5001,000,0001,000,0001,350,000kwh£0.030£30,000£0.040£40,0001,350,000kwh>50020,000,0001,350,000-18,650,000kwh£0.020£27,000£0.030£40,500Fuel Cost £75,00050.00%TotalAverage Total ClaimTotal ClaimRHI Claim as drafted £51,000Diversity2,550,000£0.0294kwh £75,000£90,500Nett Contribution -£24,000Nett Contribution £0Homes on Network125Metres of pipe1,300Payback7.90Cost per metre550Cost of network£715,000Cost per home£5,7201000kw8,000HoursEfficiency85%3,400,000Kwh Max Output

Brought down BandEntitled KwhClaimed KwhBalance RateClaimDHP rateClaim3,400,000kwh45200,000200,0003,200,000kwh£0.090£18,000£0.050£10,0003,200,000kwh5001,000,0001,000,0002,200,000kwh£0.030£30,000£0.040£40,0002,200,000kwh>50020,000,0002,200,000-17,800,000kwh£0.020£44,000£0.030£66,000Fuel Cost £100,00050.00%TotalAverage Total ClaimTotal ClaimRHI Claim as drafted £68,000Diversity3,400,000£0.0271kwh £92,000£116,000Nett Contribution -£32,000Nett Contribution -£8,000Homes on Network170Metres of pipe1,600Payback7.59Cost per metre550Cost of network£880,000Cost per home£5,1762000kw8,000HoursEfficiency85%6,800,000Kwh Max Output

Brought down BandEntitled KwhClaimed KwhBalance RateClaimDHP rateClaim6,800,000kwh45200,000200,0006,600,000kwh£0.090£18,000£0.050£10,0006,600,000kwh5001,000,0001,000,0005,600,000kwh£0.030£30,000£0.040£40,0005,600,000kwh>50020,000,0005,600,000-14,400,000kwh£0.020£112,000£0.030£168,000Fuel Cost £200,00050.00%TotalAverage Total ClaimTotal ClaimRHI Claim as drafted £136,000Diversity6,800,000£0.0235kwh £160,000£218,000Nett Contribution -£64,000Nett Contribution -£40,000Homes on Network360Metres of pipe3,000Payback7.57Cost per metre550Cost of network£1,650,000Cost per home£4,583

5000kw8,000HoursEfficiency85%17,000,000Kwh Max Output Brought down BandEntitled KwhClaimed KwhBalance RateClaimDHP rateClaim17,000,000kwh45200,000200,00016,800,000kwh£0.090£18,000£0.050£10,00016,800,000kwh5001,000,0001,000,00015,800,000kwh£0.030£30,000£0.040£40,00015,800,000kwh>50020,000,00015,800,000-4,200,000kwh£0.020£316,000£0.030£474,000Fuel Cost £500,00050.00%TotalAverage Total ClaimTotal ClaimRHI Claim as drafted £340,000Diversity17,000,000£0.0214kwh £364,000£524,000Nett Contribution -£160,000Nett Contribution -£136,000Homes on Network450Metres of pipe4,800Payback5.04Cost per metre550Cost of network£2,640,000Cost per home£5,867

651 Wood Recyclers’ Association NGO

Yes

P11, penultimate para. You should also state that biomass wood is obtained from post-consumer wood sources.

Question: Q01

Yes

Question: Q02

Yes

AgreeQuestion: Q03

Yes

AgreeQuestion: Q04

Yes

AgreeQuestion: Q05

22 June 2010 Page 1259 of 1348

Yes

AgreeQuestion: Q07

Yes

AgreeQuestion: Q08

Yes – but see comment below

P33. So far sustainability reporting has presented no problems as the requirements are very generalised. However, the requirement to comply with the new sustainability criteria, once designed, could be very different. There must be full consultation with the supply base, including that for waste-based fuels. We propose that the final use of any waste for energy production is better in all respects than consignment to landfill.

AgreeQuestion: Q09

Yes

Question: Q10

Yes

AgreeQuestion: Q12

Yes

AgreeQuestion: Q13

Yes

Question: Q14

P48. Under current circumstances the half-ROC equivalent seems to work as an incentive. It seems possible that future shortages of biomass will result in large-scale users facing very steep fuel cost increases. In these circumstances large users may need higher incentives.

Question: Q15

Yes

Question: Q18

Yes

Question: Q19

Yes

AgreeQuestion: Q20

Yes

Question: Q21

Yes

Question: Q22

Yes

AgreeQuestion: Q23

Yes

AgreeQuestion: Q24

Yes

AgreeQuestion: Q26

Yes

Question: Q29

22 June 2010 Page 1260 of 1348

Yes

Question: Q30

653 Thomas Tait (individual) Potential generator

22 June 2010 Page 1261 of 1348

As requested here is a version electronically of my response to your Renewable Heat Incentive consultation. When are we likely to get some feed back on progress?? This is important as it is at such a stage at the moment we cannot go to customers with some sort of credibility and is slowing up instalations. We have already had on of the installers "cease trading" and apply for bankruptcy protection. A second is considering their future but I doubt if they have enough money to keep them afloat if we have a long period of inertia. Please do everything to speed up the process and in particular to agree to using EN303-5 for triggering payments at least for first 5 years as once the market has grown to a size that it is worth fighting over as I believe it will then we can if thought with the benefit of experience tighten up and move on to MCS standards.

[Introductory comments from the original response of 13 April:]

I have always had an interest in Renewable Energy since I was 15 years old and went to Sweden with my father and saw a pulp mill tearing off the bark off logs and using the bark as a fuel. During my working career running a paper mill for over 32 years and replacing the CHP plant twice in that time gave me a lot of experience and encouraged my interest in energy. The latter one involved installing and running 2 * 5.3mw gas turbines, Heat recovery with Supplementary fueling and an 11 mw Electrical output back pressure turbine. After a takeover with the new owners in turn being taken over 7 years later and a major reorganisation and centralisation of many features I left the paper mill. After a lot of research and study tours of Scandinavia, Germany, Austria etc almost 18 months ago along with another entrepreneur - Bryan Harper of Harper Contracts, Insch, Aberdeenshire - we, after getting a £400,000 grant from the Scottish Government, set up Puffin Pellets – a large wood pellet making plant near Banff, Aberdeenshire - and feel we are particularly well placed to respond to your Renewable Heat Incentive Consultation Paper. In addition to the above we are as a fuel supplier (wood pellets) exposed to all sectors of our industry and almost every supplier, we feel our comments should carry more weight. In the UK using biomass to create heat certainly is still very much an embryo industry and as an example many in the industry believe there will be about 300 instillations only in the UK as against 80,000 in Germany this year!! I have no reason to doubt this are there are only 9 accredited MCS installers in the whole of Scotland (after Grampian Heat and Power deciding to cease trading recently – the third such closure). Indeed we believe it will be a lot less with the insistence of Using MC accredited equipment. En 303-5 should be accepted and evaluated in 5 years to see if still appropriate. This will bring in many equipment competitors and by offering choice of equipment nearby installers should can have a separate offering.

The Scottish Government has also encouraged 4 other plants as well as us ie a total of 5 Wood Pellet plants now operate in Scotland and there are also a few south of the border to the extent that the United Kingdom from having insignificant capacity to make Wood Pellets and having to import now has so much excess capacity that the industry is operating well below 50% with some pundits suggesting this is as low as 15% with all the plants loosing huge sums of money so any delay in getting this legislation live will be most unwelcome and may lead to some ceasing to operate and the equipment scrapped. The combined current capacity is enough to heat 50,000 typical homes in Scotland and a number of us could expand significantly easily. As you can therefore appreciate we are all desperately looking for this legislation to be implemented ASAP and a high value fossil fuel levy to fund the RHI payments to further encourage switching of fuel source so there is much to commend it. In addition to environmental benefits of Wood Pellets they are domestically produced from UK raw materials providing much needed rural jobs, creating a market for low grade wood and thereby helping the general economy and if for no other reason the UK should be encouraging the development of Biomass and in particular Wood Pellets for this reason. The industry has been waiting for this legislation for some time and we desperately require actual figures and actual restrictions so we can go to potential customers that have in the past shown interest and show them the benefit of switching heat source. Please please speed up this process and simplify it as much as possible. Finally as an opening note we think also it is a disgrace something that is clearly damaging the environment and creating Global Warming, fossil fuels in the UK enjoy the subsidized level of 5% VAT on domestic consumption and this low rate should only apply to renewable fuels such as Wood Pellets which would accelerate switching again away from Fossil fuels towards renewables!!

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What we – the industry - need desperately is to get the whole thing sown up so we can go to people that have shown an interest in installing say Wood Pellet boiler and show them the benefit of RHI. Hopefully we would have a high take up – I expect we would. We can at same time plan a marketing campaign and how we broadcast this information maximising its benefit to our individual companies and sectors they work within. At the moment it is so onerous and difficult with MSC we don’t have a range of product to offer that is attractive so please please resolve soon and allow EN303-5 as the standard at least for the first 5 years to get the revolution under way. Also we need desperately to get proposed detail and should be worked on late into evening, holidays and weekends to have this legislation completed ASAP. At the moment it is too “airy fairy” to go to customers - even farmers that understand how important grants can be!!Finally as far as I can see MCS is an extremely expensive scheme – even registering installations is twice that of GAS SAFE, £250 for a change of address etc and is doubtful if they have an adequate complaints procedure for users to register and have followed up to squeeze out the “rogue” installer!! I do not know of how you make a complaint against say an MCS installer and that the complaint procedure should be transparent and easy to use!!


22 June 2010 Page 1262 of 1348

Developers, designers, builders etc should be forced to adopt non fossil fuelled heating for new buildings whether houses, shops, offices, factories etc even for low heat requirement buildings where more than the minimum insulation standard has been used. We have held numerous discussions with builders and all have concluded if it is going to cost them more to build the houses with say a wood pellet boiler instead of a gas or oil boiler then as long as they are allowed to build houses and included a fossil fuel boiler that is exactly what they will do!! It would require a redesign of their houses and slightly enlarging the house footprint to accommodate the wood pellet store or one of the houses on “release” to have a basement for the pellet store and boiler and a small district scheme (in large developments houses are “released for sale” in small groups of 6 to 12 houses and makes it impractical to have one large central wood Pellet boiler for say the 500 house development because of the releases process as for a start the heat demand will be too low to practically operate the heating plant as it will be designed for the final number of houses). This with few exceptions would be new to the UK so again the conservatism of the builder rules this out despite this being the norm in many of the Scandinavian and European countries. We have heard builders/developers say they cannot get small enough boilers to fit small well insulated houses these days but this is absolute rubbish as you can get boilers with as low output as 7kw that modulate down to 2kw. Thereafter they can shut down and go on to standby with easy relights when necessary. In other words just like any other small boiler.

To force the builder through legislation to install non fossil fuel boilers would in addition let the public in this country see such installations and hear how good they are and get them interested in converting their own house particularly when they hear about the incentive payments and the lower fuel costs.

Question: Q01

Payments for domestic boilers do not appear to being made till end of first year. We believe payments should be made within the first month ie payments should be upfront as we believe the feel good factor of getting their first payment will encourage them to tell their friends how good their new boiler is and how much lower a heating cost and “I got my first payment almost immediately the boiler started”. It also confirms the registration process has been completed correctly confirms all registered etc. Remember that there possibly will have a few issues till the boiler “settles down” so a little sweetener would be good. This is not a time to be stingy. It is a time to be generous that always could be changed after the critical first say 5 years.

Question: Q03

22 June 2010 Page 1263 of 1348

This is the most important point in the whole exercise!!

One of the major bottlenecks that has prevented the industry from being in a stronger position currently than it is is the Micro - Generation Certification Scheme. Installation numbers have collapsed since MCS took over from “Clear Skies”. The cost of this for both the installer and equipment manufacturer and the amount of additional work it requires to get certified has meant that few have bothered to become Certified Installers or had their boilers certified compared to other countries demands. This has resulted in those that did charging more than necessary and as the UK is still an embryo market the cost has to be spread over a few boilers adding to the cost of the boiler significantly. Currently it would appear that there are only 9 installers in the whole of Scotland according to the MCS web site and only 3 wood pellet boiler manufacturers certified and some of those have a very limited range of boilers and in practical terms that means there is only one boiler manufacturer that is accredited by MCS!! This has resulted in lack of competition and availability of installers and far too high a margin being added on resulting in scaring off a lot of potential customers. One importer claiming to be the biggest installer of Wood Pellet boilers to the domestic market in 2008 when they sold 80 boilers in the UK, dropping to 30 last year and only predicting 20 this year. They were registered under the previous “Clear Skies” scheme!! A scheme is called for we agree but it needs to be simplified, shortened and made easier to get. This should be free to installers and indeed the heating engineer should get paid for his time whilst training. We need to develop this market quickly!! This payment can maybe be faded out in 5 years time or so but is essential to get the motivation in getting all the installers we need to be certified. We also firmly believe the Installer should have been on the companies training program for the particular type of boiler being installed in addition. This has not been the case by an accredited MCS installer and has caused a number of serious problems!! The installer should have to submit to a test from the installer to ensure they are fit and appropriate people installing their equipment at the end of the course having learnt all they can.

On the equipment supply side of MCS many boiler manufacturers have been scared off by the opened ended costs, international travel, time taken up by their technicians etc. This has been particularly off putting for those prepared to sell aggressively with lower margins and is one of the principal reasons why costs are so high of the equipment in the UK. In Sweden where there is almost a mature market for domestic boilers as they have been changing away from fossil fuels since 1974 they have done a good job of bringing out very competitive boilers and competition has hotted up encouraging more advances to keep costs down as the market matured. All the boiler manufacturers are already certified to the international standard EN303-5 for pellet boilers and EN15207 for burners to convert existing boilers from oil or Gas. The pellet manufacturers in Sweden brought in a quality improvement standard to ensure that not only quality was maintained but improved upon for the boiler manufacturer and is called the P mark. This is a lot simpler than the ISO 9001 as it is focused on the business and not a generic scheme to cover many industries and urge you to accept this too!! Surely we can accept the Swedish standards who are an advanced nation and been at it longest. Many other manufacturers also have their boilers certified to EN303-5 eg ETA, Solarfocus, KWB, Swebo, ECOTEC and enclose certificates copies attached from ECOTEC from Sweden. Fortunately it is in English!! We are particularly keen to encourage ECOTEC due to a radical rethink how they can be competitive in a high cost country such as Sweden yet be internationally competitive and they have as a result have about 30% of the Swedish market. We have one of their boilers operating here in the North East of Scotland as a trial and are very impressed with its reliability, its ability to take a wide range of pellets including that from recycled wood which many of the more sophisticated expensive boilers cannot take eg the only accredited boiler on the MCS register!! Indeed ECOTEC have one that can burn grain that may interest some farmers and all at very competitive prices and certified to EN303-5. It does not have the highest % of heat recovery from the fuel but still about 90%. It also has very simple maintenance regime once per month keeping cost of the boiler down. We have repeatedly talked to them about the potential of the British market particularly now that we have RHI under way but back comes the answer that they are not prepared in an embryo market to invest such a large open ended amount of money and get so little back from it. They furthermore don’t see why they should when their boilers are certified to the international standard EN303-5 by such a credible body as they have in Sweden do they have to do it differently for United Kingdom!! Also such countries that are installing large numbers of boilers and biomass heaters such as Germany, Sweden, Austria, Italy, Republic of Ireland etc all accept EN303-5 for “grant” triggering purposes. Please respond to this point.

Personally I cannot blame the certifying bodies – probably BRE - for trying to create something special and benefit themselves from the unnecessary expense of others but it is time it stopped as it is just another cost in this days of international trade and it is Joe Public that pays twice – not only more than he needs to for certification but also reduces competition.

I would like to highlight that there are principally two things holding back this industry. RHI consultation will if it is set according to our current understanding of producing a return of 12%PA solve much of the number one problem of the cost of the boilers but encourages the second major stumbling block MCS to grow and move into the number one position for detracting from installations. Please Please see sense and agree to EN303-5 at least for the first 5 critical years and let us get this market moving. We can see if there are any problems and strengthen the rules.


We are totally against extending the power range for requirement of MCS accreditation. 45 Kw is a huge boiler to fit to a domestic installation so almost certainly such boilers will be for businesses when they should be professional enough to research alternative boilers, ensure they are getting competitive quotes, the boiler is technically capable etc. Their research should take them to a technical ability conclusion further negating the need for MCS. We do not therefore see the need at all for increasing the range of size of boilers requiring MCS accreditation particularly as all these boilers are likely to have been checked to EN303-5 standard.


22 June 2010 Page 1264 of 1348

EN303-5 should be the standard for all biomass boilers etc and not MCS see above. This has been a disaster holding back the development particularly of Wood Chip boilers and more importantly Wood Pellet boilers. Those that have managed to get equipment certified are rightly looking for a return on their investment adding unnecessarily to the cost to investors in the plant many times putting them off. Also there are so few certified it has reduced competition adding to the cost. Some that were certified under Clear Skies – the previous requirement for grant - have decided not to get MCS registered as it was too much money and time consumed to get access to a small user market and concentrated on other countries that accept EN303-5. Most European countries accept EN303-5 and why should we in the UK have separate certification. It has been good for BRE etc financially but is time we moved on and allowed certification through EN303-5 being the trigger for “grant/incentive” payments for the boilers. Most other European countries (EU and others) accept EN303-5 so why should we not do the same!!

Question: Q06

We do not agree that heat pumps and the likes should be included as this is adding to the marginal electricity consumed that all for a long time is going to be manufactured from fossil fuels!! This marginal electricity is the dirtiest appalling stuff!! Why you may as well take coal and burn it in your fireplace at home and create smog etc like we used to have!! Sooner or later people will catch on to this reality and it will get taken off lists for heating home subsidies!! The only way that this should be allowed for “grant/incentive” is that you have your own wind mill producing Electricity on site!!


Again this is a turn off for companies and if you are going to achieve the aim of converting a significant amount of people on to renewables you don’t want to put obstacles in the way. As a result at this early delicate stage I suggest you do not do anything to put people off investing. In any case the boiler manufacturers are well aware of the general public’s wishes and have as a result invested here significantly into research and made amazing progress with the likes of Lambda oxygen control to optimise the burning process etc.

Question: Q09

Please do not put such impositions on the process as this as it will slow up installations dramatically. With the cost savings that are possible on the fuel and deeming it the payments should provide a cash flow to pay for insulation so should happen naturally and what does it matter if they put in a pellet boiler and have poor insulation - all it will hurt is the householders pocket by using more wood pellets than necessary which are virtually renewable and as a result are no longer damaging the environment. It is their choice to take some of the benefit from deeding and invest it in insulation and I think we will see this happening naturally but if it was me and required to insulate as well as put in a pellet boiler at the same time this would definitely would stop me!! Simply it is doing too much at one time or too high an expense at one time and would do nothing other than continue to use more fossil fuels than necessary!!


Bring the regulation forward!! It is as simple as that!! Force the builder/developer to install a wood pellet boiler instead of fossil fuel.I have repeatedly visited builders and all tell me as there is a higher cost most builders will not invest in biomass heat particularly if only an embryo market and not mass market. Just as the insulation standards have had to be legislated to improve insulation in new houses the government should give the builders an order that their new or renovated houses will either have to be heated from a central biomass station or single Wood Pellet boilers for their main heat source. This should have been done a long time ago so let us waste no more time. This will only add about 4% to a typical house – far less than the extra insulation - and could be less if based on mini district heating systems associated with each “release” from the builder.

Question: Q11

Confirm some sense in way suggested. Perhaps there could be an increase in the number of splits as some are not going to be tempted because of being at one end or other end of scale particularly above 500 kw. We totally disagree that ground source heat pumps and the likes be allowed for grant. “Incentives” should only be for solar, biomass, Biogas and Bioliquids. Ground source and the like will add to the electric load and all of this will be marginal electricity as it is consumption that is not necessary. This marginal electricity is the filthiest, most damaging to the environment as it comes from burning coal and when one looks at the cycle to produce heat from it you may as well burn coal yourself!!

Question: Q12

22 June 2010 Page 1265 of 1348

We think this program has been well thought out with one exception and that is how the deeming process works. In reality the fuel Wood Pellets will be lower priced than say oil and with RHI fossil fuel levies on top will make not only oil more expensive but Gas as well so it is not the fuel cost that is holding back renewable low carbon fuel development. It is the extra capital cost and to a much lesser extent space for the pellet store/boiler installation. A good quality gas installation with say a demand for a 30Kw boiler will cost about £4,500 and an oil one about £6,000 and you can get cheaper oil and gas boilers than this!! Because the pellet boiler and wood chip boiler manufacturers normally include various goodies to reduce heat consumption such as weather compensation etc and are built to a higher spec to last longer than oil or gas boilers the wood pellet boiler cost including pellet store will be about £25,000 as they are unlikely to have a suitable pellet store already – a £21,000 extra cost of capital!! We should also face facts that those that are interested will probably have an adequate fossil fuel boiler so it is not the extra cost we should be considering but the full cost of the installation. Therefore we find it very difficult to understand why the support from RHI should be based on the “deemed” amount of KW hours of fuel likely to be used particularly compared to oil as the fuel will work out cheaper and about the same or less for gas particularly after adding the fossil fuel levy. SAP calculations etc I understand take into account typical weather conditions locally but in reality the installations whether in the colder North East of Scotland or the warmer south east of England, they are likely to have the same boiler size and same sized pellet store so as to cope with a cold spell and it can on occasions be equally as cold when the weather pattern is coming out of the east in the winter. Often the existing housing stock is not so well insulated in the south of England again for builders cost reasons that they will certainly need as large a boiler to meet a cold weather pattern from “Russia” in the winter. We therefore think it makes much more logical sense to have the incentive based on the size of the house – the square area - and whether or not it has cavity wall or solid wall construction. This would be so much easier a calculation and not require a specialist to calculate SAP etc values and indeed could be done probably by the heating engineer making the installation. A good installer will do a survey in any case to establish the appropriate sized boiler as often the oil and gas boilers are over sized. This would mean that those houses that have better insulation could have better return on the RHI payments as there will be a fuel saving but surely that is what we should be encouraging in any case so consideration of the SAP values etc seems illogical to us again!! Of course like the SAP figures this needs “policing”. Special consideration for buildings with a large volume inside, such as churches etc, require special consideration and perhaps should be considered on volume basis rather than floor area.

We totally disagree with SAP etc assessments and should be assessed on the area of the house you are heating. It should not take account of where you live in the UK as you can get weather coming in during the winter from Russia that can make Kent and Sussex very cold as examples. Special consideration needs to be made for high buildings such as churches etc. Fuel cost particularly by the time a fossil fuel levy is added even against gas Wood Pellets should be competitive and against oil - typically oil is costing 40% more than Wood Pellets currently. So it is not the cost of fuel for heating the house but the extra cost of the boilers the industry needs help with. We should also bear in mind that many people will be trading out the boiler that are adequate to do the job at the moment but firing fossil fuel so the whole cost should be made eligible for “grant” and not just the extra cost.Finally on this question to rate the house for SAP requires specialists and don’t believe there to be enough trained for this extra work in the UK and feel that square area will be a lot cheaper and not a restriction in developing the market. For instance the Installer will have had to check the square area of the house and insulation quality such as whether the house is solid walls or a Cavity Wall structure in any case to ensure that he has sized the boiler correctly. Policing I would imagine will also be simpler too!!

Question: Q13

We think you should not worry about this and review in 5 years with the benefit of hindsight. Heat meters for hot water have adequate accuracy but for hot air say for heating Chicken Sheds I do not believe the technology is there yet and suggest the fuel input in terms of theoretical input is used times a factor of 90% to account for losses in the heat generating.

Question: Q14

You are really struggling to make financial sense of investing in smaller power plants based on biomass according to a study we did so anything that can stimulate this area should be explored as smaller local CHP’s are the way forward. This struggle is particularly acute because wholesale electric prices have fallen and expectations are low for the future. Large units should be discouraged as it requires a much larger transport distance per tonne of biomass to provide the fuel and can put immense strain on supply chain too affecting other established businesses in the locality and need to apply wider thinking and encourage small plants working on local supply and for local heat consumption. These smaller plants should have 50% minimum efficiency from their raw material input. The bigger plants should have to achieve over 90% utilisation of the raw material input.

Question: Q15

We should not be using ground or air source pumps to create heat as they all add to the marginal electricity which is made with coal or other fossil fuels – the dirties of them all!!

Question: Q17

22 June 2010 Page 1266 of 1348

We think this program has been well thought out with one exception and that is how the deeming process works. In reality the fuel Wood Pellets will be lower priced than say oil and with RHI fossil fuel levies on top will make not only oil more expensive but Gas as well so it is not the fuel cost that is holding back renewable low carbon fuel development. It is the extra capital cost and to a much lesser extent space for the pellet store/boiler installation. A good quality gas installation with say a demand for a 30Kw boiler will cost about £4,500 and an oil one about £6,000 and you can get cheaper oil and gas boilers than this!! Because the pellet boiler and wood chip boiler manufacturers normally include various goodies to reduce heat consumption such as weather compensation etc and are built to a higher spec to last longer than oil or gas boilers the wood pellet boiler cost including pellet store will be about £25,000 as they are unlikely to have a suitable pellet store already – a £21,000 extra cost of capital!! We should also face facts that those that are interested will probably have an adequate fossil fuel boiler so it is not the extra cost we should be considering but the full cost of the installation. Therefore we find it very difficult to understand why the support from RHI should be based on the “deemed” amount of KW hours of fuel likely to be used particularly compared to oil as the fuel will work out cheaper and about the same or less for gas particularly after adding the fossil fuel levy. SAP calculations etc I understand take into account typical weather conditions locally but in reality the installations whether in the colder North East of Scotland or the warmer south east of England, they are likely to have the same boiler size and same sized pellet store so as to cope with a cold spell and it can on occasions be equally as cold when the weather pattern is coming out of the east in the winter. Often the existing housing stock is not so well insulated in the south of England again for builders cost reasons that they will certainly need as large a boiler to meet a cold weather pattern from “Russia” in the winter. We therefore think it makes much more logical sense to have the incentive based on the size of the house – the square area - and whether or not it has cavity wall or solid wall construction. This would be so much easier a calculation and not require a specialist to calculate SAP etc values and indeed could be done probably by the heating engineer making the installation. A good installer will do a survey in any case to establish the appropriate sized boiler as often the oil and gas boilers are over sized. This would mean that those houses that have better insulation could have better return on the RHI payments as there will be a fuel saving but surely that is what we should be encouraging in any case so consideration of the SAP values etc seems illogical to us again!! Of course like the SAP figures this needs “policing”. Special consideration for buildings with a large volume inside, such as churches etc, require special consideration and perhaps should be considered on volume basis rather than floor area.

We include an attachment with some suggestions with some figures based on 12% return for the potential investor based on area.

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We welcome the rate of return of 12% as this should allow significant numbers of projects to become attractive to both private individuals, government bodies and commercial organisations. It should also attract investors to help those that cannot afford the initial capital cost so everyone potentially can be a winner with lower heating costs and helping the environment!!

The tariff structure will cause some specific problems, most notably the reduction in the tariff for biomass from 6.5 to 1.6-2.5p/kWh at 500kW. The reduction in the incentive level of up to 75% indicates that the current scenario assumes that there is a step change in cost at 500kW. We do not agree that this cost reduction exists. This will artificially cause projects to reduce the size of boiler installations. The difference in CAPEX between a 400kW and 600kW biomass boiler is roughly proportional to the output of the system.

As an example, a key market for biomass boilers is in new build secondary schools. Many secondary schools with swimming pools have heating loads in excess of 500kW. For example Wood Energy have installed an 840kW boiler at Walbottle school near Newcastle, we assume that the intent of the scheme would be to reward all sizes of school with the same level of incentive not just the ones with boilers of less than 500kW. To prevent this from becoming a trend we request that an additional band for biomass boilers in the range of 500kW to 1MW be created. This additional band would prevent smaller biomass boilers being installed and so increase the carbon savings of the scheme. Similarly there should be another break from1 to10MW say at 4.5p/kw and 10 to 20MW 3.5p/kw beyond this level up to 50MW should be 2.5p/kwhr. Thereafter we should be encouraging them to generate electricity and pick up subsidies there.


Yes we very much believe that additional funds should be paid for district heating particularly for adding to existing properties. This potentially is the best way forward for town dwellers particularly in high densities. I thoroughly recommend you make a study tour of how it works in Sweden who have by far the largest number of installations and are still adding to them. This is one of the major reasons why Sweden has one of the highest amounts of renewable in their energy mix in the world.

AgreeQuestion: Q20

All forms of district heating should be encouraged as they can have a true CHP plant producing heat and electric attached to them if they are big enough. Vital Energy should also be consulted as one of the leading engineers in the field of District Heating.

Question: Q21

Yes we agree and as it is to offset the capital cost then payments should be fixed. Afterall the investment is going to have to be made up front for all of the period of time the boiler is going to remain in use.

Question: Q22

Yes we agree that Degression should not be included – a deal is a deal and that is what everyone agreed to at the beginning. Depending on the uptake say in 5 years time you could look at the take up and decide whether the 12% return needs to be increased or reduced. Personally we believe even if seen as generous it will only mean more people switching and surely that is what everyone wants to help the environment and economy.

AgreeQuestion: Q23

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When new technology is introduced it should be immediately evaluated to see if it can be brought under the RHI heading at any time. We want to encourage these ground breaking technologies so make it easy to get established and may actually lead to them being built in UK!! Make it easy!!


Everyone is looking for this “holy grail” both for solar thermal heat and electricity to make it more efficient and lower cost and I don’t think we need to help. The opportunity on winning is so great that it will happen in any case particularly where there is a good tax regime for technological advances. We do not believe the government do enough to create an environment to encourage R and D but that is probably beyond our remit.

Question: Q25

We agree with your approach to reviews. However you should always respect that when the decision was taken that was the deal and a certain amount of risk is involved so the benefit should be there and any change down in benefit should only be for future installations but if not an adequate return on investment then it should be for everyone immediately. However if generous it will encourage the revolution to speed up and surely that is what we want to help the environment and economy. We need to get this industry going!!

AgreeQuestion: Q26

Emergency reviews should always be possible, for instance if you continue with MCS and it is more fully understood that this is a disastrous scheme by others and is making things too difficult for suppliers then make the change the first Monday morning no later!! In any case we should take the simplest scheme possible to encourage suppliers to come and compete here and at a later stage if you need to toughen the rules do so at that stage once the market has developed and there is reward in doing so to maintain market share in large market. Whereas just now we have an embryo market and it is just scaring off potential suppliers.

Question: Q27

Yes we do believe that those that put it in a domestic installation before 15th July 2009 should be rewarded for “blazing the trail” and for the tiny amount it is going to cost, a little thanks would be good to encourage others to take the lead on other things for what they consider the right reasons in the future. This then would keep all biomass users the same!! I also think between now and 1st April 2016 we should allow any boiler manufacturer to get his boiler installed provided they have given adequate training on the boiler, provide support from the manufacturer and are EN303-5 certified. For instance Ecotec should be included as Athol Duckett of AD heating has been on their full training course in Skene Sweden for distribution in Moray and Aberdeenshire


We think you are about right in your monitoring. However if you are tying to a square area of building as we are suggesting when deeming then why not get a second quote say from an architect?? This will be a lot easier than SAP. Of course policing needs to take place!!

Question: Q29

We think the concept of deeming is a clever one particularly if made easier and based on square area of property and with a reasonable rate of annual return this should encourage sufficient people at least in the early stages of operation of the legislation to invest particularly if you accept EN303-5 for at least the first 5 years to make it easier to get market going in UK.

Question: Q30

654 Mervyn Cully (individual) Existing generator

I have recently been made aware of the Renewable Heat Incentive consultation document and was initially much relieved to find that some type of recognition is proposed for those who invest the considerable additional capital required in order to install an energy saving heating system, when compared with what one might call a traditional system. However, on reading through the relevent sections of your document I find that the proposal only applies to new systems installed (or replaced or increased) after 15th July 2009. I have recently had my own house built and felt compelled to "do my bit" by installing a ground source heat pump as part of the new construction. The capital cost was very much higher than the equivalent gas fired boiler system - as you admit would be the case in your document - and I have been wondering ever since whether it was a mistake, which is why I was gratified to learn that an incentive was being offered. I now find that, far from my initiative being rewarded, I am to be penalised for taking early action, whilst all others (who have delayed doing anything to help the serious climatic situation until your scheme was announced) will be rewarded with an incentive! I am not looking for any special treatment here (although it could be argued that additional recognition would indeed be appropriate for those who take a lead in matters of this kind, where there is no financial gain). I only wish to be treated: a) in the same way as all those who have been unwilling to make a contribution until offered a handout and b) that my initiative, which presumably is something you would applaude, should not be penalised.


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655 United Utilities PLC Supplier

As United Utilities is installing one of the first sewage biogas clean up plants in the UK, in partnership with National Grid Gas and the Waste and Resources Action Programme, this consultation could not be timelier.

As a company concerned about our environmental and carbon impacts we believe the consultation does not fully address what we consider to be the overall objective of the RHI and similar incentive schemes – the reduction of CO2e emissions.

With specific respect of Bio-methane injection to the grid, this is a more carbon efficient use of biogas than either using it in vehicles or CHP engines. However, there is no reference to this in the consultation and the tariffs do not promote the diversion of gas to the grid. We believe the tariffs should promote the best carbon outcomes.


Yes

we believe the consultation does not fully address what we consider to be the overall objective of the RHI and similar incentive schemes – the reduction of CO2e emissions.

With specific respect of Bio-methane injection to the grid, this is a more carbon efficient use of biogas than either using it in vehicles or CHP engines. However, there is no reference to this in the consultation and the tariffs do not promote the diversion of gas to the grid. We believe the tariffs should promote the best carbon outcomes.

The consultation does not detail how commercial organisations could access the RHI for installation of small (domestic sized) heat applications. For instance United Utilities is looking at the potential to use ground and water source heat pumps to heat pumping stations and other buildings that are currently heated by electricity. The cost benefit analysis for these installations would require some sort of incentive to cover the costs of installation and operation. There are no details of how a commercial organisation could access the small scale RHI support.

Question: Q01

We would appreciate further clarification on how commercial organisations could participate in the RHI when installing small scale heat installations. Using the same system as for domestic installations could lead to a large burden of applications and licensing on sites in the water industry that already have several licences from other regulators.

Question: Q04

No00The consultation is not clear on the definition of heat from anaerobic digestion. We do not use heat directly from AD but we do use heat from the CHP engines powered by AD. Assuming heat from AD, as defined in the consultation, includes heat recovery from CHP engines fed by AD, we believe the exclusion of heat from anaerobic digestion that is used to keep the plant in operation is perverse. This heat recovery is used for process purposes (to heat the digesters to maximise gas yield) similar to other RHI incentives.

In our view we consider this to be counter productive to what we believe the aims of the RHI are. This exclusion could drive the diversion of heat away from AD plants and towards alternative uses because it would attract RHI incentives. To generate the heat required for the AD process, fossil fuels would then be purchased – this would result in an overall larger carbon footprint for recipients of RHI payments. Similarly this omission could lead to changes in design for AD plants which could have an impact on AD plants being developed to meet Defra’s AD vision and implementation plan – and reduce the overall carbon benefits of this vision.

We would also welcome additional information on whether heat recovered from incineration and used in sludge possessing would qualify for RHI?


FAME can be classed as a renewable fuel – however the chemicals required to recover this fuel are reliant on large amounts of energy in their production. The inclusion of FAME could therefore lead to the RHI payments supporting products with larger whole life carbon footprints of the fossil fuel alternative. This could be counter productive to the overall intention of reducing GHG emissions.

Question: Q08

In principle we welcome the proposal that Biomethane injection shall be metered and believe this is the best approach for biomethane generation. This approach will allow accurate data to be gathered and reported to show not only the volume of biomethane due for tariff but also the degree of carbon offset achieved. In principle we welcome the idea of deeming heat use on site, however there are two concerns:•A simple scheme will need to be developed to build competent capacity in the market place to assess heat demand for potentially complex industrial plant so that the correct heat use on site is deemed. •A simple system where sites can be re assessed at regular intervals would be welcomed to ensure that the deemed heat use does not substantially change either to a greater amount or lesser amount than originally deemed to ensure ongoing fair compensation.A system of competent assessors is required, however we would not welcome a scheme where RHI claimants were ‘held to ransom’ by qualified assessors.

Question: Q12

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No

Comments: United Utilities is installing one of the first sewage biogas clean up plants in the UK in partnership with National Grid Gas and the Waste and Resources Action Programme. Factoring the proposed tariff of 4p/kWh for biomethane injection into our planning and investment appraisal model does not provide sufficient incentive for UU to continue to put the gas into the gird rather than the CHP engines. Additionally this level of RHI support means that the rate of return for biomethane investment is considerably less than the 12% rate of return that other parts of the scheme are based upon. We therefore consider that the proposed RHI incentive level will not promote uptake of biomethane injection at sewage works or landfill sites as there is no benefit to doing so, despite (as previously stated) this option offering greater CO2 emission reductions. We would be happy to share the details of our project with you in order to assist in developing a suitable tariff structure that will promote and support biomethane injection to the grid.

We understand that you want to avoid the comparison between support levels for electricity generation and biomethane injection and would rather that appropriate use determine choice of application. Unfortunately we consider comparison between support levels to be inevitable with the proposed incentive design. We think that the RHI should in this instance promote the most carbon efficient option of biomethane to grid above the other options of use to power vehicles and use in CHP engines.We agree with the projected lifetime of the biomethane injection assets.

Additionally, the rate of return for solar installations is lower due to the comparatively well-known technology and the relatively low installation costs. Based on this logic the RHI tariff for biomethane injection should be higher based on the higher installation costs and current lack of demonstrable UK applications.

We feel that there are a number of misconceptions in the original logic when calculating this banding:•Firstly the assumption that capital costs for biomethane injection equipment is lower than that for CHP is in error. Capital costs for biomethane upgrade are significantly higher than that for CHP on a like for like basis. •Secondly additional equipment that is required for biogas injection such as metering, propane addition, odour addition and telemetry was not accounted for - costing a minimum of £500k per facility (whatever size) .•The operational costs for biomethane upgrade are higher than for CHP when the energy needed to heat the AD and the electricity needed to run the plant are taken into account. Assuming maintenance costs are equal, biomethane can also have additional operational costs from the electricity required to compress the gas to grid pressure though this may only be required in around 10% of cases. In such case, the power consumption can amount to several hundred kWe for larger (1MW+ sites).

Question: Q18

Yes, we firmly believe that the RHI should remain fixed (subject to index linking) for the lifetime of the projects entitlement. Significant delays in financing projects under the ROC scheme occurred due to uncertainty about grandfathering with financial institutions being unwilling to lend money against an uncertain return.

Question: Q22

We do agree with the proposal on degression. However we would urge an early consultation on degression as the time to develop larger projects can take 18 months to 2 years and uncertainty on returns after the first review could have the same inhibitory effect as the lack of grandfathering has had on schemes under the ROC process.

AgreeQuestion: Q23

In principle we believe that it is sensible to syncronise reviews for RHI with FiT and ROC. However we are concerned that large Anaerobic Digestion projects may take 2 years to plan and build and that an imminent review may be detrimental to investment due to uncertainty. We therefore propose that legislation is framed such that either changes following review are staged to equate to typical project development time lines or applications for tariff rates can be completed during the early stages of a project based on proposed installed capacity.

Question: Q26

We would consider significant changes to biomethane standards (of injection to grid) may require an emergency review as upgrade costs could significantly increase should injection standards become more onerous. Worth mentioning that the FIT tariffs did not include Feedstock - if such an error is made re RHI this should trigger a review.Alternatively should injection costs be socialised (brought into the regulated side of gas and hence paid for by the grid) then a downwards review may be appropriate.

Question: Q27

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We consider that RHI support for heat recovered for use in anaerobic digesters or other processes is an oversight and should be included for installations completed before 15 July 2009. Not supporting this current well used application of heat recovery, even at a lower level, could drive the diversion of heat away from AD plants and towards alternative uses because it would attract RHI incentives. To generate the heat required for the AD process, fossil fuels would then be purchased – this would result in an overall larger carbon footprint for recipients of RHI payments. Application of the RHI to existing anaerobic digesters should encourage optimisation of the assets with regards to heat recovery.

Additionally there may be instances where installations installed before this time could usefully export heat from existing sites and that these should be included within the 5.5p/kW thermal output bracket. This would be subject to a new heat user being identified and connected to an existing anaerobic digester systemOn page 34 of the consultation you state that you want to ‘avoid comparison between support levels’ between different incentive mechanisms / schemes. Yet later on page 67 for CHP installations you provide a one off choice between incentive mechanisms / schemes. Additionally in this choice for sewage disgestion there will be no choice as RHI is not applicable to the major use of heat in sewage digestion namely the use of heat in the AD process. Therefore there is no choice to make.

Question: Q28

Yes

Comments: The exclusion of heat used in the anaerobic digestion process to keep the plant in operation is perverse as it is counter productive to the aims of encouraging the use of renewable heat to power processes. This heat recovery is used for process purposes similar to other RHI incentives. The behaviour that this exclusion could drive is the diversion of heat away from AD plant CHP units to alternative uses where it could attract RHI incentives simultaneously requiring the use of fossil fuels to generate the heat required for the process – this would result in an overall larger carbon footprint for recipients of RHI payments.

Question: Q29

656 Living Fuels/Living Power Other

bio-liquids


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We do not agree with the proposed approach to bioliquids.

The consultation states that support under the RHI should not be made generally available for bioliquids given their limited supply and that, in terms of cost-effectiveness, it is better to generate renewable heat from solid biomass. The consultation proposes only to provide support for bioliquids where they are used in converted domestic heating boilers, and not in any other heat generating application.

Background and Introduction to Living Fuels and UCO-derived Bio-liquids

Living Fuels is a British subsidiary of the £100m AIM-listed renewable energy company Renewable Energy Generation Bio-Power. Living Fuels has researched and developed a process to purify used cooking oils (UCO) into a fuel grade product – LF100. LF100 is an ‘end of waste’ fuel, in the sense that the UCO is relieved of unsuitable constituents and is processed in such a way as to enable there to be derived a fuel which in all respects represents an improvement upon, and is an environmentally preferable option to, a range of natural or manufactured virgin fuels which would otherwise be used to power the type of electricity generation and heating plant in which it is applied.

Living Fuels' sister company, Living Power, uses LF100 to generate clean heat and power in small-scale CHP plants for local recycling sites, schools and NHS centres. LF100 is also sold to external customers for use in larger-scale electricity and heat generation.

Rationale for Bioliquids Policy?

The Impact Assessment for the RHI neither discusses nor refers to any reason for limiting the incentivisation of bioliquids for use as a domestic heating oil replacement. In particular, it does not contain any assessment of the cost-effectiveness of using solid biomass versus bioliquids, and does not assess or discuss the best use of bioliquids in heat generation. It is therefore not clear on what basis DECC makes statements in the consultation regarding the cost-effectiveness of solid biomass, or the best use of bioliquids.

DECC states that it is still considering the best use of bioliquids, indicating that thus far no clear case has been made for bioliquids generally in any particular application. It is therefore not clear why DECC has decided not to include bioliquids in the RHI, except for in the restricted application of converted domestic boilers. It would surely make more sense to allow market forces to allocate various bioliquids to the most appropriate and economically sustainable applications, rather than attempt to prescribe at this early stage, and on the basis of no firm evidence of benefit, which end-use they should be deployed in.

In the case of bioliquids derived from UCO (as opposed to bioliquids more generally), recent research, Comparison of the Greenhouse Gas Benefits Resulting from Use of Vegetable Oils for Electricity, Heat, Transport and Industrial Process, undertaken by North Energy on behalf of DECC supports the use of UCO-derived bioliquids in heat and power generation. When broken down according to fuel source type and analysed in detail, the evidence overwhelmingly indicates that using UCO bioliquids in CHP plants is the most energy efficient use of such fuels. It is also in this sector that this energy resource can deliver the highest GHG savings. It is therefore clear that incentivising certain types of bioliquids for use in generating renewable heat and power can be justified according to DECC’s own rationale and evidence base.

One of the greatest challenges faced by the biomass sector as a whole is the naturally low energy density of biomass. This is answered by bioliquids, which have the highest energy density of any biomass derived fuel and offer significant benefits in terms of improved combustion characteristics, improved bio-stability and ease of handling. There has been major investment in, and there is ongoing research into, biomass energy densification technologies, such as pyrolysis and other advanced thermal processes, with the specific objective of producing high energy density bioliquids.

As a catch-all category, the term bioliquids covers a broad range of products with varying levels of potential for decarbonisation. A uniform bioliquids policy therefore is not appropriate as it would not only remove commercial certainty upon which existing projects depend, but would also prejudice the development of viable future technologies that use bioliquids such as advanced thermal processes.

We would therefore like to see a coherent bioliquids policy that is responsive to the technical differences between bioliquids produced from virgin sources, for example palm oil, and secondary bioliquids that are produced from waste products, such as UCO, or other technologies. This approach would ensure investor confidence in a sector that promises further technological advances, while also allowing DECC the flexibility to update its bioliquids policy with a more nuanced approach.

Wider Policy Background

Recent consultations on Feed-in Tariffs and grandfathering under the Renewables Obligation have indicated that DECC also proposes not to provide support for bioliquids used in electricity generation.

It therefore appears that DECC proposes to divert support from the use of bioliquids in electricity and heat generation in favour of use solely as either a replacement for domestic heating fuel, or as transport fuel. There is no rationale for this proposed diversion in the UK Renewable Energy Strategy or the EU Biomass Action Plan. These proposals will negate the considerable investment made by industry in the bio-energy sector and severely damage investor confidence in the small but rapidly expanding UK based non-transport bioliquids industry.Environmental/technical aspectsEU environmental policy is driven by the 6th Environmental Action Programme, which covers the period from 2002 to 2012. This strategic framework for environmental policy identified four priority areas, two of which – climate change and natural resources and waste – are directly relevant in the context of incentivising renewable energy, including heat. Driven by this Action Programme, the European Commission published various Thematic Strategies, including a Thematic Strategy on the Prevention and Recycling of Waste. This Strategy indicates that increases in waste recovery will reduce emissions from waste disposal, and as such will result in the reduction of GHG


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emissions, which underlines the importance of incentivising waste-derived bioliquids in particular across a range of applications. The European Commission's Biomass Action Plan sets out the benefits of using biomass in electricity generation, stating that the use of biomass in this application results in the greatest GHG emissions benefits when compared with the use of biomass solely for heat generation, or in transport. The Action Plan clearly states the Commission's position:-"the Commission encourages Member States to harness the potential of all cost-effective forms of biomass electricity generation"It is clear that in no way does the Commission suggest that certain types of biomass should be diverted to specific applications for heat generation or transport. It appears from the consultation document that DECC is using an overly restrictive definition of bioliquids from which to formulate policy focusing only on those bioliquids produced from arable crops rather than the full range of bioliquids that can be manufactured from other sources, including UCO. We believe that current thinking does not take account of the varying technical outcomes and environmental benefits of different types of bioliquid. The direct result is that those bioliquids that do produce significant GHG emission reductions are treated in the same way as those that do not achieve such reductions. As a fully recovered waste material, bioliquids produced from UCO are widely acknowledged to be one of the most sustainable bioliquids. There is also a clear and compelling environmental argument to support the re-use of such a difficult waste stream as a fuel product in a wide range of appropriate applications. Recovering UCO into a versatile fuel product that has numerous end-use applications will have a direct impact on increasing the amount of UCO that is collected and recovered, and will thereby reduce waste.As indicated above, there is no justifiable reason for limiting support for bioliquids under the RHI to those used in converted domestic boilers. Bioliquids, and particularly UCO-derived bioliquids, can be put to a wider range of uses than simply as a replacement for domestic heating fuel. The consultation does acknowledge that bioliquids can be used in CHP plants, but neither it nor the Impact Assessment provide any rationale for failing to provide support for them in this application under the RHI.In particular, as stated in the consultation, it is not always technically feasible to power small scale on-site CHP projects with solid biomass, as the volume of fuel required to generate sufficient electricity is impracticably large and so cannot produce as much heat and electricity. An issue also missed by the consultation is the lack of viable small-scale CHP technology capable of accepting solid biomass fuels. A key strand of the Government’s energy policy is to encourage small scale on-site CHP production to facilitate the switch to a more decentralised energy network. The highest demand for CHP projects is for embedded small-scale plants around 0.4MW. Bioliquids are the most appropriate fuel type for these small-scale installations because solid fuels are extremely difficult and inefficient to use at this scale, and the high energy density of bioliquids mitigates the issues associated with transport and storage. Bioliquids are therefore a far more cost efficient energy source in small-scale installations than solid biomass. We therefore believe that the use of bioliquids should be incentivised not only in the context of domestic heating circumstances but also in CHP installations. It is also important to note that in CHP installations two forms of energy (electricity and heat) are being produced from one energy source. The recent Climate Change Action Plan from DECC articulates this point and says that CHP “reduces carbon emissions by utilising the fuel more efficiently”. Therefore it seems that although DECC wishes to encourage the roll out and widespread use of CHP installations, to do this effectively bioliquids in CHP applications need to receive more certain support than currently proposed, as they are logistically and technically the best fuel source for smaller-scale CHP installations. Bioliquids, including those made from UCO, can therefore provide a viable solution to expand the roll out of a network of small-scale CHP plants, that will make a significant contribution to diversifying and decentralising the energy network.Economic impact

Sustained investment in renewable energy relies heavily on there being a long-term ‘no surprise’ regulatory regime and DECC has done much to promote such an environment across the renewable energy sector. However, DECC’s recent statements that bioliquids should not be incentivised across the electricity and heat sectors has a clear impact on a small but rapidly expanding section of the renewables industry, which manufactures bioliquids for non-transport purposes.

Initial investment in this sector has been predicated on a level of revenue being earned from ROCs under the Renewables Obligation, with an additional proportion of ROCs for use of such fuels in their most energy efficient application – CHP plants. DECC now proposes to (i) withdraw such support under the RO by not grandfathering bioliquids used in electricity generation, (ii) fail to provide support for bioliquids in the context of Feed-in Tariffs, and (iii) fail to provide support for bioliquids under the RHI, except for in the limited application of converted domestic boilers. Against this backdrop, further investment in processing biomass, including biomass wastes, into this type of renewable resource appears highly unlikely.

Meanwhile, various other forms of biomass, including 'virgin' solid biomass, are incentivised in numerous applications under the RHI, despite their various potential land-use change, water use and air quality implications.

As set out above, bioliquids produced from UCO in particular are one of the most sustainable forms of renewable biomass energy and an enormous amount of investment is in the pipeline for CHP projects in the public and private sector that are run on UCO-derived bioliquids. However, project and technology developers will now be subject to considerable commercial risk in terms of guaranteeing the necessary investor buy-in that they need to remain economically viable. The wider message sent out by DECC through this consultation and other recent policy documents is that bioliquids should only be incentivised in the limited application of replacing domestic heating oil, or in the form of biofuels for transport. This will have a clear impact on investor confidence in non-transport bioliquids, and will result in current projects being put on hold, possibly permanently, with the consequential loss of jobs and economic prosperity.

DECC policy

Living Fuels and other renewable energy companies affected by DECC’s lack of joined up thinking on bioliquids, believe that there is a clear need to develop a more coherent policy on bioliquids across the three areas of electricity, heat and transport. Such a holistic view needs to be based on the environmental impacts of each type of bioliquid and the technical outcomes of their use in various different applications. It is clearly impossible for such a coherent, holistic policy to be developed with the necessary and critical industry input if there is to be no concurrent or integrated consultation on the various support measures proposed for each of these three sectors.

It is also clear that unless there is a clear and proven benefit in diverting bioliquids to specific limited applications, market forces need to be allowed to operate in order to determine where these resources are most appropriately used.

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Living Fuels therefore believes that bioliquids should not be limited to benefiting from the RHI Scheme in the context only of replacing domestic heating oil, and that bioliquids should also benefit under the RHI where they are used in CHP and district heating schemes.

657 Helius Energy plc Installer

Helius Energy plc is a biomass energy company focused on the development, construction and operation of both small (5-20MWe) and large (>60MWe) energy plants powered with renewable, sustainable biomass.

Introduction to Helius EnergyHelius Energy Plc (Helius) was established to install and operate biomass fired renewable energy plants to address the increasing importance that has been given to climate change. Helius' projects mitigate climate change by cutting greenhouse gas emissions using sustainable biomass fuel.Our strategy is to identify, develop, own and operate biomass projects. The Helius team has extensive knowledge of the UK renewable energy market, biomass energy technologies and their related economics. We use this knowledge to identify sites that offer attractive returns, readily available feedstocks, good transportation logistics and related infrastructure.Development of CHP and heat only projects in the UK has proved difficult, particularly due to adverse commercial and statutory arrangements. We believe that the RHI may significantly change this and that the introduction of the RHI may potentially make the development of CHP and Heat only projects more attractive in the UK.General PointsHelius strongly recommends that the RHI should provide support for renewable district heating and that indeed this should be given a high priority, to kick-start activity in this area. It should not be limited just to “hard to treat” properties, as networked solutions may be able to provide the most cost-effective means of delivering renewable heat. Networked renewable heat solutions should therefore be considered on the same footing as stand-alone applications. Helius Energy would comment that the financial and non-financial barriers that exist for district heating are largely applicable to both renewable and fossil fuel fired district heating schemes and therefore, in order to prove effective, a renewable district heating uplift must address more than the disparity between the costs of renewable and fossil fuel networks.

We believe that, of the range of mechanisms that could be used to support such networks, the Government should initially choose the simple approach of a fixed level of support (10p/kWh) over a fixed lifetime (15 years). We think that this figure is justified as providing a rate of return commensurate with that proposed for stand-alone installations. This should be accompanied by a period of research into the opportunities available and options for longer term support, and a thorough review of the position when the RHI is first reviewed in 2013. Helius Energy believes that if a strong signal is not sent from the outset, much of the potential in this area could be lost.Helius Energy is also concerned at that the indicative emissions performance standards for biomass boilers are significantly higher than the standards found in many other European countries. Consequently it is likely that many installations will require additional flue gas treatment systems and will be bespoke in design. In those circumstances ‘across the board’ accreditation may need to be replaced with individual compliance / accreditation. This also implies that systems would require regular checks to demonstrate continuing compliance with statutory emission limits and efficiency standards, perhaps on a 24 or 36 month cycle. Pollutants monitored should include combustion and acid gases, particulates, PM10 and PM2.5 and heavy metals.As this will significantly increase the capital cost and administrative burden for biomass combustion plant, the level of support given will need to be sufficient to support this where these standards are applied. In any event, RHI emission standards should be aligned with those in the Clean Air Act so that there is continuity in regulation. Helius Energy is also concerned that the suggested approach to emissions limits does not consider the existing air quality in the locality.Additionally, anyone installing a biomass combustion system between 15th July 2009 and the date of the statutory adoption and implementation of the RHI should be entitled to the full incentive regardless of meeting the final agreed standard for emissions.Helius Energy would further comment that in our understanding, under the current proposals to replace the CHPQA ROC uplift in favour of the Renewable Heat Incentive, large scale power generation systems with very high efficiency will be disadvantaged as they will receive less support than under the current ROC uplift, which applies to the entire energy generation output of the plant.The following issues are also important:• Improving the robustness – and thus financeability – of the right to assign the benefit of the RHI to third parties (see response to Questions 1 and 2)

• The 12% return rate must be maintained to encourage take-up of the many renewable heat technologies not currently widely deployed in the UK• Setting the energy efficiency requirements for deeming calculations at 'best practice' standards (see response to Question 10)• Ensuring that, if Ofgem are to administer the scheme, they have appropriately streamlined, simple and user-friendly procedures (see response to Question 3)Finally, Helius Energy would comment that well designed large-scale electricity generating plant do not generate high grade waste heat and therefore the Renewable Heat Incentive should take into account that the provision of high grade heat or steam suitable for most industrial applications or district heating schemes is only at the expense of electricity production.


Helius Energy would comment that in our understanding, under the current proposals to replace the CHPQA ROC uplift in favour of the Renewable Heat Incentive, large scale power generation systems with very high efficiency will be disadvantaged as they will receive less support than under the current ROC uplift, which applies to the entire energy generation output of the plant. Helius Energy stress that the overall aim of schemes such as the Renewable Heat Incentive or the Renewables Obligation, is to maximise the reduction of carbon arising from the provision of energy and therefore highly efficient technologies should be strongly promoted within these schemes to ensure highly efficient technologies are fully exploited by the market.In addition, there needs to be more clarity on the assignability of the tariff income (see our response to Q2 for further comment).

Question: Q01

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Helius Energy believes that financing schemes will come forward, providing that the returns are adequate, and the RHI is structured in a simple and transparent way. Helius Energy consider that the 12% return rate on the additional upfront investment and operational costs of a renewable heat installation, when compared to a fossil fuel alternative, that is proposed should achieve that, and note that with the 5-8% returns typical within the Feed-In Tariffs, it is proving difficult to encourage new finance providers to participate in the early stages of the scheme.One key requirement is the ability to assign the benefit of the tariff income to third parties (such as finance providers). Under the present proposals, it is not yet sufficiently clear that suitably robust assignment arrangements are possible. The requirements for RHI payments to go to the owner ofthe equipment will restrict the implementation on innovative financing mechanisms. There needs to be a facility for payment to go directly to the financier or developer (the ‘assignee’) to minimise credit risk. DECC needs to clarify whether the legislation allows payments to be secured by a lender and whether leasing can work under the current arrangements. The financing arrangements for the RHI need to be the same as for Feed in Tariffs.

Question: Q02

Helius Energy agrees with the principals of the registration and payment approach and reiterates the importance of providing for tariffs to be assigned to third parties as described in our response to Q.2.Helius Energy welcomes steps to reduce the administrative burden for large scale CHP schemes, which require registration under both the Renewable Heat Incentive and the Renewables Obligation scheme however we would comment that it is clear that Ofgem has little experience of operating schemes with large numbers of installations, nor of working extensively with household customers. If they are confirmed as the scheme administrator, they will need to invest substantial time, effort and resources on developing appropriate systems that minimise the administrative burden of the RHI.Helius Energy agrees with the proposal that installations should be properly maintained.

AgreeQuestion: Q03

There are several for biomass systems, for example please refer to ‘Small scale biomass heatingsystems: Standards, quality labelling and market driving factors – an EU outlook’Biomass and Bioenergy, Volume 33, Issue 10, October 2009, Pages 1393-1402 as an example from which the following could be considered; Optimaz, P-mark, Sawn, Blue Angel, UZ-37, SEI-Ireland, Flamme Verte, but there are many other equivalent standards across the EU.

Question: Q06

Helius Energy agrees that CHP plants should qualify for the same tariff for its useful renewable heat output as dedicated heat installations.Helius Energy would also comment that the RHI should be available to the early adopters that installed qualifying technology prior to the 15th July 2009 so that they are not discouraged by the RHI, as has been the case under the FiT. The higher costs are justified if they create sustainability champions in communities. Implying that the early adopters should not share in this extra reward will be very counterproductive and engender a ‘wait and see’ mentality. There is also an argument that the introduction of the RHI will create greater demand for biomass, raising the price – this will actually penalise early adopters who could not have foreseen this when they made their decisions.

AgreeQuestion: Q07

Helius Energy agrees that there need to be emissions standards to protect air quality but that they should not be excessively onerous so as to substantially restrict the roll-out of modern low-emissions boilers.The indicative emissions performance standards for biomass boilers are significantly higher than the standards found in other European countries. Consequently it is likely that many installations will require additional flue gas treatment systems and will be bespoke in design. In those circumstances ‘across the board’ accreditation would need to be replaced with individual compliance/accreditation. This also implies that systems would require regular checks todemonstrate continuing compliance with statutory emission limits and efficiency standards, perhaps on a 24 or 36 month cycle. Pollutants monitored should include combustion and acid gases, particulates, PM10 and PM2.5 and heavy metals. This will significantly increase the capital cost and administrative burden for biomass combustion plant, so the level of support given will need to be sufficient to reflect this burden where these standards are applied. Furthermore, RHI emission standards should be aligned with those in the Clean Air Act to ensure continuity in regulation.Helius Energy notes the failure of the current proposals to address the cumulative impacts of a number of biomass installations within a particular locality in an urban area. Current regulations for installations above 20MW require the impact of the plant on the surrounding air quality levels to be assessed against national air quality objectives, thereby taking account of background air quality which would include existing biomass installations in the area. A similar approach would be more appropriate for biomass boilers under 20MW, allowing their impacts to be assessed on a basis which considers the air quality of that locality. Helius Energy suggests that the use of a Register of Installations could assist in threshold monitoring and would help to minimise the administrative burden on both the Regulator and the individual installations.Finally, Helius Energy consider that biomass combustion systems installed between 15th July 2009 and the date of the statutory adoption and implementation of the RHI should be entitled to the full incentive regardless of meeting the final agreed standard for emissions.

Question: Q09

Helius Energy believes that the RHI should support good energy efficiency standards. However it is not fundamentally an energy efficiency measure, so we do not believe it is appropriate for specific entry requirements to be set. Helius Energy therefore supports the proposed method of deeming calculations to incentivise energy efficiency, without acting as a specific obstacle to eligibility.


Helius Energy agrees that metering is appropriate for large-scale installations.

AgreeQuestion: Q12

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In practice, the primary income stream for large plant will remain electricity generation. The risk of metering resulting in over-generation in large scale schemes is extremely low and therefore not is perceived to be an issue. The proposed tariff is insufficient to cover the full operational costs of heat generation; therefore a commercial outlet for the heat must be in place to make the production of useable heat commercially viable.

Question: Q14

Helius Energy agrees that the tariff should include consideration of the additional capital and operational costs of supplying renewable heat compared to fossil fuel alternatives. In addition, Helius Energy would comment that well designed large-scale electricity generating plant do not generate high grade waste heat suitable for most industrial applications or district heating schemes. The Renewable Heat Incentive should therefore take into account that the provision of high grade heat or steam suitable for most industrial applications or district heating schemes is only achievable through reducing the electrical output of the plant, having a direct impact on the primary income stream of the plant which therefore forms an additional financial barrier to achieving a commercially viable CHP application.

Question: Q15

Helius Energy agrees that a 12% return rate on the additional upfront investment and operational costs of a renewable heat installation, when compared to a fossil fuel alternative, is a pragmatic level at which to start bearing in mind the need for rapid take-up and the relative lack of familiarity with renewable heat in the UK market.Helius Energy notes that the tariff for large scale installations is based on the current Renewables Obligation uplift level and that the tariff will be the subject of further review prior to the implementation of the Renewable Heat Incentive. Helius Energy would comment that in practice, capital and operational costs for CHP plants do not increase in linear proportion to the generating capacity of the plant. In addition, smaller plant are likely to be able to source all, or the majority, of their feedstock from local sources which are likely to be less costly than the imported feedstocks necessary to meet the demand of larger scale CHP installations. Any further consideration or assessment of the large-scale installation tariff should take such considerations into account and Helius Energy would comment that it may be necessary to provide further variation within the tariff technology categories in order to ensure appropriate support is offered to a range of operating capacities.Helius Energy do not support the inclusion of a variable element within the tariff to link the tariff to future fuel costs, as this would result in an excessively complex system.

Question: Q18

Helius Energy agrees with the proposed approach for mixed fuels.

Question: Q19

Helius Energy welcomes the proposed additional uplift for district heating as district heating systems can play an important part in improving the UK’s security of supply as well as renewables uptake. Helius Energy believes that the RHI needs to send a strong signal to the marketplace that it is encouraging the uptake of renewable heat through heat distribution systems, in particular to ensure that local authorities give the opportunities thus afforded proper consideration when updated their development plans in line with the revised PPS1/22. Such proposals that are made need to be entrenched for a period of 20+ years in order to provide certainty.Helius Energy believes that the additional uplift is necessary as the initial capital expenditure and operational costs for a district heating network would be supplementary to the capital and operational costs of the CHP generation plant supplying the heat network.Helius Energy would comment that the financial and non-financial barriers that exist for district heating are largely applicable to both renewable and fossil fuel fired district heating schemes and therefore, in order to prove effective, a renewable district heating uplift must address more than the disparity between the costs of renewable and fossil fuel networks. Barriers to the development of commercially viable district heating networks include:• The cost of the provision of the new infrastructure and implementation;• The ability to secure long term, bankable contracts with end users that can sufficiently address the perceived risk in order to obtain project funding;• Resolving the technical implications of the variability of heat demand from domestic consumers, particularly seasonal and hourly variability;• Addressing the variability of temperatures and pressures requirements of different end users;• Competing commercially with existing heat supplies, both for individual domestic consumers and industrial uses, to provide economic grounds for end users to switch to renewable heat;• Providing an incentive for consumers to change from their existing heat supply, including the inconvenience of new equipment and a new and perhaps unfamiliar solution to heat supply;• Balancing the provision of a competitive heat supply against the loss in electricity generation that will result from the off-take of high grade heat or steam; and• Overcoming the legal and practical challenges associated with the implementation of a district heating scheme due to the number of connections.Helius Energy believe that, of the range of mechanisms that could be used to support such networks, the Government should initially choose the simple approach of a fixed level of support (10p/kWh) over a fixed lifetime of 15 years. Helius Energy considers that this figure is justified as providing a rate of return commensurate with that proposed for stand-along installations. This should be accompanied by a period of research into the opportunities available and options for longer term support, and a thorough review of the position when the RHI is first reviewed. Helius Energy believes that if a strong signal is not sent from the outset of the RHI, much of the potential in this area could be lost.Finally, Helius Energy would comment that the ‘owner’ of the district heating network may be a different entity to the ‘owner’ of the heat generating installation and therefore it is important that the RHI uplift payments should be administered separately from the standard incentive and be made directly to the ‘owner’ of the district heating infrastructure.

AgreeQuestion: Q20

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Helius Energy would comment that the definition of ‘hard to reach’ properties suggests that district heating schemes are straightforward for all other potential end users however even with cheaper fossil fuels, district heating schemes are difficult to make commercially viable due to the barriers highlighted in our response to Q.20. Helius Energy further comment that limiting the uplift to schemes or the proportion of schemes which reach ‘hard to reach’ cases may not make efficient use of potential heat generation sources as it is likely to preclude many large-scale CHP installations.The location of a potential large-scale CHP installation is determined by a number of factors which include maximising the distance from sensitive receptors to minimise the environmental effects, such as the visual or noise impacts, of the scheme and the proximity of the proposed site to either local fuel sources or strategic road networks or international gateways, such as ports. Such considerations make it unlikely that a large-scale CHP would be located in dense urban areas or close to tower block apartments which may be defined as ‘hard to reach’ cases. Despite this, a large-scale CHP plant may be located at a reasonable distance from existing residential settlements and/or community infrastructure, new housing developments located on the cusp of urban areas or industrial estates containing several potential heat users; all of which may benefit from a district heating scheme but which are not defined as ‘hard to reach’. Under the current proposals, district heating schemes these scenarios would not receive the uplift support despite being subject to the same barriers discussed in our response to Q.20 and therefore, the current proposals may limit the ability of the RHI to increase heat use associated with large-scale CHP plant.Helius Energy agrees that the supply of heat to a single external user should be suitably incentivised under the standard RHI tariff and should therefore not be eligible for an additional uplift. We would comment however that the proposed criteria of a minimum 10 connections to a network appears to be an arbitrary figure and may preclude smaller networks which could potentially supply a small number of industrial installations amounting to a significant supply of renewable heat. When supplying domestic heating grids with smaller individual loads, a minimum number of external customers may be more appropriate to ensure all renewable heat solutions, including individual generation, are considered.

Question: Q21

Helius Energy agrees that RHI tariffs should be fully fixed and would comment that a stable long-term is fundamentally important to the success of the RHI.

Question: Q22

Helius Energy agrees that the introduction of degression should be determined by the technology cost levels which can be periodically reviewed. Helius Energy would comment that it may be more appropriate to determine the rate of degression on the individual technology types covered by the Renewable Heat Incentive rather than across the board.

AgreeQuestion: Q23

Helius Energy agrees with the proposed approach on innovative and emerging technologies.

AgreeQuestion: Q24

Helius Energy would comment that set tariffs at attractive levels will grow the UK market and hence the volume, not just of production, but of all aspects of the supply chain right through to installation. Experience shows that market volume is the most powerful driver to cost reductions.

Question: Q25

Helius Energy agrees with the proposed approach to reviews but would comment that the time required to develop large-scale installations is such that the suggested first review would not capture any operational schemes that had been developed in response to an active Renewable Heat Incentive scheme.

AgreeQuestion: Q26

Helius Energy suggests the following scenarios may warrant an emergency review:- Important new technologies coming forward- Uptake of the scheme falling drastically short of the level required- Major errors the legislation or administrative arrangements

Question: Q27

Helius Energy believes the proposed approach severely and unnecessarily penalises recent pioneers who have led the way in renewable heating. Helius Energy considers that the additional cost to the scheme would be marginal and those early adopters should be encouraged to act as ambassadors for the scheme, rather than potentially be resentful of it.Powers for the Government to introduce a Renewable Heat Incentive were included within the 2008 Energy Act, passed by Parliament in November 2008, and as such, back dating of the RHI should be extended to include renewable heating schemes installed from November 2008, rather than July 2009. This would ensure that the early pioneers, who were encouraged to invest in renewable heat because of the proposed incentive but ahead of the details of that incentive being finalised, are able to benefit from the reward available to all potential investors in this technology.


Helius Energy does not envisage abuse of the RHI support to be a major issue but suggest regular spot check on significant claimant to root out any abuse. In addition, Helius Energy would comment the minimising the administrative burden is a much more significant issue to the success of the scheme (see comments under the response to Q.3 above).

Question: Q29

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A renewable district heating uplift needs to consider the following barriers that currently limit the application of such schemes in the UK:• The cost of the provision of the new infrastructure and implementation;• The ability to secure long term, bankable contracts with end users that can sufficiently address the perceived risk in order to obtain project funding;• Resolving the technical implications of the variability of heat demand from domestic consumers, particularly seasonal and hourly variability;• Addressing the variability of temperatures and pressures requirements of different end users;• Competing commercially with existing heat supplies, both for individual domestic consumers and industrial uses, to provide economic grounds for end users to switch to renewable heat;• Providing an incentive for consumers to change from their existing heat supply, including the inconvenience of new equipment and a new and perhaps unfamiliar solution to heat supply;• Balancing the provision of a competitive heat supply against the loss in electricity generation that will result from the off-take of high grade heat or steam; and• Overcoming the legal and practical challenges associated with the implementation of a district heating scheme due to the number of connections.Helius Energy would comment that these barriers apply to all potential district heating schemes and therefore the restriction on the uplift to only those schemes, or parts of schemes, which supply to ‘hard to reach’ properties is unduly restrictive.

Question: Q30

658 Countryside Alliance NGO

The Countryside Alliance welcomes the opportunity to respond to the Department of Energy and Climate Change: the proposed RHI financial support scheme. The Countryside Alliance is a campaigning organisation covering the whole of the United Kingdom and works for everyone who loves the countryside and the rural way of life. As a membership organisation representing 250 000 people, we reflect the views and concerns of a broad range of rural people and their livelihoods.

We welcome that Government is making progress, through the development of the Renewable Heat Incentive, to meet the binding target of sourcing 15 per cent of our energy needs from renewable sources by 2020. The plans outlined in this consultation to incentivise investment in, and use of, renewable heat technologies is a welcome step in realising the contribution that individuals can make to reducing carbon emissions and the potential that farmers and land managers can make in contributing to the UK’s energy mix.

We are encouraged that the Renewable Heat Incentive (RHI) will support a range of technologies and scales of operation. We welcome that the proposed tariffs will provide fixed, guaranteed financial support because this gives individuals and businesses the confidence to invest in renewable technologies, which is likely to increase there uptake and use. In addition, we are encouraged by the Government’s ambition to drive forward more renewable district heating schemes by considering extending financial support, through the RHI, for infrastructure to deliver heat in district renewable heating projects.

However, we have concerns about some of the plans within the consultation, specifically on the installation and registration of renewable technologies, the eligibility of bioliquids for support and the conversion of conventional fuel heating systems in rural areas and will provide feedback on them within the context of the relevant consultation questions.


The consultation contains clear information about the process of registration in order to qualify for the RHI for technologies covered under the MCS, but it remains unclear for those technologies not currently covered by the MCS at the household and commercial level, such as biogas and bioliquids. If the RHI proposes to support a range of technologies at different scales, we believe that for stakeholders to have confidence in investing they need clear information about the standards required for registration in order to qualify for the RHI. In the absence of such information, individuals may invest and install a biogas or bioliquid technology now, but later find they can’t claim the RHI because the Government issues different standards or qualifications required for the technologies to qualify under the RHI. We would therefore seek assurances that the Government issues guidance for the product and installation standards required, at all scales, for biogas and bioliquid technologies to inspire confidence and uptake of these technologies among consumers now.

Question: Q03

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Under proposals within the consultation, at the domestic level, homeowners will have to register with Ofgem and use a Microgeneration Certification Scheme (MCS) accredited product and installer in order to qualify for the RHI. In addition, the Government anticipates that for all renewable technologies up to the upper limit of 300kW, the RHI will require that beneficiaries use only MCS-certified installers or equipment.

We do not oppose such an approach in principal. However, if the MCS accreditation is expensive or difficult for installers to obtain this could result in few technicians being qualified to install renewable technologies – such a situation would have a knock on effect on the ability of home owners and businesses to register to qualify for the RHI. In addition, if the MCS accreditation used for setting the standards of renewable technology products are not used widely by manufactures, consumers may have difficulty obtaining products which qualify for the RHI. We believe any unnecessary burdens on individuals, businesses, installers or manufactures could act as a disincentive to the take up of renewable technologies. We would therefore seek assurances that Government ensures that the MCS is an accessible accreditation, which installers can easily qualify for and one which is widely understood and will be used by manufacturers for setting standards for renewable technology.

The consultation contains clear information about the process of registration in order to qualify for the RHI for technologies covered under the MCS, but it remains unclear for those technologies not currently covered by the MCS at the household and commercial level, such as biogas and bioliquids. If the RHI proposes to support a range of technologies at different scales, we believe that for stakeholders to have confidence in investing they need clear information about the standards required for registration in order to qualify for the RHI. In the absence of such information, individuals may invest and install a biogas or bioliquid technology now, but later find they can’t claim the RHI because the Government issues different standards or qualifications required for the technologies to qualify under the RHI. We would therefore seek assurances that the Government issues guidance for the product and installation standards required, at all scales, for biogas and bioliquid technologies to inspire confidence and uptake of these technologies among consumers now.

Question: Q04

Under proposals the Government intends not to make bioliquids eligible for support in the initial stage of the RHI. However the consultation then proposes that in certain situations it may be more appropriate to use bioliquids rather than solid biomass for heat, the key example given being homes not connected to the gas grid that use domestic oil for heating. In this situation Government is likely to support the use of bioliquids where they replace the use of domestic heating oil . While we recognise the contribution that biofuels could make to the energy mix, we remain concerned about the long term sustainability of biofuel production.

The EU Biofuels Directive has imposed a target that by 2020, 20 per cent of all energy used in the EU must come from renewable sources. This directive allows member states to set different targets, but in the transport sector member states must source 10 per cent of road transport energy from renewable sources. These targets have encouraged increased biofuel crop production and raised significant concerns that such production is having a negative effect on biodiversity, land use, human rights and global food security.

The development of sustainability standards for biofuels represents an important step in ensuring the negative effects of biofuel production are minimised. The European Commission is looking at sustainability criteria for solid biomass, and while the Renewable Energy Directive lists some criteria for responsible biofuel production, currently there are no plans to develop similar sustainability criteria for biofuels. We value the progress being made on improving the sustainability of biofuels, however criteria remain in their infancy and until there are robust sustainability standards to ensure responsible biofuel production within and outside the EU we don’t believe the biofuels should receive support under the RHI.

The Government makes reference to its work with OFTEC in enabling people in rural communities to convert their existing oil boilers to use biofuels as a way of reducing the dependence of rural communities on fossil fuel heating oil. While conversion offers people in rural areas a relatively cheap way of reducing their dependency on oil, the reduction in dependency is slight. The RHI only offers financial support for the renewable portion of their blended fuel, which may only be a small proportion of the fuel used, so individuals will still rely on conventional oil for the bulk of their heating needs. In addition, as the biofuel market is small and supply limited the cost of biofuels is likely to be higher than conventional fuel; therefore the RHI will represent poor value for money in helping people in rural areas reduce their dependency on fossil fuels. We believe a combination of better energy efficiency support in homes and the use of other renewable technologies represent better value, longer term solutions to reducing oil dependency and securing diverse energy supplies in rural communities - which are expanded on under question 10 and 20.

Question: Q08

We would agree that the RHI should be structured to encourage energy efficiency through the tariff structure. However, we would advocate that householders require more support making their homes energy efficient. We are encouraged that from 2013 all new builds will be constructed to higher energy efficiency standards. While this is a positive step to ensuring all new homes are built to the highest sustainability standards as part of a strategic approach to the challenge of climate, new homes represent a small proportion of the total housing stock. An estimated 27 per cent of carbon emissions come from existing homes, therefore improving energy efficient in these properties must remain a priority as part of suite of measures to tackle the challenges of climate change and energy supply.

A very simple measure to facilitate this would be to cut the VAT on labour relating to repairs and maintenance on properties. Reducing the rate of VAT from 17.5 per cent to 5 per cent would help encourage home owners to invest in energy efficiency measures and technologies. We are encouraged that the installation of some energy saving materials attracts reduced rates of VAT, such as cavity wall installations, yet disappointed that for others, such as double glazing, the full rate of VAT is charged. This lack of consistency in the rates of VAT charged for the installation of different energy saving measures is confusing for home owners, and rather than encouraging energy efficiency it could encourage the maintenance of old or inefficient systems or materials rather than incentivise their replacement. We believe flat rate of five per cent on all energy efficiency measures would produce a more coherent and more readily implementable treatment of energy efficient retrofitting.


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We are encouraged that the Renewable Heat Incentive (RHI) will support a range of technologies and scales of operation. We welcome that the proposed tariffs will provide fixed, guaranteed financial support because this gives individuals and businesses the confidence to invest in renewable technologies, which is likely to increase there uptake and use. In addition, we are encouraged by the Government’s ambition to drive forward more renewable district heating schemes by considering extending financial support, through the RHI, for infrastructure to deliver heat in district renewable heating projects.

Question: Q18

We are encouraged by the Government’s ambition to assist the development of district heating through additional financial support, provided by an ‘uplift’, for infrastructure involved in the deployment of heat energy. District heating using the products of anaerobic digestion offers exciting opportunities, particularly in rural areas, for communities to reduce their dependency on fossil fuels, and for land managers and farmers to diversify their income and convert massive amounts of waste into an energy source.

Approximately 90 million tonnes of agricultural material such as manure and slurry are produced in the UK annually. Initial estimates suggest that this waste, in combination with other waste types, could produce around 10-20 TWh (Tetra Watt hour) of heat and power by 2020 – enough to heat and power more than two million homes. Currently there are 23 anaerobic digestion plants in the UK and hopefully the introduction of the RHI will encourage investment in the creation of more plants. A key part of increasing the number of digestion plants depends on there being networks through which to deploy and sell energy products to consumers. We welcome that the Government is considering providing financial ‘uplift’ on district heating networks to support hard to treat properties, subject to further analysis. We believe those 42 per cent of rural households not connected to the gas grid represent ‘hard to treat’ properties. These households currently use oil or Liquid Petroleum Gas (LPG) to heat their homes and often pay significantly more than those connected to the gas grid who can take advantage of dual fuel discounts offered by suppliers.

We believe the ‘uplift’ that the Government is proposing could be used to build pipelines from anaerobic digestion plants in rural areas to the gas grid and to nearby communities not connected to the grid. Not only could this help those ‘hard to treat’ properties in rural areas diversify there energy supplies and reduce their carbon emissions, it would help provide investor confidence and stimulate growth in new renewable gas markets. Government support for the infrastructure delivering the products of anaerobic digestion offers a longer term solution to reducing oil dependency in rural areas compared to investment in biofuels. The future production of biofuels is likely to be subject to fluctuation based on population growth and the global demand for food, whereas the supply of waste and bi-products for anaerobic digestion is likely to remain constant – which represents a sustainable approach to diversifying fuel sources.

AgreeQuestion: Q20

Individuals and businesses require the security of long term, guaranteed financial support if Government wants to increase the uptake of renewable technology. We understand that fixed tariffs do not provide flexibility to adjust the additional costs of, or support given through, the RHI for renewable technologies should the price of biomass or biofuel increase or decrease. However we believe financial support offered through fixed tariffs represent the best way of giving people confidence by offering a baseline return on investment on renewable heat.

Question: Q22

659 Vital Energi Utilities ; DC21 ; Helix Agencies ; Highland Wood Energy ; Other

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A Joint Response to the RHI Consultation.

This response has been formed from contributions by:

Angus Perry and Martin Robinson of Limited.Matthew Tidmarsh, LimitedHoward Roche, Stuart Reid, LtdBill Watson,

Following meetings with and hosted by

DECC at the Stakeholders Meetings in Glasgow, Bradford and InvernessandJim Mather, MSP for Oban, Minister for Enterprise, Energy and Tourism Scotland.

Compiled by Howard Roche, Helix Agencies

Thanks for information and adviceAndrew Nichol, M.R.I.C.S., M.I.C.For Bob Mcllwraith Msc,.Stuart MaitlandAshtonSmith Associates(Architects to the Logistics Industry)Steve Bright at Argyll Forestry Products Ltd(Wood fuel and Forestry Product, planning a Biomass CHP and District heating scheme)Alistair McGlynn at Balcas Ltd(Producers of Wood Pellets)Alan Little at Carvill Group(Developers of the Woodbrook Eco Village Biomass District Heating Scheme)Gideon Richards at Consulting With Purpose Ltd(Renewable Energy Advisors)Robin Sedgewick at Crannich Farm Woodfuel(Suppliers of Dried Woodchip & Farmers) Roger Hartshorne at Estates Office York University(Constructing a biomass CHP District Heating Scheme)Janet McAlsitair at Fyne Homes(Housing Association)Guy Milligan at HoB Esco & Phase Energy(Property Developers and Operators of a district heating scheme)The Isle of Mull Woodfuel Group(Community Group)Jon Cape of Renew Cooperative Energy Services(A Co-operative esco)Christine Hutton at Rural Generation(Installers of Biomass Systems and growers of SRC Willow)Dominic Barton at Scottish and Southern Energy (Renewable Energy Power Generation)Andy Knight at TSL Contracting Ltd(Property Developers constructing a district heating project)Brendan Clancy and Mark Howell at Vital Energi (Utilities) Ltd(Designers, Installers and Operators of District Heating Schemes)Graeme Bruce and Lesley McInnes at West Highland Housing Association (Housing Association)

About the Contributors

This document has been drafted following the DECC stakeholder meeting in Glasgow where DECC called for factual evidence, rather than opinion and by common consent of those present it the industry should work together in developing the Rnewable Heat Incentive for the betterment of all.

Vital Energi - Martin Robinson - Design and Proposals ManagerMartin has 25 years experience of working within the buildings services and energy markets and during his time in project management built up considerable experience in the control and operation of a wide range of building and industrial services plant, including boilers and compressors.


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Combining engineering and commercial know-how he is developing innovative solutions for the provision of combined heat and power (CHP). His expertise at financial modelling, and knowledge of the grants and incentives ensures projects maximise their fiscal potential. Vital Energi - Angus Perry - Project Development ManagerAngus has over 25 years experience of the energy and utilities markets specialising in the design, implementation and operation of CHP schemes in the early stages of his career. As a Senior Design Engineer he gained a wealth of technical experience which has allowed him to work on significant trigeneration, combine cycle energy centre and district heating and cooling schemes. Responsible for larger gas fired CHP project opportunities providing technical and commercial support to our design and delivery teams to develop biomass generation from clean and waste wood and CHP waste to energy opportunities.

Helix Agencies - Howard Roche Howard is an expert in procurement and the legalities of providing innovative new technologies to market advising on environmental impact. Howard’s background in agriculture and the food and drinks industries gives him a deep insight into the impact bio-energy has on the environment liaising with engineers, regulators and the client.

DC21 - Matthew Tidmarsh Matthew Tidmarsh is responsible for delivering all DC21 activities. Matthew is a Chartered Engineer with over a decade of experience in delivering multi-million pound projects and new business opportunities involving capital expenditure, knowledge transfer, and risk management.

Highland Wood Energy - Stuart Reid Highland Wood Energy was established in Fort William in December 2003 with the co-founders having spent a number of years working within the wood heating industry. Now Scotland’s largest specialist biomass heating company employing more than 20 people with ambitions to grow through the successful delivery of sustainable energy. The work of the company is founded on the belief that wood heating will contribute greatly towards the sustainable development of Scotland. Wood heating makes use of our substantial timber resource to produce low cost and renewable heating, whilst at the same time paying dividends for the local economy. With unrivalled practical experience, ranging from domestic to large scale projects, and our work in assisting the establishment of wood fuel supply chains, we provide clients with a uniquely comprehensive approach to wood heating.

Angus BioFuels – Bill WatsonBill Watson is the proprietor of Angus Biofuels that supplies graded and dried wood chip to numbers of projects in Scotland. Bill has also other business interests as a civil engineer, farmer and property developer as well as owning and managing forestry. Bill has developed and operates numbers of stand alone biomass projects and ESCO modelled biomass district heating schemes for Housing Associations and similar Social Responsible Landlords and developers. This unique forest to heat model gives Bill a deep insight into the issues related to the Renewable Heat Incentive.

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Comments:





In the main we concur with the response by “Scottish Renewables” and that of the “CHPA”

Observations by Stuart Reid (Highland Wood Energy)We are strongly supportive of the government taking steps to ensure that the UK energy mix can be delivered in a more sustainable way. We therefore agree with the RHI in principle as it will lead to an expansion in the level of renewable heat being utilised which should correlate with reduced CO2 emissions, economical heating bills for users, increased security of the UK energy supply, help prepare us for declining fossil fuel supplies and stimulate economic growth across the full renewable supply chain.

Given the requirement to quickly introduce a mechanism to allow the UK to have the opportunity to deliver its 2020 targets we will accept the underlying premise of the consultation document that the RHI, alongside the FiT and ROCs, is the most appropriate solution for delivering sustainable energy. This is as opposed to – for example – the introduction of a CO2 tax. However, we also note that the development and administration of a scheme like the RHI is inherently more complex than a CO2 tax would be. It is also underpinned by a large number of assumptions and policy objectives that will likely lead to unintended consequences. One immediate observation on the RHI is that it places a wide range of value on 1 tonne of CO2 savings when compared with mains gas heating. These range from £86 per tonne for a larger scale biomass project, through (a very optimistic) £645 per tonne for a highly efficient (4:1) domestic ground source heat pump (assuming the grid becomes 30% less carbon based) and up to £1027 per tonne for a solar thermal solution. Given the significant, non CO2 based advantages associated with the introduction of the RHI this is not necessarily a shortcoming but it does emphasise the policy driven nature of the incentive and the range of value based assumptions that underpin it.

The key requirements of any incentive which is introduced to stimulate the uptake of renewable heating are as follows:1.It needs to be introduced quickly. Continuing uncertainty will prevent decision makers from adopting renewable technology which will mean an ability to meet 2020 targets and prevent business like our own from surviving and prospering. 2.It needs to be consistent and available for a sustained period. The industry and customers need certainty to allow them to invest for the future.3.It needs to be available to all sectors. Existing capital grant schemes tend to focus on one sector and exclude others which means the projects with the most benefit are not necessarily the ones which are being taken forward. 4.It needs to be “scaleable” and “expandable”. By this we mean that uptake cannot be prevented on the basis of all available capital funding having been used and if more people adopt than anticipated the system can cope. 5.It needs to have widespread political support. Which means it needs to be rational, transparent, accountable and defendable in the popular press.

In our view the RHI proposals meet the first 4 of these criteria and we are optimistic that it will have widespread political support and can be amended slightly to be made more rational and transparent. The Consultation document asks for specific responses to a number of areas and we respond to each of the key areas in turn below and attempt to identify areas where we think the proposals can be improved. If we have not responded to a question it is because we either agree with the proposal or do not have sufficient expertise to suggest an alternative approach.

Question: Q01

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[original response includes a chart referred to at the end of the response to this question]

Proposal 1) On smaller deemed schemes, proof of use is submitted.Proposal 2) Early Adopters and Best Practice (Vanguard) schemes supported to an extent. Proposal 3) Consideration to underwriting larger schemes.Proposal 4) Schemes be pre-certified for anticipated outputsProposal 5) Ofgem pre-certify that a scheme qualifies and to what levelProposal 6) On Larger schemes RHI remitted monthly in arrears.Proposal 7) RHI payments can be subject to Lien, bond or mortgage.

Comments:Observations by Howard Roche (Helix Agencies)

For the public purse, investors and those who would ensure the durability, efficacy and reputation of the scheme it is important to them to have peace of mind that the plant that receives the RHI actually works and is operational.

One simple form is by way of self assessment, much in the way VAT is managed and that there is a requirement that adequate evidence is retained. One such evidence could be receipts for fuel or servicing costs being retained and subject to occasional inspection. It might be that HMRC would prefer copies are supplied with any claim.

It will only be the case that investors come to the market place if the RHI accounting is robust, if it is easily open to fraud then they will remove themselves from the market as their risk capital may not get repaid if fraud becomes the name of the game.

As noted at the various DECC RHI Stakeholder meetings (notably in Glasgow, Bradford and Inverness) financial institutions are also reticent to lend against new technologies or schemes where the asset is buried, such as District Heating (DH) and ground source. This arises due to a technicality in accounting rules as it would appear that such “equipment” is considered to be a cost issue and not an asset in balance sheet terms. Furthermore the weighting financial institutions give on the viability means that as a credit risk they see such renewable energy schemes as inherently more risky than say property. Co-Operative Bank is a notable exception in that they consider the renewable installation as a whole.It would be helpful if within the framing of the Renewable Heat Incentive that clarity be given to banks that RHI could be payable directly to them, by way of assignment, so that they may secure their lending against that stream, until a predetermined repayment has been made, regardless of ownership and that the scheme is eligible and to what extent, prior to them making funds available. We have explored this below and how banks may view this sector.Credit ratings for the industry as a whole would not be assisted by the RHI not reaching out to the “early adopters” who will be placed at a competitive disadvantage even allowing for any grant aid they may have obtained in a market where costs historically have been high and they are going to be poorly placed to survive as the cost of biomass rises as more players enter the market supported by the RHI.Early schemes were predicated on the cheap and easy availability of biomass, and many on alleviating fuel poverty. That situation is changing as multi-megawatt plants come on stream with more buying power and higher income streams from ROC’s, FIT and RHI.If early schemes and operators create a record of failure the sector will accrue a demerit with credit reference agencies which will affect the ability of future projects to raise funds.As many early schemes are also constrained by commitments to alleviate fuel poverty and cannot easily raise tariffs to a viable level given the constituency that they tend to serve, namely social housing, it follows that these are vulnerable to the inevitable increase in biomass prices the RHI will bring. Thus we would seek that early adopters of the technology are not barred out from the RHI.

Financial Accounting aspects on assets or infrastructure of RHI schemes

An RHI premium for district heating can be considered by the Nation as an investment in its infrastructure where normal market drivers may not apply, such as after the 2nd World War in the development of the National Grid. For District Heating (DH) to properly work in the wider urban environment it will need to access the existing built environment if the 2020 objective is to be achieved.

The scale of which may require city, town and village wide district heating schemes is well beyond normal financing without some underwriting.

Part of this problem arises from accounting rules (IFRS) wherein items such as District Heating Mains are classed as infrastructure. We are advised that under IFRS IAS 16 then “depreciated cost data is not available for infrastructure assets under an IFRS acceptable methodology.”

The upshot of that is that infrastructure is a cost item and not an asset, thus cannot be shown on the balance sheet as an asset and that in turn means one cannot borrow against that value asset to purchase it. As it is shown as a cost this then should be properly accounted for by way of an Internal Renewal Charge (IRC) in the operators accounts based on the life of that Infrastructure. This is shown in accounts as a cost and not as a depreciation charge.

It should be noted that tax relief on IRC only works when a scheme enters profit upon which tax is payable and thus tax relief would not assist in the financing of a scheme. We would see this being part of the District Heating Premium.

Further note banks do not normally loan against Profit and Loss items. This is made all the more so with certain institutions such as Leasing Companies. This is because from their perspective, district heating network cannot be easily be repossessed and offered to the market in the event of a default.

As a result, we propose that the District Heating element RHI should aim to cover that IRC element as historically gas and electric grids were installed, in main, by Government policy. They were then sold off by way of shares to the market.


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An alternative would be to issue a Government Backed Bond against this cost item, so that the bond could be placed on the balance sheet as long term borrowing, thus supporting the liquidity of the project in accounting terms, which would show a reducing balance over time. In previous times certain local authorities were able to issue such bonds as well, but we doubt if they have the liquidity themselves at this time to offer Bonds.

The 2010 Budget proposed a “Green Investment Bank” and UK Finance for Growth (UKFG) Either of these two propositions could be suitable vehicles to issue the bond as a formal fiscal instrument that is repaid by a deduction to a greater or lesser degree from the RHI entitlement.

This would ensure schemes are financed and that the public purse is protected as the bond holder could be put in a pre-preferential position on the RHI income.

Over time, should a DH network financed by way of bonds, evolve to a large enough scale, perhaps city wide, it may be able to be sold off as part of a wider going concern resulting in an earlier yield to the bond holder.

Not only are corporate entities such as Ltd, LLP, and PLC’s affected by the asset issue. A similar issue arises within public bodies. See OFRIV 12 for public bodies and infrastructure accounting.

Thus from certain aspects the lifetime of 15 years and the modelling does not appear to take into account the balance sheet impact of district heating infrastructure as a cost item and a 12% internal rate of return over 15 years will not, in our opinion, accrue sufficient capital to allow eventual renewal of that infrastructure via the IRC mechanism.

On larger schemes quarterly payment does make good sense, but the better means would be monthly in arrears to reduce cash flow impact of the winter season.

To illustrate the need for improving the cash flow, we need to appreciate that many schemes are not fully populated at day 1. The more common scenario is the plant is installed before day 1 and accruing charges throughout.

The chart shown below illustrates the cash flow on a scheme growing to 400 homes over a 4 year period. The redline representing fixed inflation impacted overhead cost, the blue line representing income. It is clear that in early years cash flow is a going to be an issue.

Proposal 1) Ofgem certify early support of schemes as evidence to financiers.Proposal 2) Proof of operation is given to Ofgem in support of RHI operational claims.Proposal 3) Claims should be possible as an “online” process. Comments:

Observations by Angus Perry, (Vital Energi)For medium and larger installation developers need to have a clear understanding of the level of RHI that would be paid for any scheme to secure finance. Therefore a step should be added to the process where Ofgem can (based on information delivered in a simple format) provide the developer with confirmation of payment level for the proposed scheme (Additional step between the current first and second step).


The issue of keeping projects operational and reporting is a valid one. Given biomass should be regularly maintained would it be appropriate the competent person, (such as MCS installers or qualified engineers in larger schemes) issue an annual service certificate? An alternative would be to make it a condition of RHI that projects may be subject to audit and proof of fuel supply should be maintained, much in the same way VAT is self administered. It could be a simple internet process.

Question: Q03

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Proposal 1 ) MCS accept equivalent other accreditations as proof of competenceProposal 2) MCS be tasked to streamline product approval into one form.

Comments:

Observations by Angus Perry, (Vital EnergiYes

Comments: However it is important that the number of accredited installers is sufficient to ensure effective supply and competition in the market.


There is widespread concern over the efficacy of the MCS scheme. We believe it is viable but will need simplification if it is to hit its targets. Other accreditations could be offered as means of proof of competence, using the doctrine of equivalence. Thus a “Gas Safe” Accreditation might equate to automatic MCS accreditation if only on a provisional basis.

Manufacturers are both UK and overseas are tiring of continuing and varying approval processes. We see little advantage in not accepting certain overseas standards as being acceptable here. Most European, USA and Japanese standards should suffice. In US patent law they have developed the concept of “equivalence” that is; it is not the same but equivalent. (If it looks, talks and walks like a duck then it is a duck). We are of the view it would be a worthwhile piece of work for MCS to align what EU standards are acceptable under the MCS accreditation scheme. This would add to the desire for a single market. We are minded to support the others in the industry’s view that EN303-5 is adequate for biomass boilers.

Presently we have the Smoke Control Orders, the remnants of Clear Sky, and now MCS. Each accreditation has cost time and money. This is now proving a barrier as some manufacturers and smaller installers consider they have other priorities.

Equally for financiers to support schemes they will need some peace of mind that the equipment they are financing is fit for purpose, thus we support the MCS process but do recognise a need for increasing the pace of accreditations and reduction in costs. We suggest that Gemserv who are the MCS licensee under take an urgent review of what accreditations already in place can be directly considered equivalent and accept that as evidence of competence and issue the appropriate MCS accreditations swiftly.

Question: Q04

Proposal 1 ) MCS adopt other accreditations as proof of competenceProposal 2) MCS be tasked to streamline product approval into one form.Proposal 3) Firms operating to accredited British Standards can self assess product.Proposal 4) Appropriate EU standards accepted as being equivalent to British Standards

Comments:

Observations by Angus Perry, (Vital Energi)This depends on the volume of installations expected, if the volume is high it maybe more appropriate to increase the accreditation limit for installers, if the volume is low then an accredited body could be used to sign off installations. The point at where the threshold is set is important for installations, however all equipment should be accredited (i.e. meet minimum BS/EN harmonised standards ).


There is a risk to constraining the market in plant and equipment as MCS accreditation can take time and be costly. Certain EU manufacturers are already crying foul. We would seek a streamlining of Smoke Control accreditations under the Statutory Instruments (Orders) within the Clean Air Act 1993 as a strategy to remove a barrier to the market at no cost to government or consumer.

As in the previous question we would like to see that a harmonised standard across the EU be adopted and propose a recognition by DECC, DEFRA and MCS that accreditations used by other EU countries can be accepted as proof of competence in design and manufacture here without the need for further testing.

We understand that advice on what standards could be recognised as equivalent is available from, for example, those Consultants who already assist DECC on related matters.

There is a sensible case to argue that if a manufacturer has certain standards already in place, then they can “self assess” designs and new products.

We suggest this will maintain standards and open the market to further competition and encourage innovation.

Observations by Stuart Reid (Highland Wood Energy) In relation to increasing the limit to which MCS certification applies it would seem to be logical to align the accreditation requirement with a specific banding payment. The proposal in the consultation document to increase the accredited limit to 300kw does not align with any banding or other recognisable criteria and is therefore random. A 305kw system would receive the same level of RHI as a 295kw system but be subject to a different procurement process. We would propose that either the accredited banding is increased to 500kw or a separate RHI banding from 45kw to 300kw is introduced.

Question: Q05

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We are only qualified as far as to suggest EN303-5.

Question: Q06

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Proposal 1) Ground Source heat be required to contract “green electric” to qualify.Proposal 2) Absorption Chilling be an eligible use for Renewable Heat. Proposal 3) Where cooling is considered only the heat energy supplied be counted.Proposal 4) RHI extend to existing schemes but at a lower rate. Comments:Observations by Angus Perry, (Vital Energi)

Ground source and air source heat pumps should not be classified as renewable technologies as they are driven from electricity (with can be brown or green). They should only qualify for RHI if proof is given that the electrical supply is from a renewable source.

Observations by Matthew Tidmarsh (DC21)

Ground source heat pumps – eligibility criteriaFrom page 29 – Eligibility: We need to ensure that we only support useful renewable heat generation.

The eligibility of heat pumps is defined using the criteria in the EU Renewable Energy Directive. This criteria means that the minimum energy saving across the full energy cycle (electricity generation and heat pump) is only 17%, i.e. to get 1kWh of ground source heat requires 0.87kWh of natural gas supplied to a power station, where as a gas boiler at 95% efficiency would require 1.05kWh of gas to supply 1kWh of heat.

[graph]

Considering the proposed tariff the heat pump incentive is disproportionate to the reduction in CO2 emissions, calculated below at £1.68/kg of CO2 saved. By comparison biomass fuelled heating systems have the potential for much greater reductions in CO2 and at much lower cost £0.44/kg CO2 saved.

It is suggested that the tariff level is maintained, but that a more stringent target should be set, such that only those installations achieving more significant savings are encouraged. It is suggested that the following criteria are adopted:•SPF = 1.5 / power generation efficiency

This would mean that the actual energy used to produce each kWh of heat would drop to 0.67kWh of gas, and the cost of the CO2 emissions reduction would fall to £0.79/kg – still double that of biomass heat. In real terms this would equate to a 37% energy saving compared to heating with natural gas.

Of course should the heat pump be powered with renewably produced energy, then the above argument does not apply. However, in such a scenario the power produced has more than likely already benefited from an incentive (FiTs or ROCs).

Methodology The following methodology is based on a simplistic analysis of the systems concerned; a more thorough analysis may give a more “accurate” answer, but the general outcome would remain. The system boundaries are based on a natural gas fired power station and a natural gas fired boiler.

[graph]

Comparison to biomass heatBiomass energy generation using fuel from sustainable sources is reported to have a CO2 efficiency of over 95%. Little data is available for medium scale heat only systems but a figure of 80% would be a reasonable assumption. Using a similar methodology to that outline above for medium scale systems (45-500kW) the cost of the emissions reduction would be £0.44/kg of CO2.

Comparison to solar heatHarvesting heat from the sun is not entirely energy free, power is needed for circulation pumps and control systems. However, for the purpose of this calculation an efficiency compared to gas of 100% is assumed. Using similar methodology to that outline above for medium scale systems (20-100kW) the cost of the emissions reduction would be £0.88/kg of CO2.

Proposed adjustment of the heat pump eligibility criteriaBringing the cost of CO2 emissions reduction more in line with that for solar heat would be achieved by increasing the minimum SPF by adjustment of the eligibility equation to:SPF = 1.5 / power station efficiencyThis would mean that the actual energy used to produce each kWh of heat would drop to 0.67kWh of gas, and the cost of the CO2 emissions reduction would fall to £0.79/kg – nearly double that of biomass heat. In real terms this would equate to a 37% energy saving compared to heating with gas.The implications of this change would require higher SPF performance from the heat pump, and/or more efficient power generation – i.e. a power efficiency of 50% would require an SPF of 3 or greater.


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Cooling technologiesFrom page 30 - CoolingThe RHI is designed to support the generation of renewable heat, but there is also the important question of renewable cooling technologies. As the purpose of the scheme is to support the generation of renewable heat, the RHI will not support renewable cooling.

Whilst it would be perverse to incentivise electrically driven air conditioning, the same does not apply for Absorption Refrigeration systems driven with Renewable Heat.

The UK has 1000’s of large distribution centres with refrigerated compartments; each typically consumes several hundred MW of electrical power. Today the refrigeration for the majority of these facilities is provided using electrically driven compression technologies such as “direct ammonia”.

An alternative technology, Absorption Refrigeration, when driven using Renewable Heat, has the potential to make a significant reduction in the UK’s CO2 emissions. The combination of Absorption Refrigeration and Renewable Heat reduces CO2 emissions from refrigeration by over 80%.

Why should renewable heat for Absorption Refrigeration be included in the RHI? •The “user energy” concerned with refrigeration is heat, that is the removal of heat. Traditional refrigeration uses high value electricity to generate mechanical rotation, which in turn provides the compression of gases/vapours for use in evaporative cooling. An alternative is to use a lower value energy source; i.e. heat, to drive an absorption process for refrigeration.•Unfortunately Absorption Refrigeration plant is more expensive to purchase than compression driven plant – the refrigeration process is more complex. Unless there is a viable and economic heat source, this drives engineers to select compression driven plant for their refrigeration projects.•Onsite power generation using CHP technology often produces more heat that can be easily used. Absorption Refrigeration provides a significant heat load that improves the overall efficiency of CHP systems. There is also an advantage in balancing summer cooling loads with winter heating loads. Biomass boilers could also supply renewable heat for absorption refrigeration.

The typical carbon foot print of a 1MW state of the art direct ammonia refrigeration system would be 1,826 te CO2 per annum. The equivalent 1MW state of the art absorption refrigeration plant driven with a biomass boiler using sustainable wood chip would produce just 319 te CO2 per annum, a reduction of over 80%, as illustrated below.

[table]

Space heating of large commercial buildingsFrom page 31 - Wood burning stoves, open firesWe propose excluding wood burning stoves, air heaters, open fires and similar applications from the RHI……

Many large industrial buildings are heated using indirect gas fired and heat recovery air heaters. It would be appropriate to include these in the RHI where the energy is provided with a qualifying fuel source such as biomass – it is unclear from the consultation document whether such technology would be included. A significant reduction in CO2 emissions could be achieved if end users are encouraged to adopt biomass technologies for these applications.

Tariff for solids biomass – effect of scaleThere are two issues with the proposed tariff structure: firstly the large drop when going from medium to large scale; secondly the manner in which facilities will be scaled, is this peak or average, potential clash with deeming.

The significant drop from 5.5p/kWh to 2p/kWh from medium (45-500kW) to large scale (>500kW) has the potential to warp the market. For example there would be many 500kW systems and no 550kW systems. This could potentially lead to topping-up with fossil fuel power systems and not arriving at the best solution for reducing CO2 emissions.

The method used to determine the scale of the system needs careful consideration, particularly when considering it’s interaction with deeming. Particularly in commercial systems a high peak capacity may be required to serve the nature of particular business operations. It is recognised that turn-down can compromise efficiency, but that can be corrected with the use of “summer” and “winter” boilers.

Observations by Stuart Reid (Highland Wood Energy)

Fully automated pellet stoves should not be excluded from the RHI proposals. These technologies meet national efficiency standards, can be clean air compliant, are operated with wood pellet fuel that meets national quality standards and cannot be used with coal or other fuels. The cost of administering these in the scheme need not be large as a recognised number of hours per annum of use could be agreed. Fuel purchase receipts could be retained by the owner and subject to auditing on a random basis by OFGEM and these could also be serviced by accredited companies on an annual basis. For many householders this form of technology will represent the most effective means of renewable heating and therefore there uptake should be encouraged. Observations by Howard Roche (Helix Agencies)

The consideration that eligible useful heat being as heat that is used for: space heating, water heating, cooking, low to high temperature industrial processes, drying and separating is in our submission, defective in that it does not include the opportunity to displace a large emitter of carbon, being the industrial use of energy for cooling.

A developing technology is that of absorption chilling that can use low grade renewable heat such as may be derived from ground source heat, or heat recovery from biomass, district heating, CHP or surplus process heat.

It is appreciated that domestic refrigeration and the risk to double counting exists. (Such as using renewable electricity to cool)

Accordingly we propose to avoid that scenario by proposing electricity (power) for cooling be excluded and that claimants wishing to use heat for

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cooling demonstrate to the regulator that this is “heat derived as a bi-product of power generation or heat directly created from renewable sources”.

That is; by means of metering it can be demonstrated RHI has NOT been claimed for that heat at a higher temperature further upstream. This can be done by way of simple line heat flow diagram to the regulator at point of scheme approval, then by supplying meter data of heat meter that shows the flow of heat to heating (a) and a heat meter to cooling (b) and heat meter at point of generation © . With the obvious audit formula = a + b < c

We agree that in principle that any increase in capacity would be eligible for RHI support as if it were a new installation.

However we do see a number of practical issue that may dissuade operators from increasing the capacity in a way that minimizes overall embedded carbon impacts and issues of fairness in the wider community particularly in the “target group” when a Responsible Social Landlord (RSL) such as housing association comes to setting tariffs in existing schemes.

By way of example, a scheme in Western Scotland is seeking to extend the existing scheme to displace electric heating using spare capacity in the existing district heating scheme by way of a new extension.

The extension may attract RHI as presently set-out, however residents on the existing scheme will be paying a much higher rate as they were part of a pioneer estate and as a result will be paying a higher tariff to person potentially next door using heat derived from the same biomass source.

It also raises the question of how does the operator apportion of the heat generated which was used by the extension. If on the other hand a new pipeline was to be taken from the existing boiler house then the cost under any support scheme would render it; not viable.

Equally, a further non desirable option would be build another boiler house and attendant plant to handle the 35 additional homes increasing the embodied carbon in scheme substantially.

It is suggested that so few of these scenarios exist due to the small amount of existing biomass schemes that are actually in operation then RHI could simply apply to all biomass district heating schemes, albeit at a lower rate.

Thus we are of the view, so as to ensure fairness across the piece where an existing biomass district heating scheme be extended, then the RHI apply to the entire metered heat generated and exported onto the heating network be eligible with the proviso that the consumers be metered so as to ensure the heat is “usable” and not sent to waste.

There may be a beneficial side effect by this approach, this may encourage existing operators appraise ways they may make existing plant more efficiently and find novel ways to extend networks to new users such as a community hall or leisure centre, perhaps retailers so as to lower the daily demand variances. In this scenario it might be reasonable to stipulate the minimum anticipated amount of heat consumption the extension might reasonably be required in the design to take, so as to avoid perverse results of say adding a single consumer. It is suggested that this additional requirement be set at say 20% of the existing consumption levels. By way of example a scheme of 100 homes using 10Mw/h per annum per home, to qualify for RHI over the entire scheme would need to add at least a further 20 homes or perhaps single consumer who uses 200Mw/h per annum, or a combination of both.

Given what is known of existing biomass schemes that are in operation, these are few. It is known that early adopters of this technology have struggled to remain viable. We are aware of at least two schemes where the biomass has been either removed or mothballed with others at substantial risk to closure if as is anticipated the RHI exerts pressure on the supply chain. Given that scenario, electricity and oil becomes a viable option off the gas grid and gas becomes very attractive indeed where gas is to be found nearby.

It is presently a concern that the market will sustain a loss of confidence if the early adopters cease to operate. The cause of much of this operational difficulty appears in our view to arise from the absence in the Consultation of consideration of operation and maintenance.

We have data from numbers of schemes that demonstrate that operational costs of biomass are at least double that of say gas or oil. This arises from issues of storage, fuel movement into the boiler, condensates in the flame tubes and stack, the aggressive nature of the ashes and the predisposition of biomass to arch over or bind against augur systems.

Therefore with the aim of simplicity of the overall RHI, there is a meritorious argument that providing schemes continue to operate on biomass then they would be supported. This will avoid the perverse outcome that they revert to fossil fuel in preference to investing in the existing scheme.

We would support a view that if such support was to be offered then it could be at the proposed lower level.

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Proposal 1) Where bioliquids demonstrate they have not displaced food production then they be eligible.

Observations by Angus Perry, (Vital Energi)Comments: Bioliquids are not currently eligible for ROC therefore how can they be considered for RHI?


It depends on the sustainability standards, but given transport requires large amount of this material then on present technology this could be reserved for that purpose. The USA example of diverting arable food stocks to biofuel impacted on the price for basic foodstuffs across the globe engendering social unrest and widespread starvation. Obviously GB will wish to avoid that scenario.

This situation may change as advanced biofuels (such as derived from algae) enter the market at the commercial scale.

Algae fuel, also called algal fuel, algaeoleum or second-generation biofuel, is derived from algae During photosynthesis, algae and other photosynthetic organisms capture carbon dioxide and sunlight and convert it into oxygen and biomass. Up to 99% of the carbon dioxide in solution can be converted, which was shown by Weissman and Tillett (1992) in large-scale open-pond systems. At present, such fuels remain too expensive to replace other commercially available fuel.

SRC Willow grows well on marginal land and on Brownfield sites as does Eucalyptus, particularly in parts of Scotland which is not used for arable farming. This material may well become attractive in the biofuel market should “3rd generation” process prove practicable.

We also see opportunities arising in the marine environment or indeed large scale indoor “greenhouse” type structures, such as demonstrated by DC21 in their Bluesky concept for the large scale manufacture of biofuel from Algae and Protozoa.

There is a case for restricting biomass and biofuel to marginal land. This also applies when we come to palm oil and the like. There are options though that could be encouraged in emerging economies, such as Jatropha which grows on marginal land in third countries and has the potential to distribute wealth to Southern African Countries and the Indian sub continent.

We are also aware of a technology that converts fish processing waste to a biofuel. Cellulosic ethanol is a biofuel produced from wood, grasses, or the non-edible parts of plants. Production of ethanol from lignocellulose has the advantage of abundant and diverse raw material compared to sources like corn and cane sugars, but requires a greater amount of processing to make the sugar monomers available to the microorganisms that are typically used to produce ethanol by fermentation. One of the benefits of cellulosic ethanol is that it reduces greenhouse gas emissions (GHG) by 85% over reformulated petroleum. By contrast, starch ethanol (e.g., from corn), which most frequently uses natural gas to provide energy for the process, may not reduce GHG emissions at all depending on how the starch-based feedstock is produced. It may be with time Renewable Heat could be used to displace the gas.Companies are producing enzymes which could enable a cellulosic ethanol future. The shift from food crop feedstocks to waste residues and native grasses offers significant opportunities for a range of players, from farmers to biotechnology firms, and from project developers to investors.In Europe, several plants are operational in Germany, Spain, and Sweden, we understand that a capacity of 10 million litres per year is under construction.We therefore propose that biofuels should be eligible providing they comply with a sustainability standard.

Question: Q08

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Proposal 1) A standard lexicon be used where possible.Proposal 2) A web based “emissions planning tool” be developed.Proposal 3) In rural areas the emission standard be relaxed.


Comments: Before introducing more stringent standards the additional cost needs to be considered. It may be a requirement to include extra plant (filtration and flue gas recirculation) to meet the levels. This will add cost to design, equipment, operation, space, etc and should be taken into account when setting the standard tariffs.

Also iIndustry standard nomenclature and references should be used when setting emissions limits to be achieved. Concentrations, mgm-3 , dry at 0°C, 101.3 kPa (at ref O2 )

Observations by Stuart Reid (Highland Wood Energy) One question not specifically asked, but which is referred to in the content before question 9, relates to the solid biomass sustainability criteria. It is likely that there will be considerable uptake of biomass projects at a local – farms and estates - or community level where either on-site or local biomass resource is being utilised. It is conceivable that the biomass resource to feed these systems could be made up of a number of small pockets of timber from a range of sources from the immediate locality (windblown, dead standing wood, small quantities from the local estate, etc, etc). To try to ensure that all biomass resource for these type of systems was certified to ensure access to the RHI would be a significant barrier to uptake. It is not clear from the document as to whether it is the intention of the RHI proposals for biomass to classify the “microgeneration” banding at 45kw or 300kw. However, it would seem to be appropriate that either the 300kw or 500kw banding be the level above which fuel should be certified as sustainable. Above these sizes the volume of fuel required will be more significant and therefore the economics of undertaking certification should be more practical. .


There is some debate between UK standards and other EU countries standards on the means of measurement of emissions. This leads to delay and cost on importing suitable equipment. It also rather depends on the location of the boiler. It is obviously less desirable to have a unit emitting 30mg with a low flue/stack height than it might be to have a larger unit in a rural area with a higher stack height. Given most off gas grid homes and businesses are in the rural setting

The recent the emissions evaluation tool developed by AEA technology if widely adopted by planners as the standard for approval would not only assist planners but also developers calculate the viability of a given site prior plans being submitted which would greatly reduce work loads and thereby shorten the planning process which we see as a priority given the size of the target and the timeframe in which it has to be achieved. See the “Biomass for London Report” at page 54 [see link below)

http://www.londoncouncils.gov.uk/transport/briefings/ReviewofthePotentialImpactonAirQualityfromIncreasedWoodFuelledBiomassUseinLondon.htm?showpage=-1)

The model while effective is not intuitive for designers and architects. We would propose that a free web based version that gives an definitive outcome or recommended course of action by linking post codes data with the emissions data already collated on be made available on either the Defra or Air Quality websites such as http://www.airquality.co.uk

Question: Q09

Comments:


It would only complicate the management process and slow initial take up. Energy efficiency should be targeted by other means such as building regulations.

Observations by Stuart Reid (Highland Wood Energy) We are of the view that the deeming method as currently proposed can be utilised to encourage energy efficiency. The deeming proposals will effectively assume that properties are appropriately insulated which is a coherent and justifiable stance in that it will not reward those who are not energy efficient and will encourage them to take steps to improve. Any attempts to make energy efficiency measures compulsory are likely to be a significant barrier to the adoption of renewables.


It could be a consideration when considering retro-fit to multi-home developments but the management of that process may be better addressed via CERT and CRC.

Question: Q10

22 June 2010 Page 1292 of 1348

Comments: Proposal 1) Homes planned to use low carbon heat could be given a partial derogation from the revised Part L building regulations or the low carbon heat element be counted towards the Energy Performance Certificates where buildings are obliged to show such a certificate.Observations by Angus Perry, (Vital Energi)Property developers must design and build to the minimum standards applicable at the time of Construction, therefore the introduction of RHI will have no impact. Developers that build above the minimum standards do so on the basis that they are offering a premium product and therefore can market their properties at a higher value to recover the additional cost. There is a reluctance in the private house building market to use renewable heat technologies due to the additional expense of plant and complication of setting up ESCO’s to manage the long term operation, maintenance and billing operations. Observations by Howard Roche (Helix Agencies)The renewable heat sector is on the horns of a dilemma. On the one hand we need to maximise the result from the finite renewable resources available to the planet and thereby reduce energy usage, but on the other low consumption, or more properly low revenue undermines the viability of schemes. By way of example compare 2 Housing Association schemes in Scotland using biomass heat. The first built 7 years ago averages a heat use of some 10,000kwh per home per year whereas a more modern site some 40 minutes away with an identical climate, averages less than 7,500kwh per home per year with the same overhead. The dilemma lies in that the lower uptake of heat sales undermines the viability on the operation of the scheme as cash income from heat sales is lower when the homes are better insulated. Accordingly DECC may wish to consider relaxing the building regulations for new homes that are to be built using renewable sources and tightening the regulation on new homes that are to be built using fossil fuels as the primary heat source. This method would encourage, at little cost to the pubic purse, that more homes are built using low carbon energy sources.

Question: Q11


Observations by Angus Perry, (Vital Energi)Comments: SAP or SBEM may be appropriated for domestic level and small scale commercial. Metered energy supply or energy input is a simpler and more manageable solution. It would also provide valuable actual building energy data against which to benchmark future scheme development.

Observations by Stuart Reid (Highland Wood Energy) We agree with the proposals about metering versus deeming although in practical terms we think it likely that depending on the methodology for deeming (see below) it is likely that most biomass projects in the 45kw to 500kw range will utilise a heat meter. Observations by Howard Roche (Helix Agencies)

We understand there is a new SAP being developed. Developers and investors and Installers would need to know what change that might entail. Also certain structures fall outside either method. We agree with the views set out by “Scottish Renewables” in that; “currently the SAP, SBEM and EPC’s are the best methods available to access building heat demand. However these methodologies do not account for regional climatic differences. Scottish Renewables feels that a multiplier should be included to take into account the use of heating degree days. This would give a more accurate interpretation for the specific heat needs of different parts of the UK.”

Question: Q13

22 June 2010 Page 1293 of 1348

Proposal 1) District Heating may be asked to offer supporting evidence of the usable heat.Proposal 2) Schemes outwith of MCS may be asked to offer supporting evidence of use.Proposal 3) Plant replacement be pre-certified by Ofgem based on previous heat consumptionProposal 4) New plant be pre-certified by Ofgem based on the design case.

Observations by Bill Watson (Angus Biofuels)

We are against RHI being paid to CHP that can not demonstrate efficient use of the heat production. Let's not build power stations that will burn our renewable fuel and only be 30% efficient. We have done this with our coal and oil reserves and lessons from this must not be repeated.


Comments: Use of metering is the most appropriate method for all levels, for the larger schemes auditing can be employed to minimise any misuse of the system.

Observations by Stuart Reid (Highland Wood Energy)The process for deeming is an area that we feel requires consideration. The process for deeming needs to be simple, clear, transparent, accountable and not open to manipulation. This is particularly the case in the retro-fit sector as for new build projects information should already be available. In the retro-fit sector there is the potential danger that installers competing for projects could interpret variables differently in order to maximise the RHI payment and use this as a means of attempting to win projects. The most straightforward approach would be to develop a matrix for different types of buildings and construction methods which identified the notional kWh per sq m (or m3) when all reasonable energy efficiency steps were taken and model this based on the appropriate climatic zone. The hot water demand could also be identified. The matrix would need to be constructed in such a way that it accounted for the different types of buildings that were in the sub 500kw range and there likely different uses and occupancy. The RHI claimant and the installer would be liable for the accuracy of the deemed claim and this would be subject to audit and verification as required. The deeming methodology also needs to take account of climatic variability not just across the UK but in different parts of Scotland.


We agree there maybe a temptation to over generate heat and dump it when the heat is not required. In order to maintain the credibility of the RHI programme and protect the public purse methods need to be considered to avoid the waste of a valuable resource. With district heating projects a simple audit is available, that is the relationship between heat sales and heat generated.

We have supporting data that suggests the relationship is in the region of 60 % to 70% of heat generated is purchased. When claiming the RHI therefore supporting heat sales evidence could be required perhaps annually.

With non-domestic users we do see the risk that say a larger boiler may be run during times when the heat is not actually required. In discussions an option has emerged that may give peace of mind on this issue.

With the first application for an RHI claim, in the case on displacing existing plant, the claimant could supply evidence of the consumption in the previous years heat usage, by way of example; supply to Ofgem copies of the previous fossil fuel invoices.

Ofgem may then certify RHI that claims to the level +/- 10% of that disclosed would be met if evidenced. For a claim above that figure further evidence must be given that the heat was for usage. This might be done, for an example by evidence of perhaps an increase in production, new facilities having been built, or new connections. This might be referred to as the Ofgem RHI Approval Certificate. (ORAC)

A regards new build developments then we propose that the design case should be submitted to Ofgem for the RHI Approval Certificate (ORAC) which would allow for a margin for error being larger, perhaps 20% to reflect the higher risk to genuine error between the design case and actuality in the real world.

Thereafter Ofgem could certify based on actual claims.

By this pre-certification method investors can see what return a proposal may achieve and then go to the market to raise capital for that investment by using the ORAC with the added benefit to DECC of simultaneously protecting the public purse.

Metering risk is not serious issue as there is a recognised European standards for heat meters.

Question: Q14

22 June 2010 Page 1294 of 1348

Comments: Proposal 1) RHI be phased down from the 15 year end point.Proposal 2) RHI have a wider range of bands. Proposal 3) Back up boilers not be counted as part of the installed capacity


To develop large scale biomass/CHP scheme a significant heat load would be required. There are basically two potential area which could deliver such loads industrial process and district heating networks. For example a 1MWe biomass ORC CHP would require a heat sink of 4MW thermal. To provide a 4MW base load a DH scheme with 5000 plus connected dwellings would be required. The build out time for such a development would be 10 years plus and the DH cost would be in the order of £20,000,000.

The RHI incentive arrangement to support the development of this level of scheme would have to be robust and allow for investment to be secured.


The cost of District Heating is not a function of the energy generation plant but the distance and terrain between the plant and the consumer. This cost is in the region of £550 per metre installed. It can be seen that it does not take a long distance fro the DH to overtake the plant room costs. This is discussed further in the District Heating response.

We are of the firm view of setting “large scale” as being over 500kw will result in perverse installations on schemes that properly should be specified with larger plant to deal with peak demands, or the splitting of more efficient larger schemes into smaller units with the attendant higher risk of mechanical failure. (See diagrams at end of this response) As set out above, and so as to scale this problem and by way of example: Vital Energi operate a scheme of 50 homes with a 460 kw boiler and a 98 home scheme with a 600kw boiler both with oil back up. (Referred here as Schemes A and B)

Equally; being developed is a 350 home scheme with 4 x 500kw boilers, 2 of which are biomass backups. (Scheme C). As drafted scheme B would be penalised for being over the 500kw yard stick. If being brought forward under the proposed regime Scheme C could have been specified as 4 small schemes with 4 small boiler houses with an increased fossil fuel being used to pump the networks and do the biomass deliveries. This would clearly be unsatisfactory.

We are the firm belief that larger schemes are adversely affected by the present proposal which would result in an unsustainable demand of boilers under the 500Kw line and actively dis-incentivise the ambitions and vision of larger schemes with potentially a much larger reduction in carbon emissions plus a lack of take up in interconnecting schemes. It is suggested that an option developer could select and one that could easily be appended to the proposal would be to scale the RHI on the cost per home (or more properly unit) installed, but this may have an undesirable effect in artificially inflating scheme costs.

Question: Q15

Comments: Observations by Angus Perry, (Vital Energi)

Biogas CHP requires the installation of an anaerobic system which generates the biogas. These are available but expensive and specific to defined markets (municipal effluent treatment, process effluent treatment, farming, etc). The main support for the process is waste stream gate fees, electrical generation and ROC’s, the RHI mechanism is unlikely to offer significant additional support.

Question: Q16

Comments: Observations by Angus Perry, (Vital Energi)An air source heat pump is basically a refrigeration system working in reverse; they are not a renewable technology unless using green power produced from another technology!

Observations by Howard Roche (Helix Agencies)We would be concerned that power for which perhaps FIT has been paid is then used to create heat and so garner RHI. We believe this is a waste of the valuable resource of power and agree with the DC21 position as set out in Q7

Question: Q17

22 June 2010 Page 1295 of 1348

Comments:

Observations by Bill Watson (Angus Biofuels)

Sliding scale tariffs would cover all boilers in the range from 20 kw to 1MW thus removing possible abuse of the proposed table of tariffs.


As long as the RHI tariffs calculations take account of the true additional costs when compared against the standard carbon based alternative. The RHI tariffs calculation should include fuel price difference (where appropriate) the additional capital plant and cost, the additional operational and maintenance costs.

Observations by Stuart Reid (Highland Wood Energy)Based on the varying cost per tonne of CO2 saved, the 12% ROI calculation used to underpin the levels of the RHI is clearly a policy decision based on factors additional to the pure reduction of CO2 emissions. However, there are several key points about the proposed bandings approach which we believe require to be addressed.1.It does not seem logical to band based on installed capacity rather than heat use. This will result in sub-optimal choices in relation to size of systems being installed and could potentially lead to increased fossil fuel consumption. For example a project could need a 50kw system but choose to install 40kw to maximise RHI payment which would result in more fossil fuel being used despite a higher RHI payment being received. Switching to a system based on actual heat use would not require a substantive change to the proposal. 2.The dramatic drop off in RHI level above 500kw for biomass systems will mean that very few projects between 500kw and 1MW will be installed. A 500kw system delivering 2000 MWh of heat per annum would, under the proposal, receive an annual RHI payment of £130,000. In contrast, a 1 MW system producing 4000 MWh of heat per annum would receive £100,000. This is not a logical nor desirable position. 3.One solution to this is to introduce an additional banding between 500kw and 1MW for biomass systems. This will lessen the impact of the mismatch. However, whenever there are distinct bands introduced it will always be the case that people on the larger side of a band will be tempted to “downsize.” The only alternative approach is one whereby the RHI is awarded incrementally to projects as they move through the consumption bandings. This would eradicate the desire of projects to “game” play. The consequence of this would, however, be that larger biomass projects would receive more RHI payment than currently proposed. An example of how this would work is shown in the following table:

[see original response]



The option to develop energy centres with mixed fuels is appropriate as many customers (especially in the industrial sector) require dual fuel systems to ensure security of supplies. Also biomass systems are not as flexible in operation as gas and liquid fired boiler plant so a mixed fuel arrangement may deliver a more efficient overall system performance.

It should not be necessary to require a dedicated biomass boiler for RHI, as long as the secondary fuel supplies are separately metered. The facility for dual fuel firing is likely only to be require on large scale industrial and commercial plants (hospitals, chemical, food, etc.)


How is it proposed to manage a scheme that uses gas as a back up, either as the prime mover or as a separate boiler installation? We would propose metering on each boiler output, or on each fuel technology set. (i.e All renewable output is metered separately from fossil fuel metered output.)

Question: Q19


22 June 2010 Page 1296 of 1348

Comments:

Observations by Angus Perry, (Vital Energi)An uplift tariff needs to be set for all district heating that clearly defines what level of RHI payment is available and what the eligible criteria is. Without any definition development of district heating networks will be limited to say the least.


By using a cost per unit installed mechanism then the RHI as set out in Q15 could be properly reflected in the project and would in turn give an element of case by case, as once that cost was calculated both developer and regulator would clearly be able to discern the efficacy of any proposition. However we do accept the DECC view that any mechanism needs to be simple and transparent.

As illustrated by Q20 then the level of support will need to be at the bottom rate of expectations be at least 3.5p/kwh. The capital cost shown in the examples was incurred before the collapse in Sterling exchange rates and the bulk of the capital cost is for pipelines and boilers imported from Europe. Early indications show the range of support to be in the region of 6p/kwh to 9p/kwh if a rate of return of 12% is to be achieved.

Question: Q21


In the property market there is the principle in letting of upwards only rent reviews. In all studies there is shown to be only marginal risk of energy prices deflating. In the terms of Renewable Heat there is a further constraint on the economics. It should be recalled in the 17th Century the British Isles practically ran out of usable forestry due to the production of charcoal for iron production. It is inevitable that biomass prices will increase if only to follow the trends as set out in the Ofgem “Project Discovery” report.

[see chart in original email]

Work done by DC21 and Andrew Nichol, a chartered forester, and work by the Forestry Commission has given clear indications as to restrictions on availability of existing forestry to supply what has the potential to be a burgeoning market.

The construction of some very large biomass power only generation plants are clear indicators of the stress the market will suffer. This will manifest itself in higher biomass prices which could easily undermine the ability to achieve the target penetration particularly since coal prices may well remain static.

There is a measurable risk that the market will stall if biomass prices get out of hand, there will also be pressure to take in supplies from sources that are not sustainable. Whilst is recognised that the EU is developing a biomass sustainability standard it is not clear how in the real world smaller operators can be made to comply.

It is a concern that individual home owners may take in supplies of biomass say from rain forest products unless DEFRA or others apply controls on the import of those materials. Reputable operators will wish to comply and be obliged to comply by way of contract.

Therefore we would be of the view that Government should make this promise: “The RHI is under constant review but guarantees the minimum rate will not fall below the original tariff accorded to a given project.”

This will encapsulate the better aspects of “grandfathering” but allows for Ofgem to vary the scheme rates if biomass inflation outstrips say coal and that avoids schemes either failing or convert back to coal.

We have a concern that at the end of the 15 year period discussed on page 47, as to how larger scale operators undertake the tariff transition without impacting on annual inflation rates as they move to a non RHI environment given that the equipment is by this stage beginning to age and from the data in the Consultation makes no allowance (as far as we can see) for sinking funds to replace the equipment at the end of its useful life but assumes a simple return on the capital invested of 12%.


Comments:


It is unlikely that the capital cost of equipment used in heat generation will decrease as the inherent engineering does not allow for the type of mass production that printing solar cells might afford to the market or a reduction in the amount of material used in the equipment.

Question: Q23

AgreeQuestion: Q24

22 June 2010 Page 1297 of 1348


Through degression Q23, as an option as take up increases to possibly reduce future tariffs

Question: Q25

AgreeQuestion: Q26


Changes that may require a review may be large increases in fuel, energy or finance charges. A review may also be required in the event of large scale de-forestation.

Question: Q27

22 June 2010 Page 1298 of 1348

Comments: Observations by Bill Watson (Angus Biofuels)All projects which comply should be eligible for payments from 15 July irrespective of when they were installed.Observations by Stuart Reid (Highland Wood Energy)We feel strongly that biomass projects implemented before July 2009 should be eligible for the RHI. The reason for this is that there is that the introduction of the RHI will have a dramatic and artificial impact on the biomass fuel market. It is a fundamental economic rule that when demand for a primary resource goes up, price goes up. The modelling work in this area undertaken to help develop the RHI proposals does not seem to recognise this fact. Given that we are already seeing prices in the region of £30 to £40 per MWh for wood chip fuel it is not clear how the modelling work that has been undertaken would predict that the upper range of fuel prices will be £34 per MWh in 2020 following the very significant increase in demand for biomass fuel which will be required to achieve the renewable heat targets. The economic foundation on which many existing biomass projects were developed (we have undertaken more than 200) depended on the availability of fuel at a reasonable price and will therefore be fundamentally affected by this proposal. It would be counter productive for existing biomass projects to be forced to come off-line and install fossil fuel systems because of the introduction of an incentive aimed at reducing fossil fuel consumption. Observations by Howard Roche (Helix Agencies)

Existing early adopters are facing numbers of difficulties as they committed early before the market skills gave certainty of outcome. Numbers of schemes have already been moth balled or removed entirely, such as the scheme in Orkney. Designs have in some cases been poor and assumptions over optimistic. What would indefensible is that schemes that are at risk are converted to fossil fuel. Notable examples are Orkney which is converting back to electricity and Wick in which the generation technology (biomass CHP) never worked though the DH network is working well, albeit on oil. It is a concern that a project such as Wick, which now requires large scale “refurbishment” and “repair” would not qualify. This could be addressed on a case by case basis as there are few early schemes.This is a real risk as many of the early adopters are Housing Associations and other public bodies and have a duty to avoid loss or at the least not pass it across the organisation. It is these bodies that have allowed the market to develop its skill that the RHI now requires. We suggest it is not equitable or desirable to place these early adopters at a competitive disadvantage.Furthermore there then is the difficulty of how the RHI would manage an extension to an existing scheme and how it discriminates tariff between parts of the scheme that obtained RHI which offers a return on the investment capital and those parts of the scheme which may have been grant aided to no more than 50% of that capital cost. The edict that one can have either the grant or the RHI does not reflect the commercial reality that many of these schemes find themselves. They do not have the reserves to refund the grant and in any event they only ever got 50% of the original cost at best. A reasonable resolution and giving equity between the players would be to suggest, by way of example, if the project obtained (say) 40% of its capital cost by way of a grant in the past then it could qualify for 60% of the RHI. The duty would be on the operator to demonstrate to Ofgem that percentage rate.Guidance by EU commissioners on State Aid support states:Where the investment aid for renewable energy sources is to be given to SMEs, the aid intensity may be increased by 10 percentage points for medium-sized enterprises and by 20 percentage points for small enterprises, as set out in the table “Aid intensity for renewable energy sources”

Small enterprises 80 %Medium-sized enterprises 70 %Large enterprises 60 %

Where the investment aid is granted in a genuinely competitive bidding process on the basis of clear, transparent and non discriminatory criteria, effectively ensuring that the aid is limited to the minimum necessary for delivering maximum renewable energy, the aid intensity may amount to up to 100 % of the eligible investment cost as defined in points 105 and 106.

We suggest DECC may consider certifying existing schemes eligibility to RHI and a reduced rate or at a rate that over time refunds previous grants in order to comply with guidance.This should be a welcome fillip to existing schemes and defray claims between operators in general and consumers in particular at those schemes that the RHI has not warped the renewable energy sector in the favour of new entrants. This would also demonstrate to investors that the government is willing to reward risk equally. Schemes that we are aware of affected in this way are, West Highland HA at Glenshellach, Fyne Homes at Lochgilphead, Skye and Lochalsh HA at Portree, CHAP at Wick, Three Gardens Elmswell, Lasswade Road, Edinburgh. DECC might, on the basis of cost, require that to obtain the RHI supplement envisaged that there has to be domestic consumers on the scheme and that the operator addresses in part some of the criteria being part of the “target group” and there is a social housing element in order to qualify.

Question: Q28

Comments:


Would suggest that the smaller units obtain payment on the supply of a copy that the annual maintenance has been carried out or fuel supply invoices. Perhaps these might be submitted at 5 yearly intervals but available for inspection on demand of the Regulator

Question: Q29


22 June 2010 Page 1299 of 1348

660 Greenheat Systems Limited Private Company

bio-energy and emissions, innovation


The Renewable Heat Incentive is pedestrian in scope and will have insignificant benefit to the effects of climate. I note that nowhere in your RHI documentation, the SI unit ‘kWh(thermal)’ or ‘kWh(th)’ is used and feel that this nomenclature should be used instead of kWh. I will use the term kWh(e) to denote a unit of electricity. The use of suffixes (th) and (e) should be used in all governmental documentation to avoid confusion.

The kinetic energy in wind, wave and tidal power should be converted to heat, not electricity, in the first instance. It can then be stored as heat in large thermal accumulators that act as buffers for when the renewable prime mover is no longer available in real time. The heat can then be distributed to provide hot water, space heating and converted into electricity using either steam turbines or solid state heat to DC thermocouples and inverters.

As a rule of thumb it takes 3kWh(th) to produce 1kWh(e) using a Rankine Cycle process.

It is obvious, to me at any rate, that using renewable energy resources such as wind, wave and tidal, to provide heat to our existing stock of fossil fuelled power stations would cut the burn rate of fossil fuels considerably over time. Indeed, for every 6MWh(th) supplied from non-combustion renewables, one tonne of coal is not burned and 2MWh(e) of pure renewable electricity will be generated.

Question: Q01

No, this approach is too restrictive and, perversely, will have a negative impact on climate change because it will kill off innovative ideas at a stroke.

Renewable Heat Incentive can be easily split into two categories; combustible and non-combustible. The former should be de-incentivised and the latter incentivised if we are going to effectively tackle climate change in a meaningful way.

It should be made about 10 times more attractive to generate renewable heat from the kinetic and potential energies in non-combustible renewables than from burning anything with the prefix ‘bio’.


This approach is disastrous and will discourage uptake because the ‘cartel’ of accredited installers just charge a lot more if the householder has to qualify for payments. It is essentially blackmail and besides, people can decide for themselves who they are willing to pay for a renewable heating system without being forced to use an accredited installer. This approach has not worked very well with renewable electricity and is unlikely to work in the green heat market either.

The approach should be a ‘free for all’ where if it can be shown that any householder is using any non-combustible renewable to provide green heat, then he or she should be paid a premium rate for every kWh(th) produced irrespective of how this is done. This can happen retrospectively by inspection once the renewable energy to heat system has been installed by any installer.

If the householder is using a bio fuel, then he or she should get next to nothing for every kWh(th) produced. Clearly, the aim of generating heat from non-combustible renewables is preferable to burning anything. Creating a ‘pre-qualifying list’ today with known technology is going to stifle innovation because nobody going to install any new inventions that may come along in the future.


There should be no certification other than, does the system provide renewable heat? If it does a certificate should be issued to allow the householder to claim for payments based on the kWh(th) generated.


Why bother?

Question: Q06

Certainly not. All non-combustible renewables should be included as well as the blindingly obvious solar and ground/air heat pumps. Biomass burning should be discouraged.


22 June 2010 Page 1300 of 1348

Again, burning bio-anything is still going to produce CO2 and other NCGs. This pedestrian idea of having to burn something to get heat should be discouraged by offering a tenth of the rate awarded to non-combustible renewables.


That should read 20MW(th). The burning of biomass should not be encouraged.

Question: Q09

This is perverse. Energy efficiency is no longer important if the householder is producing his or her own heat. Ridiculous idea.

Question: Q10

Large scale biomass/gas should not be incentivised in the first place so there is no ‘right level’

Question: Q15

See above

Question: Q16

The operating costs are very high because bought in mains’ electricity is used to circulate brine and operate the compressor. Improvements may come from using another renewable source such as wind to raise the deltaT.

Question: Q17

They should be simplified into two categories. Non-combustible should receive very high tariff levels and combustibles next to nothing if we truly want to save our planet from the effects of climate change.

Question: Q18

We should not be burning anything, with or without the prefix ‘bio’, to get heat.

Question: Q19

Yes, providing it uses any non-combustible renewable energy source such as wind, wave and tidal.

Question: Q20

RHI tariffs should be fully fixed for non-combustibles and combustibles phased out over 5 years.

Question: Q22

No, it is not open enough and too clunky. Make it a free for all and, providing the new and innovative technology demonstrates that it produces heat, then it should automatically qualify for non-combustible tariffs


Solar thermal heat in northern latitudes require another renewable energy input such as wind to create a hybrid that can deliver thermal heat throughout the year. The present RHI thinking prevents this kind of innovation from happening because it would be disqualified – a rather perverse scenario.

Question: Q25

Ironically, you have already created an overly high administrative burden as RHI stands now. Simplifying it to just two tariffs – a high one for non-combustible and very low tariff for bio-combustibles is all you need to do. The market will take care of the rest without an accredited installer in sight.

Question: Q29

661 Aggregate Industries Private Company

large installations, bio-liquids in industrial process, biogas combustion incentive level, "engineered geothermal" (new technology)


22 June 2010 Page 1301 of 1348

No.

Question: Q01

No.

Question: Q02

No. For larger schemes, payments should be moved to monthly as oppose to quarterly as this will inevitably have an impact on project finance.


Yes.

Question: Q04

Yes.

Question: Q05

No.

With major thermal processes it is unlikely that the complete process is replaced. Under your eligibility criteria, where a process heater is replaced to operate on either a biomethane or biogas from oil, this would be eligible under this wording. More clarity is required in the definitions.


No.

While aimed squarely at the domestic market, no inclusion and/or mention has been made for bio-liquids that are used in Industrial process. These cannot be construed as FAME bio-diesel replacements. Unlike, the domestic market a range of fuel oil replacements, manufactured from products like ‘Tall Oil’ can be used. Some consideration should be given to the wider use of bio-liquids, with a full audit trail as to their sustainable use.


Yes.

AgreeQuestion: Q09

Yes.

Question: Q10

Yes.

Question: Q12

Yes.

Question: Q13

Yes.

Industrial processes are inherently well managed by business. Energy usage can represent a significant risk if not managed properly, so most processes are in reality metered currently.

Question: Q14

22 June 2010 Page 1302 of 1348

With large biogas combustion, it is neither possible or practical to have dedicated bio-gas production facilities located at each individual site. As a major user of liquid fuels, for process heating and drying, I would look towards converting the existing process to operate on bio-gas across the UK. This would be generated at a number of geographically strategic hubs. After compression or liquefaction, this would then be transferred to sites for use. Most installations are in the range of 8MW – 24MW for asphalt production, using direct fired rotary dryers. While biomethane injection require additional scrubbing, blending and treatment, it is anticipated that facilities, which are not grid connected, will do the same. This is to ensure that any fuel transported has the highest NCV, ensuring minimal vehicle movements. For this reason, I propose a tariff equal to the one for grid connected biomethane.

Question: Q16

Yes.

Question: Q18

Yes.

Question: Q19

Yes. RHI tariffs should be fully fixed, as this will give greater transparency when attracting project finance at the onset. Developers of major schemes, would have enough of an insight to account for increases within bio-energy feedstock

Question: Q22

Yes.

Sensible approach until the level of uptake is more fully understood.

AgreeQuestion: Q23

No.

No mention of ‘Engineered Geothermal’ has been made, which is already a proven technology in other parts of the world. Schemes would be designed as ‘electricity’ only as there is no support under RHI


Yes.

AgreeQuestion: Q26

No.

Question: Q29

662 David Pritt (individual) Existing generator

No

Question: Q01

No

Question: Q02

This would seem a sensible approach, but what ever is decided should be as simple as practical for home owners, possibly an annual electronic form?

Question: Q03

22 June 2010 Page 1303 of 1348

Qualified Response.

While this is a sensible approach, it leaves a number of early adopters of the technology in a situation where we had the system installed by non-registered installers. There should be a scheme to allow for existing installations to be inspected for a reasonable fee, and if passed become eligible for inclusion.

There are also a number of self-builders who would wish to install equipment themselves, and again subject to an inspection should be able to benefit from this.

Question: Q04

This locks users into suppliers who could not provide good value for money, or even run a cartel by matching the prices of the market leaders. When getting quotes for my solar system I was quoted between 25% and 40% a lot higher by companies that claimed that they could install a 'qualifying system', than others supplying exactly the same equipment.

There should be a method for small scale domestic systems to be certified by independent surveyors for a reasonable cost to prevent abuse of the system.


This is good practice anyway, but has to recognise that some older buildings may not be able to fully comply with the latest standards, and this should not be a barrier to inclusion provided all 'reasonable' steps have been taken

Question: Q10

Qualified

I am disgusted by the number of buildings where the heating is on but windows are open to regulate the temperature. This should be tackled before any rebates are given, and the installations should be inspected by an independent surveyor – there is too much vested interest in self-certification by installers. Only where measures have been taken to reduce energy consumption should rebates be given.

Question: Q14

Yes. They seem to be well though out. The aim should be to keep the methods simple in relation to the type of installation.

Question: Q18

No.

Question: Q22

Yes.

It is important to get a critical mass of installations fast to help meet our targets. While costs are high the rebates need to reflect that, but this should be reviewed to ensure that they reflect the true costs in future years, and also ensure that there is pressure on suppliers to pass on wholesale cost reductions to the end users, as providing a rebate can have an impact on the 'market price' of the installations by allowing suppliers to maintain higher prices as they sell the 'final cost after rebates' to the consumers. This has recently been seen with the introduction of rebates on new boilers, where I have notices that the net price seems to have only dropped my a portion of rebate costs, indicating that the previous 'discount' off the list price being offered has been reduced and partially replaced by the rebate, so the supplier is not passing on the full value.

AgreeQuestion: Q23

663 Glendevon Energy Company Ltd Consultancy

Respondent: Glendevon Energy is an independent Scottish company providing consultancy and contracting services to reduce reliance on fossil fuels in the built environment. They also install equipment.


22 June 2010 Page 1304 of 1348

I'm writing firstly to welcome the proposed new scheme on behalf of recent customers and those currently considering an investment in micro generation. I'm sure the RHI will provide a terrific stimulus to the micro generation industry which we look forward to playing a part in.

However, I'd also like to represent pre April 2009 customers who presently stand to receive no benefit at all through the RHI. Many of our customers have spent very significant sums on micro generation and feel some disquiet that they will not qualify for the attractive RHI payments. I'd therefore like to propose the following:1. RHI is backdated by say 5 years.2. Any grant funding that customers have received is deducted from RHIpayments.3. The time frames set for respective technologies are reduced by the time thathas already accrued since installation.

I'm particularly keen that these measures are extended to our Biomass and Heat Pump customers given they are exposed to future variations in energy costs. Wood fuel prices have remained stable over the past few years but this cannot be guaranteed to last with the large scale wood fired electricity generation plants that may be built. Meanwhile good quality hard wood is becoming harder to source for logburning boilers.

Incidentally we're opposed to the use of wood fuel to co-fire coal power stations andits use in electricity only generation stations. The thermal and transmission losses insuch forms of electricity generation make for a very wasteful use of a valuableresource. Wood fuel for CHP installations should of course be given strongencouragement.

Electricity prices are a significant issue for our heat pump customers. These arebound to rise over time. That is of course partly to help fund new renewableinvestment. Should those that have already invested subsidise new installations?


664 Macgregor Solar Consultancy

We welcome this incentive scheme for renewable heat, including solar thermal.

However, we have some comments/suggestions:

P11 SOlAR THERMAL

A)First para: should include “working gas” as well as “liquid” to cover solar air heating systems. (“fluid” would cover both)

B)Should mention solar SPACE heating as well as solar WATER heating.

P25: second para “installations below 45kW”How will this peak power be calculated for solar thermal ?We suggest the simplest way is to choose a ratio between collector area and peak thermal power e.g 0.7kW/m2

P28Why is PASSIVE solar excluded ?

P30Why is solar cooling excluded ?


22 June 2010 Page 1305 of 1348

P39Why has solar thermal a lower rate of return than other renewables ?

P414th parawhy has gas-fired generation been chosen? Many houses, specially in rural areas do not have access to gas and have to use more expensive oil or lpg.

P43 Small-scale (Covered by SAP/SBEM/EPC)It is stated “each installation’s tariff entitlement is established by multiplying the proposed tariff per kWh with a deemed heat requirement”This is misleading since it is the renewable heat SAVINGS, not the heat REQUIREMNT which should attract support.

P47: SCALE COLUMN

As for comment on p25, how will the capacity (kW) be calculated? We suggest a simple ratio between collector area and peak power e.g for solar thermal 0.7kW/m2.

P47Why no large solar thermal ?

P50The calculation assumes a constant heat load for hot water, regardless of the size of house. This is illogical since hot water use depends on the number of people living in the house. There are several studies which would allow a more accurate estimate.

The example calculation states “he might conclude that solar thermal panels would provide 60% of the hot water requirement”What methodology should be used for this estimation of solar contribution ?

There are several possible approaches e.g f-Chart, TRYNSYS,probably too difficult for installers.However we believe a simpler approach be taken with a simple solar fraction , say of 400kWh per m2 per year for solar hot water and 350kWh per m2 per year for solar space heating.

Alternatively, data from comparative tests done by DTI could be used(Side by side testing of eight solar water heating systems, ETSU S/P3/00275/REP/2DTI/Pub URN 01/1292)

Question: Q18

665 Ground Source Heat Pump Association Trade Association

Deeming; Ofgem; Innovation


22 June 2010 Page 1306 of 1348

The GSHPA is very pleased with the concept of the RHI and in the following response, we set out how we believe the finer details can be refined to make the scheme work more effectively in practice.In particular, we are concerned that without:•Pre-capitalisation, i.e. adequate upfront loans, the scheme might struggle to 2020 targets•The 12% target ROI is laudable but we have serious doubts whether full installed capital costs especially for boreholes have been considered and so again, are concerned about reaching 2020 targets. We believe this is demonstrated by the lower rates for GSHP at 7p/kWh as compared to ASHP at 7.5 p/kWh. The capital cost of the heat pump engine will be similar for both an ASHP and a GSHP and yet the GSHP ground loop collector is considerably more expensive than an ASHP air collector which should lead to a significantly higher tariff for the GSHP system. Borehole based ground source heat pump systems will be required for the majority of the existing housing stock and new build housing. Borehole GSHPs will require a higher tariff to achieve the same ROI. We would like to work with other heating industry representatives to advise DECC on fair rate tariffs, lifetimes and deeming procedures. As currently structured, the scheme appears to favour ASHPs over most other technologies and we want to see a balance between all the renewable heat technologies. •Deeming; we would gladly go along with far more refined look-up tables (examples in appendix 2) as long as there was also an appeal process to consider properties that are not covered by the relevant look-up table or the occupant feels they have a case for query. The look-up table should be based on SAP and SBEM.•The administration of the scheme should be as simple and transparent as possible, the scheme should have many routes to market with the utilities as just one stream and Ofgem should be fully supported in their role as scheme administrator. We want to see effective policing of the scheme. The GSHPA is already deeply committed to producing best practice installation and training guidelines and installation standards. This work is based on the experiences of responsible installers in the UK and also existing standards and guidelines from both North America and mainland Europe. It is our hope that this work will be considered by OFGEM when formulating its policing methodology.•MCS is being used as a catch all accreditation process rather than just the consumer protection that it was designed for. It should be evolved into separate parallel systems to cover different sizes, applications and competencies, not just a blunt under or over 45 kW limit. It should also be refocused onto safety and competence matters rather than a hard focus on business systems.•For commercial systems, cooling is often an essential element of the building which sits alongside the heating of the building and this cooling load must be supplied by renewable energy sources and counted into 2020 targets. We do not support cooling on domestic properties, only on commercial buildings. The carbon emissions saving from ground source heat pump cooling comes only from the incremental efficiency improvement over traditional air source chillers and only this element should be rewarded by RHI. Passive cooling, whereby ground loop circulation is used to achieve cooling without the heat pump running should also be supported. This method uses minimal electrical energy and can actually improve the efficiency of the heating cycle by pre-warming the ground to some degree. •All installations of renewable systems since the start of Clear Skies should be considered for RHI. We are concerned that excluding these early adopters from the benefits of the Incentive will cause much friction that will restrict the future growth of this vital industry. We need these innovators as ambassadors for renewable heat. Failure to include these systems could lead to perverse replacement of perfectly functional heat pumps with new units (on existing ground loops) in order to access RHI. These Clear Skies and LCBP systems could be affirmed in their full & proper operation by an MCS installer.•We would recommend the setting up of a group of heating and energy assessor industry experts to advise government on deeming and all other relevant aspects of RHI. However, we note that this expert group must not create delays in developing RHI. This development must continue apace through existing routes.•Innovation; the scheme must be open to new developments. As an Association, we promote members interests by protecting the consumer. We note however that some industry bodies and accreditation schemes have a history of resisting change even when good scientific evidence is presented. It is hoped that with RHI, if our members present quality data for their innovation with appropriate guarantees, then these innovations will not be blocked from moving forward. One route for achieving this is to allow metering to prove actual performance and avoidance of “gaming” via a pre-determined deeming limit to the metering process. This could facilitate the bringing forward of innovations in multivalent heat sources, heat storage, building integration and control.


•Cooling on large scale commercial projects must be included as part of 2020 targets. Cooling is just another form of heat (n.b. we do not endorse cooling for domestic projects)•Finance, without up-front capitalisation, the scheme favours the capital rich•Early adopters. i.e. those who installed renewable heat pre July 2009. We need these householders as ambassadors for renewable heat and their exclusion from RHI severely limits this process. We note that the on-going EST heat pump field trials use these early adopters.•A strong policing system with an appropriate appeals procedure is essential.

Question: Q01

Issues as regards assigning revenue to leasing companies or mortgage lenders

•Financing will probably be easier through Local Authorities or Housing Associations. •Private financing needs to be simple, accessible and not unlike car loans. •Ideas about mortgage loans will then need RICS to intervene with house valuations. Especially as a long term income stream attached to a property will surely influence its resale value.•We don’t believe that a 12% ROI will get the numbers (200,000 per year by 2020) without an extensive “buy in” by lenders. It may be necessary to start higher and then reduce rates as market uptake increases. Care needs to be taken to avoid any rogue trading with these processes.In all likelihood, a utility only route will emerge as they will be the only ones who could put together the installation and financing under one roof. We are concerned about the damage this might cause to independent installers as a distinct route to market.There needs to be clarity regarding the right to assign the RHI to a finance company, installation company, or other third party to again provide confidence to lenders. And certainty, through an award letter, that RHI will be available for an installation before an order is placed.

Question: Q02

22 June 2010 Page 1307 of 1348

Yes and obtaining an accelerated payment in earlier years will help financing.

Dealing with consumers is time consuming and expensive. The resource required to look after the scheme should not be underestimated.


Yes but simplification necessary. We suggest that the interim period is between July 09 and March 2011 is deemed and paid out as per after April 2011. We don’t see the need for special interim assessments.

We feel it is important to clarify that multiple buildings, each having a dedicated renewable energy technology will be treated as separate sites for the purposes of RHI rate calculation, even if within the same ownership. For example, Housing Associations should be entitled to an RHI at the sub 45kW rate for each individual heat pump installation.

There is some confusion currently since changes to the Low Carbon Buildings grant programme imply that MCS listed installers are also capable of design and constructing systems greater than 45kW capacity, which is not always the case. We can see the need for a second certification for larger capacity systems, or at least recognised technical standards and competency criteria to provide structured guidelines for contractor assessment of specialists.

AgreeQuestion: Q04

MCS should only be used for up to 45kW in heat pumps. Above 45 kW a different approach is required and the GSHPA would be pleased to work with other industry representatives including MCS Heat Pump Working Group to develop these standards

Question: Q05

Heat pump standard testing in Sweden (ISP) and Germany for example for product testing.

For heat pump equipment, cognisance should be given to the RES Directive requirements detailed in Article 13, section 6. For ground source heat pump training standards, reference could be made to the European course being developed and delivered under the GeoTrainet scheme (http://www.geotrainet.eu/moodle/) and if appropriate, equivalent design standards.

Question: Q06

There is no motivation to develop higher performance in heat pumps. A higher tariff level for better performing heat pumps would help. It is likely higher performing heat pumps will be more expensive.

The GSHPA suggest start of Clear-Skies as cut off date for RHI.


Demand side management is paramount to future energy needs. We need to encourage as far as possible best practice. We want to encourage good policing and self-certification to building regs either through Building Control Officers or through Competent Persons Schemes (CPS).

Energy efficiency is being encouraged through other government initiatives and we believe that trying to introduce some mechanism into RHI will make the scheme too complicated and risk becoming a barrier to uptake of renewable energy technologies by simply making it too difficult.

Question: Q10

Set minimum u-values as with previous regs. On new builds which aren’t to the proposed future standards discount the deemed amount by a similar percentage eg if EPC shows the building is say 25% below the 2013 regulations then the deemed amount should be reduced by 25%.

Question: Q11

We would recommend the setting up of a group of heating and energy assessor industry experts to advise government on deeming and all other relevant aspects of RHI

AgreeQuestion: Q12

A look up table based on kWh/m2 consumption for house construction types/age should suffice for typical properties and we recommend an appeal process for those exceptional situations.

Question: Q13

Risk is low and metering is a mature industry and so we don’t foresee problem. However there should be a means of policing and withdrawing the incentive to ensure responsible conduct.

Question: Q14

22 June 2010 Page 1308 of 1348

ROI should be higher to kick-start the industry. Financing will be difficult on 8 year payback. This ROI should be 5 years for replacement system. With degression, the ROI can be reduced in future years

For Commercial systems the ROI would appear to be in the right place. However, we would like to keep this under careful review and adjust according to take up.

Timescales for payment should not be seen as product life time guarantees by customers. We make this point because some payment lengths for certain technologies (not GSHPs) seem to be longer than typical product lifetimes.

We believe that the rate as currently set will be insufficient to support systems with vertical collectors. Vertical collectors will be required in urban areas and for the vast majority of the existing housing stock where there is not sufficient space to install horizontal collectors.Modelling suggests that the tariff would need to be increased by 2p/kWh to compensate for the borehole drilling costs, which on average cost 38% more than a horizontal trench. Therefore we advocate setting an additional tariff 2 p/kWh higher for Ground Source Heat Pumps with vertical collectors. We note that in the Executive Summary the following appears: “Tariff levels have been calculated to bridge the financial gap between the cost of conventional and renewable heat systems at all scales, with additional compensation for certain technologies for an element of the non-financial cost (e.g. the inconvenience of digging up a garden to install a ground-source heat pump)“. It is not clear that this has been accounted for in the proposed differential between GSHPs and ASHPs

Question: Q18

Appropriately designed Heat Pump technology can be used to supply district heating schemes

Question: Q20

Yes. They should be index linked

Question: Q22

At least for some time, we do not believe that there are significant cost reductions in delivery of the systems. However, there are some opportunities for reductions in the supply chain system.

Question: Q24

Good tariff levels will grow the market and realise economies of scale. It is the only way. Bigger ROI’s please!

Question: Q25

Yes.

AgreeQuestion: Q26

Insufficient uptake of schemeExcessive uptake of schemeMajor errors in legislation or scheme administration emergeExternal change requires increase in rollout of renewable energy heating systems

Question: Q27

We believe that we need the innovators and early adopters (that is Clear Skies and LCBP) as ambassadors for the scheme. The bad feeling it can create might encourage otherwise effective schemes to be mothballed or even removed.


Random spot checking of “larger than expected” claims would flush out most abuse. In the smaller scale this happens before installation. Annual inspection and verification should ensure compliance, provided it has “teeth”.

For heat pumps - there must be a clear distinction between heat delivered from the refrigeration cycle - and heat delivered from supplementary electric or fossil fuelled bi-valent installations. The RHI should only apply to heat delivered by the “heat pump” component of the system.

Question: Q29

Some members of the Association are working on such schemes and should have data available in a year to eighteen months time.

Question: Q30

666 Solar Trade Association Trade Association

Deeming;


22 June 2010 Page 1309 of 1348

1.Introduction:

This document sets out the responses of the Solar Trade Association (“the STA”) to the solar related sections of the Renewable Heat Incentive (RHI) consultation.

Established almost 32 years ago, the STA is the UK’s longest established renewable energy trade association. Already representing in excess of 200 member companies we are still growing fast. Our association includes manufacturers of solar water heating equipment, importers, distributors, installation businesses and consultants. The STA plays a leading role in promoting high standards and ethical practice. For more information about the STA, including the Association’s ‘Code of Ethical Practice’, please visit www.solar-trade.org.uk.

2.Solar Water Heating and the UK Market:

Almost half (49%) of the final energy consumed in the UK is in the form of heat. Of this heat 70% is used by households and in commercial and public buildings. Heating water accounts for 27% of aggregate UK household use of heat. Therefore the usage of Renewable technology, such as Solar thermal is essential to tackle the issue of global warming and climate change.

Domestic Solar Hot Water (DSHW) is generally the most practicable, convenient and effective renewable energy technology for providing a contribution to the heat use of households. It is also the only virtually zero carbon heating technology. This explains why solar water heating is the most widely used domestic renewable energy system in the UK with over 100,000 (400,000m2) systems installed already. Over 90% of all building integrated renewable energy systems fitted in the UK to date are solar water heating systems.

Please note that there are also strong arguments, both economic and technical, for using DSHW in homes rather than utilising electricity from additional wind farm capacity to heat domestic water via immersion heaters.

Uptake of solar water heating in other European countries and key lessonsMuch information can be obtained on the European Solar Thermal market from the European Solar Thermal Industry Federation (ESTIF www.estif.org ) website and market data can be found by clicking here. Markets across continental Europe are very advanced in comparison to the UK, with installation figures or 2.1 million m2 of solar thermal collectors in Germany in 2008 alone.

Whilst well over 99% of solar thermal technology in the UK is DSHW, in the German and Austrian solar thermal markets, Solar Combined hot water and space heating (Solar Combined systems) account for around 50% of the solar thermal market. There is also a rise in the number of ST systems that feed into district heating networks in quite a number of northern based European countries, many being installed are producing heat at a comparable cost to fossil fuel generated heat. The UK solar market tends to follow the German market and so we expect this Solar Combined technology to significantly penetrate the UK market over the next few years.

Following on from this, solar thermal technologies for industrial, commercial, cooling and many other applications should become more widespread. Solar Thermal electricity generation technology which is now being utilised in Southern Europe is another huge growth area. Germany and other European countries are exporting their own expertise designing and installing these simple and extremely effective technologies abroad. The UK, with suitable support, has the potential to export its own solar thermal technologies in a very similar fashion to other European countries.

3.General Comments:

The STA welcomes the Governments commitment to the Renewable Heat Incentive. The STA views this as the most important development to date for the renewable heating industry and so we welcome the opportunity to give our feedback and influence in the development of the Renewable Heat Incentive. This Incentive will create many new jobs in the heating and other related industries.

The following section sets out the STA’s responses to the Consultation questions. We note that the RHI scheme as set out within the consultation is still in a gestation phase of development and we as an Industry and as an Association commit to working closely with Government to develop the scheme in the coming year before its launch on 1st April 2011. We are keen to see an RHI that provides stability for our industry, so that we can assist Government in meeting its’ 2020 renewable energy targets.


From the solar thermal perspective, the proposed Renewable Heat Incentive (RHI) only deals with Domestic Solar Water Heating systems (DSHW). It does not cover other common and possible solar applications:

•Space heating•Pool heating•Air heating•Cooling•Industrial heating•District heating•Medium and large scale solar thermal systems •Many other solar applications of heat•Systems above 100kW output

This lack of support for the full range of solar thermal applications severely limits the impact of the RHI. It is essential that it is able to effectively support the full range of applications for this simple technology.

Question: Q01

22 June 2010 Page 1310 of 1348

We agree that financing schemes will be essential to ensure widespread take-up of these technologies. We also feel that the rates of return proposed for solar thermal will provide a barrier to the introduction of financing schemes for the technology. When all other renewable heat technologies have been given an ROI of 12% it is unlikely that any investors will want to back a technology with only 6% ROI. This uneven incentive will adversely affect the uptake of solar thermal technologies, the only virtually zero carbon renewable heat technology

Solar thermal is a key technology which can be used to reduce fuel poverty and unless finance is readily available, it will only be accessible for the richer segments of society.

We note 2 further important points

•Whilst the energy utilities are a vital route to market to support the growth of onsite renewable technologies, they should be seen as one of many routes to market. RHI must be designed in such a way as to enable many routes to market and not come under undue influence from the energy utilities.

•Legislation around loans and mortgages needs to be fully clarified. What is the security behind the loan or is the loan unsecured? Is it on the property in question or is it on the technology in question and so acts somewhat like a car loan. At the moment, there appears to be grey areas around this issue which if clarified would assist in the structuring of loan facilities.

Question: Q02

In broad terms we agree with the approach being taken. We have concerns over the running of the scheme specifically relating to:

•The complexity for householders in registering and accessing the RHI particularly where their system is financed by others.

•The ability of Ofgem to administer a scheme in a user friendly way which may have many millions of household users as well as some large commercial users.

•The frequency of payments suggested may be too long to enable regular loan repayments in funded installations (particularily those in fuel poverty situations). We note that sub 45 kW systems obtain yearly payments and over 45 kW systems quarterly payments

•Similar to the Feed-in-Tariff, RHI must be tax free and index-linked

•On-going concerns about the cost and complexity of MCS accreditation and very significant concerns about what above 45 kW accreditation will look like. All renewable heat equipment will be installed by the heating industry and not by “renewable energy” installers. Therefore, accreditation should come through heating industry routes and not establishing schemes that have no links to the heating industry.

All structures and accreditation need to be simplified and rationalised.

Question: Q03

We do agree that it is important that solar installations and products are of a high standard and that the consumer is protected from bad quality installations and unethical sales practices.

Therefore we support a scheme to ensure this occurs, however we have serious concerns over the MCS scheme and its potential to block entrants to the market. It is felt by many in the industry as an overly onerous barrier to trade which is substantially more complex and costly to become part of than the Gas Safe register for example. Urgent attention needs to be given to this to ensure that the scheme meets it objectives with out creating an unnecessary barrier.

It may be that different levels of certification or accreditation may be more appropriate for the solar industry; perhaps schemes aligned with the existing Competent Persons Schemes for the smaller scale installations / installers and a scheme like MCS for the larger companies and more technical installations.

Avoiding duplication in fees and certifications at this point would be very helpful in smoothing the path for new entrants as well as existing companies, who currently must register with a number of schemes to comply with the standards.

A rival scheme for the REAL Code is needed in the marketplace and the STA is well placed to deliver this. However, the Association needs financial assistance to get its code of conduct OFT registered.

Question: Q04

The level of 45kW seems totally arbitrary and we would like to see different certifications for different types of system rather just a notional size cut off.

Each renewable heating technology needs to use the existing MCS working group structure to advise on what accreditation is required for each application of the technology and each size range.

Different skills are required for different applications on different technologies at different size ranges. The 45 kW model is simplistic and inadequate.

Question: Q05

22 June 2010 Page 1311 of 1348

We note that MCS is an EN 45011 scheme which requires the following 3 items:

•Evidence of an implemented product standard•A Quality Management System (QMS)•A regular audit of the above (normally annual)

Currently the only equivalent scheme is Solar Keymark and this is fully recognised. Before we can recognise other certification schemes, it is worth reviewing the British MCS scheme. On the product side, this seems logical to expect a product to be tested and then manufactured so as to qualify for a standard such as EN 12975, the solar collector standard. However, we note that the solar collector, like all other heating systems is just one component in a wider collection of components, none of which are required to have certification. This again demonstrates an isolated product rather than a “systems” approach that is the only way to ensure that a quality heating circuit is installed.

To recognise other product schemes, we should review if these schemes demonstrate that the component in question is made to a recognised standard (preferably international) and also that the component is manufactured, through a factory production control system or similar to the recognised standard. There doesn’t appear to be any other method to ensure product quality.

Reviewing the installation methodology, we note that the emphasis of the MCS scheme is on the Quality Management System (QMS) of the installation company. Whilst this is a laudable aim, we question the need for such a QMS when the issue at hand is the installation quality. Yes, an installation company should have good office systems. However, the purchaser of heating equipment rather wants a good system installed than efficient paperwork. The emphasis of installer MCS needs to be restructured onto installation quality.

We note that much of this installer MCS review process is on-going and is being led by Summitskills. Much more emphasis and resources need to be diverted to this review process to make Installer MCS fit-for-purpose.

Question: Q06

No, we very strongly reject the criteria! Solar thermal is the only virtually zero carbon technology and we find it incredible that technologies that are only percentage points better than gas condensing boiler technology could qualify for a 12% ROI when a solar thermal system only qualifies for a 6% ROI. All renewable heat technologies must be treated equally when setting the rates of return.

The UK solar thermal industry is still small with only 100,000 completed installations. When compared to a potential market size of about 20 million installations it becomes obvious that the market is still at the “early adopter” phase and therefore must have complete parity with other Renewable Heat technologies in terms of levels of support if it is to reach a suitable level of market penetration.

As currently designed, the Incentive scheme is based on cost rather than a balanced approach including carbon. In this configuration it seems highly likely we will miss both 2020 and 2050 targets, and underperform on the deployment of these technologies. The emphasis must be changed to favour technologies that save carbon, are user friendly and present a reasonable cost/unit of carbon saved rather than technologies that are similar in carbon performance to gas condensing boiler technologies without some of the user friendly advantages of other renewable heat technologies.

We are therefore asking for a rethink of both the deeming process and returns for different technologies. The scheme will fail to meet its objectives as it is currently structured. We would encourage DECC to complete more technical analysis of the proposal in relation to different technologies as we believe that this is required to refine the design of the RHI and significantly the schemes impact.

We suggest that the whole RHI process needs further consideration so that it includes carbon savings and is not based just on a cost/kWh basis. A properly funded task group which consists of known industry experts needs to be established to advise on this process. Much more advice should be sort from our European neighbours who have a more advanced renewable heating industry to inform our UK based options. We are happy and willing to facilitate such a contact (as we have already started to do) and are very happy to have an input into the design of the scheme going forwards.

Therefore we ask for a task group to be established with industry experts that could refine the space and hot water heating look-up tables discussed elsewhere in this consultation response so as to balance the carbon benefits and the cost/kWh benefits of different technology and system solutions.

We find it unacceptable that RHI does not specifically include cooling. Solar thermal technologies are proven in cooling applications and are becoming widely used for such in some countries. Peak output from a solar thermal collector often coincides with peak cooling requirements. If cooling or heating is required, then they both need to be supplied in an efficient manner and excluding cooling from the scheme is misguided (unless there is another route to support cooling). Supplying cooling with low and zero carbon technologies will significantly reduce our national energy consumption and carbon output. The RHI must be implemented under the reduce then supply premise and not under arbitrary its heating or its cooling premises.

Finally, we do not agree that equipment should only receive the RHI if installed after 15th July 2009. Early adopters who have helped to establish a market for solar thermal and other technologies in the UK will be a key part of the promotional force to accelerate its uptake. Excluding these early adopters sets a precedent whereby those who do the right thing even though there is limited personal benefit are then disadvantaged when good benefits are brought to market. There needs to be more balance in the scheme with some additional benefits for these early adopters.



Question: Q09

22 June 2010 Page 1312 of 1348

We note that as part of any hot water system intervention, the building regs require that the installation company has to bring the Hot Water system up to the latest Part L standards and so all Domestic Solar Water Heating RHI installations will have to install minimum energy efficiency HW standards to pass building regs.

STA policy clearly states that we believe that demand should be reduced (energy efficiency) before supply side (renewable heat) measures are implemented.

However we do not feel that the RHI should be linked to specific energy efficiency measures, as this could act as an unnecessary barrier to uptake.

Question: Q10

We believe that this issue would be properly addressed through planning policy statements. We are concerned that planning will often be sought in one year say 2012 for a planned construction at a later date so that the building can be constructed to older building regs. This loophole could be legislatively addressed via several different routes.

Question: Q11

In principle, we agree with the proposal of deeming for smaller systems and metering larger systems.

However, we have observed that both in the consultation and in wider discussions, both with the British Government and our European colleagues that deeming is a complex process and that 2 separate deeming calculations are required, one for space heating and one for hot water heating. Deeming should also take into account bivalent and multivalent heat sources, weather compensation and the manner in which different heat distribution systems including cylinder volume, radiators, underfloor or fan coils influence the final outcome.

A fully funded and resourced deeming task force needs to be immediately established to address these issues. Relying on unqualified consultants will not deal with this issue. It requires heating industry expertise to develop a consensus view that can be implemented by Government.

We do not want to enter into a wider discussion of advantages and disadvantages of deeming within this consultation response. We have carried out some of our own analysis and are willing to share this information in the appropriate fora.

We are also working with our European colleagues to collect and collate data on medium and large scale solar thermal systems and will feed this onto the RHI team at DECC as we obtain useful and easy-to-process information

Question: Q12

The deeming process is creating much confusion and concern. As is clearly understood, “gaming” (i.e. any form of over-claiming) is the major risk associated with adopting an incentive process. To avoid this gaming, space heating incentives probably have to be based on a look-up table as featured in appendix 2 of the consultation document. The task group discussed elsewhere in this submission could review this table and implement a more advanced version which covers the requirements of being:

•Quick & easy•Certain•Consistent•& reasonably accurate.

We believe that using existing fuel bills in the deeming process should be avoided because this brings in behavioural elements. We also note that the insulation should be upgraded before renewable heat is installed and this will alter the buildings performance as compared to the fuel bills. An appropriately designed look-up table overcomes the potential complexities for both space heating and hot water heating technologies.

To achieve a more acurate result for solar thermal technologies, a slightly more complex methodology can be employed that uses elements of a look-up table to avoid “gaming” allied to the solar algorithm in appendix H of SAP. This calculation takes into account the zero-loss efficiency and efficiency curve of the collector and also the dedicated and effective solar volume of the hot water cylinder in its computation. Much of this information is readily available from Solar Keymark and MCS standards. We will gladly work on the further development of this process as part of a properly funded and resourced task group.

Question: Q13

22 June 2010 Page 1313 of 1348

The consultation document does not propose medium and large scale tariff levels for solar thermal technologies therefore the perverse incentive to overgenerate would definitely be low. As we have previously said we feel that this is a huge oversight. If a suitable tariff is introduced for systems of this scale then metering of the heat produced would be an appropriate way to measure the levels.

It is unlikely that large scale solar thermal applications would over produce heat as these systems are carefully designed to meet a heat loading. Installation of systems that were much larger than required would cause major stress on the system and potentially cause the system to fail. Excess heat in a solar thermal system is hard to dissipate, and therefore is normally designed to be a kept at a minimum.

A properly funded and resourced committee of industry experts needs to be established to support the RHI review process. This committee should include measurement and monitoring expertise so that metering processes can be evaluated by this committee.

Heat meters are a tried, tested and established technology. The key elements of a heat meter are accurate and reliable flow meters as well as robust temperature, data acquisition and storage systems.

Question: Q14

We will submit the European data we have on solar thermal systems above 100 kW and also information we have on other applications of solar thermal systems.

Some initial analysis from some of our European neighbours is as follows.

Systems costs vary a lot depending on the application, placing and size.

For your reference, system costs in Austria (including storage and installation):100 - 500 m²: +/- 600 €/m² corresponding to 850 €/kW500 - 1000 m²: +/- 500 €/m² corresponding to 700 €/kW

If it is a system for district heating (no need of a storage and secondary loop) the cost are significant lower (minus € 200/m²)As for Sweden, we can estimate 1.100 €/kW (solar collector costs are of the order of 5 000 - 3 000 SEK/m² corresponding to +/- 570 €/kW and system costs incl. storage tank etc. adds up about the same)

Therefore, taking the highest cost (Sweden) and considering:-yield of 400 kWh/a.sqm-Annuity between 0.05 - 0.10We can estimate solar heat costs about 0.14-0.28 €/kWh (or 0.07-0.14 €/kWh if it doesn’t include storage, etc.).

We have previously submitted data from seven different solar district heating schemes located in Denmark, on a similar latitude to Scotland. These schemes are producing heat at a cost of £0.017 – £0.029 per kWhr.

Question: Q17

The ROI on solar thermal technology needs to be the same as that on the other other low carbon heating technologies. A tariff level which provides a ROI of 6% when all the others receive 12% will provide a disincentive to invest in the technology.

Please see our answer to question 7. We want to see a balanced cost/kWh & carbon based deeming methodology which favours systems that save carbon as well as just cost benefit measures. The current system is in danger, without careful evaluation of the deeming process, of favouring technologies that make only minor improvements on gas condensing boiler technology.

To realise this, we are calling for the setting up of a short term task group of properly funded and resourced industry experts and representatives to design and establish a fair and reasonable deeming process based on space heating and hot water heating look-up tables.

This short term task group could be used as the basis for establishing a group of leading industry heating experts to advise government on the operation of the RHI scheme.

Question: Q18

District heating is not within our core levels of expertise.

Question: Q21


Question: Q22


AgreeQuestion: Q23

22 June 2010 Page 1314 of 1348

We note that this discussion is based on cost/kWh rather than cost/unit of carbon saved. We have to be implementing technologies that are much and not just partially better than gas condensing boiler systems if we are to fully meet our long term targets.

We also note that this innovation discussion is based on a technology approach to the renewable heat issue. Heating is not just based on technologies; it is based on integrated systems consisting of many control, provision, collection, storage and distribution elements. These individual elements or technologies make up the heating system and innovation occurs within the elements and sometimes within the whole integration principle of the system.

For example, most heating systems, if effectively controlled and installed with underfloor heating often save more carbon as compared to their radiator based alternatives. However, the type of underfloor heating employed also has an effect on the heating system performance. RHI should encourage the uptake of low temperature heat distribution systems which can be provided by low temperature radiators, fan coils and radiant distribution systems.

Whilst we must have a relatively simple to use deeming process, this deeming process must encourage carbon saving and be supported initially by the task group of heating industry experts and this task group has to be developed into an independent set of government advisers so that all aspects of the RHI can be supported and the incentive scheme is developed to bring through a “systems” or portfolio approach to innovation and carbon saving.

Finally, we note that in the specific case of solar heating technology, costs are very different for different situations.

In our experience, the most expensive property to install can be a one-off new build situation where the installer is called back in by the contractor for several fixes at the various stages of the construction process. Several site visits adds to the total installation cost.

Then, in a typical retrofit scenario, to achieve the highest available solar fraction, the solar installer will opt to change the existing cylinder and as well as passing this cost on, they will also have to absorb the cost of access equipment within the total installation cost.

Finally, in a large number of new build properties, the installation cost can come down somewhat due to the ability to leave installers on the construction site for sometime as they move from property to property to install the system and both access cost and cylinder cost is covered by the wider construction process.

Room for innovation is fairly limited. If bigger solar fractions are to be obtained, current evidence indicates that the hot water cylinder should be changed and this has fairly fixed associated costs. Innovative access systems for reducing collector installation cost could be realised. However, there are many costs that only offer limited room for improvement.

Statements such as economies of scale don’t always apply when analysing heating systems. Sometimes the individual local and integrated unit can be much cheaper than the large scale solution with all its inherent complexity. It brings us back to the case-by-case basis and the need for independent expert and knowledgeable advisers to support innovation and review processes.

Question: Q24

See response to Q24.

Question: Q25

Yes.

AgreeQuestion: Q26

With an independent group of heating experts meeting every 3 or 6 months or so, they would be capable of advising Government on innovative cases and Government could be provided with advice on whether an emergency intervention was required or not.

Question: Q27

This decision to deny support to early adopters is misguided as it discriminates against those who have acted in good faith and looked to support the early adoption of on-site renewable technologies. These early adopters, if supported in some way through the RHI can act as ambassadors for the new Incentive scheme.


22 June 2010 Page 1315 of 1348

A complex and bureaucratic deeming process requiring 2 MCS companies is described in the consultation; we consider this unnecessary. The deeming of all systems installed after 15th July 09 should go through the same deeming process which is likely to be based on look-up table for space heating and a SAP Hot Water and appendix H calculation allied to a look-up table for solar thermal hot water. This methodology should be applied to all RHI applications for incentives including those installed between 15th July 09 and 31st March 2011.We also note that all heating systems, including all the major elements should be regularly serviced and maintained. In the case of solar thermal, many suppliers recommend that the householder regular checks that the solar system is functioning properly and that the system is given a major service every 5 years. Householders are shown how to check correct operation at handover. Therefore, we would recommend that the householder self certifies their solar performance to qualify for annual RHI payment and that an MCS installation company services the solar system every 5 years. MCS and any other relevant accreditation scheme should write the appropriate maintenance procedures into the relevant standards.

Data Collection: For many years, the STA has worked in association with other industry bodies to provide accurate information on the UK heating market. We note that it is more difficult to accurately obtain data on new industrial sectors as compared to mature industries. This solar market data will now be more accurately collected by Ofgem as part of the RHI process. The STA wants to continue to publish this broad (not individual company) market data.

We have been publishing our own data in association with our European sister association ESTIF on their website www.estif.org . We want to work closely with Ofgem to continue to publish this broadly based market data and want to be able to publish this data on a quarterly rather than yearly basis. We trust that Ofgem and Government will want to work with reputable industry bodies to achieve such a process.

Question: Q29

667 BEAMA Trade Association

BEAMA very much welcomes the introduction of the world’s first Renewable Heat Incentive.

Being the first scheme of its kind, clearly it is essential to ensure that it is targeted towards the right installations with payments based on useful renewable heating contributions. We have therefore put forward what we believe to be important opinions on load calculations and the assessment for heating versus cooling.

Setting tariff levels correctly to pull customers through is also important and we have observed some significant under assessment of tariff levels for medium air source and larger range ground source heat pumps.

Eligibility for accessing tariffs both in future and retrospectively back to July 2009 is important. BEAMA fully supports MCS but we feel there are alternative product approvals available including the EHPA Quality scheme and retrospective payments can be made against ‘scheme’ and Clear Skies related installations, including those commissioned by manufacturers if products are compliant with MCS by April 2011.

BEAMA is a key stakeholder in this consultation. We represent the major European heat pump manufacturers and have a very deep understanding of policy issues such as SAP, MCS and the overall heating market. Consequently, we would be very happy to meet with members of the DECC Renewable Financial Instruments team to discuss all aspects of our response.


Yes

Comments:

We do not feel that eligibility from 15th July 2009 has been thought through with respect to allowing only MCS or equivalent installations to apply for the incentive.The MCS scheme has had a very slow start to reach any critical mass. There are low number of installers and heat pump manufacturers are still negotiating on product family definitions despite the Steering Group approving a definition in 2009. We believe the solution is:•Include Clear Skies installations and all scheme installations (e.g. those completed under CERT, SCHRI and LCBP for the smaller scale). •Accept products that are MCS approved by April 2011 if the manufacturer has commissioned the system

As stated above, if there does have to be MCS links then this must state MCS product compliant by April 2011. Our definition of equivalent eligibility if this is needed for product approval is to refer to the EHPA Quality scheme which is a heat pump product testing and performance scheme. If a product has EHPA Quality approval then it should be eligible. An alternative would be to have complied with the requirements of Eco-label (recognised within the RES Directive).

It is important that the RHI is exempt from income tax payment which could lead to a 50% reduction of the incentive in real terms for those in the higher tax bracket.

Question: Q01

22 June 2010 Page 1316 of 1348

Yes

Comments:

There are a number of issues that need to be resolved regarding finance and they are as follows:

1. 3rd party finance/leasing

In order to encourage companies to put leasing arrangements in place, it will be necessary to amend primary legislation under the Capital Allowances Act. Currently, enhanced capital allowances cannot be applied to equipment installed in dwellings and this would dis-incentivise provision of lease equipment.

There is also an element of risk associated with the provision of loans for equipment purchase. This can be resolved through the assignment of RHI payments back to the provider of the finance. This could in itself be covered by contract. However, if the customer moves home, this contract would not hold weight as the original assignee no longer owns the equipment. Consequently, a triangular contract is required through which OFGEM (or the administrator) underwrites that contract and itself contracts to pay the finance provider the incentive for the lifetime of the incentive period (or as defined in the original contract… perhaps a 5 year period to cover the cost of equipment and loan).

2.New Build

We support the provision of incentive to the new build market but not direct to house builders at any stage of the system lifetime unless the house builder is providing a management service such as an energy service to the customer. The incentive for new build should become active only when the initial dwelling owner makes his/her application.

Question: Q02

NoComments:

There is an assumption that OFGEM will administer this scheme yet the organisation has no track record in this regard. The scheme administration should be awarded to an organisation that has successfully bid under a competitive tendering process.

The overall customer process appears overly onerous and complex and seems to assume two site visits with different emphases. In reality the process probably shouldn’t be so prescriptive in terms of number of visits and for what purpose those visits took place. We do not see a situation in which someone will visit a home and advise on a range of options. This stage will probably need to be a web based assessment of what the most suitable technology can be. This web site may also feature an online simple rdSAP type tool that can estimate the RHI value vs an estimated product cost (see comments on SAP below).

In stage 2 the more formal SAP assessment is made alongside the system design and installation.

With regards SAP, we think a full SAP calculation will need to be undertaken, particularly to assess the predicted RHI level for hybrid systems and the application must be backed by a plant size ratio assessment using a formal tool (for heat pumps this is being developed by the BRE funded by the BRE Trust but needs to expand remit to assess bivalent systems and DECC should be co-funding this as requested by BEAMA in March 2010). This use of a plant sizing tool is particularly crucial to prevent the under-sizing of a heat pump using excessive electric heating back up aligned to inappropriate tariffs. DECC must be assured that the documentation assesses the RHI level based on the heat pump’s contribution to the load.

For bivalent/hybrid systems (i.e. working alongside another primary heat appliance – not electric), we would encourage the requirement for a heat meter to accurately measure the proportion of renewable heat and ensure the fossil fuel appliance (if heat pump is running bivalently with an oil boiler for example) is not being used instead of the heat pump. If a heat meter is not present then at least a full SAP will be required to predict the heat output for the renewable appliance.

In general, we are not convinced rdSAP is a sensible tool for deeming. It will use the main SAP calculation method but apply assumed metrics for fabric elements (without accurate measurement). If two houses of exactly the same form claimed an RHI for a heat pump and one had rdSAP vs. full SAP in the other, the deemed figures will be very different and subject to question to the administrator.

The overall payment rules seem unclear in terms of whether the RHI is paid once the system is installed or at the end of the year. We would advocate at the very beginning because of the capital costs/loan servicing implications from day one.

We have some concerns over the process for continuing payments and requiring regular maintenance. We believe the customer should annually re-subscribe to the RHI and self declare on maintenance and continued operation.


22 June 2010 Page 1317 of 1348

Yes

Comments:

We agree in principle with this but only if the installer scheme is amended to become less administratively burdensome and expensive. MCS for installers needs to be linked to training ASAP and the costs of overall assessment and registration to fall below £300. DECC also needs to bear in mind that an installer is required to have completed an installation in order to complete the MCS process. This may lead to a circular problem and our recommendations under question 1 can go some way to resolving this by paying against schemes or manufacturer commissioned systems. For products, we must agree the product family definition to encourage take up and require BRE to accept parent witness test reports with test house approved declarations for product children. This is not happening now and needs to be made clear.

Without the above, we would not support the use of MCS. However, we do support the use of the EHPA Quality Scheme as a suitable equivalent for heat pump product approvals.

AgreeQuestion: Q04

Yes

Comments:An approved installer and product scheme needs to be prepared by the main trade associations under the MCS WG 6 in advance of April 2011.

AgreeQuestion: Q05

Comments:As mentioned above, heat pumps tested and approved under the well established EHPA-Quality scheme must be eligible and BEAMA intends to work with EU and UK stakeholders to roll this out as a national scheme here in the UK. Eco label is an additional route

Question: Q06

NoAt the medium range (i.e. non domestic), we have concerns over the use of heat pumps for cooling. The RHI payments should not be channelled towards the mature air conditioning market.

For ground source heat pumps there is a benefit in providing a cooling service as this will extract warm air and use it to replenish ground energy. We therefore believe heat and cooling heat pumps should receive the same tariff as heating only for ground source only.

With regards both medium and domestic sized heat pumps we believe the solution to preventing payments for cooling is to only calculate the incentive on a deemed heat contribution (in the absence of the preferable heat metering option). This can of course be linked to the MCS (or equivalent) required declarations to the customer. What this means is that an MCS type approach will need to be developed for medium range heat pump installations. The alternative would be to require heat metering for all medium range heat pumps that have a cooling function (except for ground source for reasons covered earlier). Notwithstanding the above, the Department needs to understand that some heat pumps with a cooling mode will be used for that purpose in the summer months. This is why the deemed heat contribution needs to be declared formally via MCS or a heat meter installed.

Generally the approach is ok but we are disappointed that there is not specific extra reward for higher efficiency heat pumps. Industry has recently invested heavily in a Government backed SAP Appendix Q project and it is possible to now identify higher performance products. The RHI payment should be increased by a flat 10% for products that are higher than a benchmark efficiency.

This approach will improve take up of higher efficiency products and drive innovation in the supply chain, a focus particularly in tune with the policy direction coming through from the Energy Using Products Directive. It will also encourage the take up of products with a higher renewable content. However, it needs to be backed by a full SAP calculation with proof of the SAP Q product used.

A larger scale system also needs to benefit from this approach. SBEM is the model to support this and needs to be developed to allow accurate RHI calculations by efficiency.


No comment


No comment


22 June 2010 Page 1318 of 1348

Yes

Comments:

We believe that energy efficiency should be encouraged with a minimum of building regulation levels of loft insulation and cavity wall insulation where a cavity is present. This is consistent with the Government’s Household Energy Management policy (Warm Homes, Greener Homes) that aspires to all homes having a minimum level of insulation by 2015. Indeed, such a requirement will help to achieve this target.

We appreciate this may be harder to achieve in solid wall properties where a minimum loft value only should be supported. Practically speaking, whether it is compulsory to have the measures or not, the RHI deemed return must be based on what the heat load would be with high levels of efficiency as the customer then takes the investment risk if they do not have the measures. BEAMA recognises that it would be hard to enforce and police the installation of measures.

There is a very important point to note here to avoid abuse of the RHI. If DECC decides to only estimate RHI on assumed energy efficiency levels then the RHI will need to be calculated on that basis only. There will need to be an ‘actual state’ of dwelling assessment for heat load to enable accurate sizing and this needs to be compared to the RHI application (the RHI load will be lower than actual state without measures installed). DECC needs to make sure under sized heat pumps are not encouraged so although the RHI is paid against an energy efficient dwelling assumption, it also has a duty of care to ensure the customer is not being undersold a heating system.

If we are not careful here, the RHI will be paying out for under-sized heat pumps where the customer has been told the system will deliver the RHI deemed load but the dwelling actually has a much higher load without installation of energy efficiency measures and is then required to top up with electric heating.

Question: Q10

Comments:This can be simply ensured by setting minimum fabric efficiency standards under the Code for Sustainable Homes when specifying renewable heat technologies. A requirement will need to be added into the recently closed Code consultation.

Question: Q11

No

Comments:We believe bivalent systems (e.g. heat pump with boiler) should be heat metered to ensure the renewable is used consistently in line with the estimate in the plant size calculation. A full SAP/SBEM assessment will be required for accurate estimates in the sales process.

We are unclear why we need 3 levels of RHI tariffing. It would be simpler to administer a 2 level scheme i.e. up to 45kW and 45kW+.


No

Comments:

Ideally heat meters should be encouraged (either remote or integrated into the appliance (as is possible with some heat pumps) but in the case of deeming, we would expect use of full SAP calculations rather than rdSAP and EPCs due to reasons already stated earlier in this response.


Comments:

A heat meter for large scale processes can be quite expensive (up to £1500) but many heat pump products already have an integrated heat meter/SPF control. The advantage is that if someone is ‘wasting heat’ due to false installation and design the SPF is low. A well designed system generates a high SPF. A heat pump with a built-in SPF calculator should be accepted by RHI as mentioned earlier in this response.

BEAMA members believe the metering requirement should be extended to cover systems at 45kW+

Question: Q14

No comment

Question: Q15

No Comment

Question: Q16

No Comment

Question: Q17

22 June 2010 Page 1319 of 1348

No As mentioned earlier, the tariff for higher efficiency products needs to increase by 10% as an uplift for better performance and to drive product innovation. This will clearly improve renewable heat performance as well, making a positive contribution to overall UK renewable targets.

The tariff for 45kW to 350kW air source heat pumps is too low. Evidence suggests that the NERA CAPEX figure is too low and should be £987/Kw rather than £610/Kw based on the average figure from 6 manufacturers in the UK (reference: Mitsubishi Electric Assessment Document March 2010). This revision alone leads to a tariff of 4.6p/kWh to deliver the 12% return suggested by DECC.

We would also dispute the OPEX figure used by DECC that assumes 0.5 days every 5 years for maintenance. Taking into consideration the need for two annual clean procedures at 3-4 hours each and an F Gas for leaks twice per annum, the maintenance schedule is closer to 2 days per year . Evidence suggests the cost of this annual maintenance is £900 per annum for a 200kW system. If you divide £900/year by 250kW system the OPEX figure is around £3.60/Kw/year. Assessments indicate a 0.2p impact on the tariff which means the overall tariff level for 45kW to 350kW should be 4.8p/kWh (reference: Mitsubishi Electric Assessment Document March 2010).

In discussion with Scottish & Southern Energy, we have reached agreement that the proposed tariff for larger Ground Source systems (350kW and above) is very conservative. The overall CAPEX of a ground source system is higher than the NERA figure, and is closer to £1,500 Kw due to the added cost of developing electrical infrastructure compared to the gas counterfactual. We also believe that for consistency, the assumed annual operating/maintenance costs should match the air source heat pump figure of £900 (rather than £300 in the DECC proposal). Calculating the tariff on an assumed CoP level of 4 (which we think is very achievable with a ground source heat pump) and building in revised CAPEX and OPEX figures as above, will result in a tariff of 5.3p/kWh.

We have some concerns over the lifetime periods, implied warranty and the result of early product failure within ROI calculations.

The RHI lasts for 18 years for air source heat pumps and 23 years for ground source. This may raise expectation on how long the system should last and if it doesn’t then the customer may see this is a guaranty not delivered upon. The big question is if the technology breaks down before the end of 18 or 23 years. If the technology is replaced, would the customer be expected to start the RHI process again on a new prevailing rate based on degression for the prevailing period set (which may still be 18 and 23 years) or would the original agreement just continue? Obviously there are impacts here based on capital cost and return on investment but it must be clear that there is no implied guaranty of system performance for the whole period (it is assumed). We therefore recommend the following:

1. RHI conditions must make it clear that there is no implied guaranty on product installation for the incentive term

2.If a product fails and is replaced, the customer has the choice to continue at the original tariff or begin a new one under the prevailing terms following interim degression

Question: Q18

NO COMMENT

Question: Q19

Yes

Comments:

On an equity basis this must also incorporate heat pump communal systems.

AgreeQuestion: Q20

No comment

Question: Q21

Yes

Comments:

Yes, the RHI tariff should be fixed

Question: Q22

Yes

AgreeQuestion: Q23

22 June 2010 Page 1320 of 1348

No

Comments:

There isn’t really an approach outlined. We believe the best way to bring forward new technology is by simple demonstration (say a field trial) backed by a product tested to a recognised standard. The SAP Q approach is not suitable for this as it is too long and too expensive


No comment

Question: Q25

No comment


No comment

Question: Q27

668 GREATER LONDON AUTHORITY OGD / Statutory Agenc

22 June 2010 Page 1321 of 1348

Thank you for inviting us to comment on the Consultation on the proposed Renewable Heat Incentive (RHI) financial support scheme.

The Greater London Authority (GLA) welcomes the consultation on the Renewable Heat Incentive financial support scheme and we believe that this could play an important part in driving not only the production of renewable heat in London but also support to develop the heat networks that are essential for supplying low and zero carbon heat and so reducing the carbon content of the heat presently being consumed in London.

London has and continues to develop an array of policies aimed at reducing the carbon dioxide emissions related to London’s energy consumption, through both directly reducing consumption and reducing the carbon content of the energy supplied and consumed in London. In delivering these carbon dioxide reduction policies the GLA and the London Development Agency are aiming to ensure that the work also develops the commercial markets in these areas, this includes the heat market, so that ultimately these policies will be being delivered by the private sector through commercial mechanisms.

The Mayor has set a 60% carbon dioxide reduction target for London by 2025 and as part of the mechanism for achieving this is has also set a target for supplying London with 25% of its energy requirements from decentralised energy. These targets, along with a target for reducing energy consumption, form the headline targets for the Mayor’s draft Climate Change Mitigation and Energy Strategy that its resulting policies and programmes are devised to deliver. The Mayor’s draft Municipal Waste Management Strategy has been developed in conjunction with the Climate Change Mitigation and Energy Strategy and these strategies address how energy from waste facilities can be developed, incorporating advanced conversion technology, to support the generation of low and zero carbon energy, including heat, as part of the activity required to meet the targets mentioned above. As an example the Mayor’s draft Municipal Waste Management Strategy is proposing high recycling targets (80% for all waste by 2031) to drive the production of solid recovered fuel from London’s waste with high-biomass content to generate renewable energy, including heat, for Londoners and the RHI scheme will support this. Finally, the London Plan and its energy policies re-enforce this through the planning process, for example the energy hierarchy for developments is devised to minimise the carbon dioxide emissions related to new buildings.

The Mayor’s main programmes related to delivering the 25 per cent target are • London Heat Map – a web-based, interactive GIS tool that aids the identification of decentralised energy opportunities to boroughs, generation companies and developers.

•Co-development of exemplar decentralised energy projects – primarily the London Thames Gateway Heat Network.

•The Decentralised Energy Masterplanning Programme – offering a comprehensive package of support to boroughs, helping them to develop decentralised energy projects and identify areas appropriate for developing district heating networks.

•London Waste and Recycling Board – providing £84 million of funding to deliver new waste and recycling infrastructure to London.

•London Green Fund – with an initial value of £114m made up of European and match funding from London’s European Regional Development Fund allocation through the JESSICA mechanisms, the Fund will look to lever in a further £500 million of public and private sector investment to support waste, decentralised energy and energy efficiency projects.

•Dedicated centre of expertise – A committed team at the LDA providing strategic guidance and support on decentralised energy. We believe the Renewable Heat Incentive (RHI) will support these policies to achieve these targets initially through the generation of renewable heat and ultimately through the development of commercial heat markets in London. We welcome the inclusion of the financial uplift for renewable district heating but do not believe that it should be restricted to ‘hard-to treat’ properties as the carbon and financial benefits of district heating networks are considerable but there is an obvious additional cost associated with the initial installation of the network infrastructure that the uplift would help to address. The networks provide essential infrastructure to encourage large-scale renewable heat generation and ultimately consumption by providing the infrastructure required for receiving and transporting large-scale renewable heat from generators to users.

We welcome the RHI as they support heat production at a local level, which is an important element of the Mayor’s wider decentralised energy programme, as mentioned above. We have answered the majority of the questions but wanted to highlight here our main areas of concern with the proposals in the consultation document. We would welcome the opportunity to meet with you and discuss these issues so that we can work with you to help ensure the scheme is set-up in a way that will help ensure it maximises its impact and contribution to mitigating climate change and delivering energy security.

These are:•The tariff levels are banded for different technologies and generating capacity of the renewable heat source – We believe the banding of support is likely to result in a distortion in the underlying cost effectiveness of the various technologies that are being supported, introducing the risk that the RHI could actually support the introduction of technologies in places and buildings where it is not the most cost effective solution for reducing the carbon content of the heat supplying a particular heat demand. This would increase the total cost of the RHI to consumers, who will ultimately be paying for it, as well as distort the market in various heat technologies.

•Confining a proposed uplift for RHI support given to renewable heat delivered through a heat network to networks in ‘hard to treat cases’ – We believe that this is an unnecessary test and it should be available where a heat network provides the most carbon and financially effective solution.

•District heating forms part of the Mayor’s response to addressing fuel poverty - We believe that confining the RHI uplift for district heating to ‘hard to treat’ premises will limit the impact that the RHI could have on helping to support the provision of cheaper heat for the fuel poor.

•Integrating RHI into whole house retrofitting activity – We believe that both the RHI and the Feed-in-Tariff needs to be effectively integrated into a whole house approach to retrofitting to help ensure that opportunities for reducing carbon dioxide emissions in the residential sector are


22 June 2010 Page 1322 of 1348

maximised.

Finally whilst we recognise that you have decided not to include low carbon heat in the RHI we would like to re-iterate our position in London that as an integrated approach to reducing carbon dioxide emissions in London we believe that there is good reason to include low carbon heat generation, where it is directly associated with supplying a district heating network, as this would directly support the installation of the heating network that would ultimately provide a network for the large-scale generation and transportation of zero carbon heat as technologies mature. This would initially allow additional heat demand on existing networks to be pursued in the short to medium term once the renewable heat technologies mature sufficiently to be commercially competitive with gas-fired technologies as well providing the longer-term opportunities for transitioning from gas-fired to renewable heat sources.

Our answers to your specific questions are set out in the table accompanying this letter. Yours sincerely

Yes

Comments: The Government must commit itself to an uplift for heat network costs now rather than proceeding on a call for evidence to look at this issue. We believe that the only way to deliver large scale carbon dioxide reduction from the heat consumed in London and other high density mixed use urban areas is through large–scale heat generation with transportation through heat networks. Not including the uplift for networks at the same time as the rest of the RHI will have a major impact on delivering heat networks, and ultimately on renewable heat generation, as there are significant additional upfront costs associated with the network infrastructure required to provide communal heat in urban areas such as London even though these ultimately represent the most carbon and financially effective approaches to reducing the carbon intensity of heat in urban areas.

Question: Q01

Yes

Comments: There are inherent challenges to developing financing schemes for these types of activities, just as there are for renewable electricity technologies or retrofitting activity. In London we are looking at a number of financing options for delivering retrofitting and decentralised energy programmes and would be happy to discuss how these could support the RHI. It would obviously be worth looking at how the financing mechanisms for the Feed in Tariff operate for the smaller renewable energy installations to understand if they could be appropriate here for the smaller capacity heat generators. Could pay-back options for the financing option be set to be covered by the RHI payments whilst leaving a small amount of profit for the heat generator as an incentive.

Could the proposed Green Investment Bank make the loans so that, at least part of the money being paid as a subsidy would then be returned to the bank so that it could be re-invested again in similar activity.

Question: Q02

YesComments: None

AgreeQuestion: Q03

YesComments: In principle satisfactory

AgreeQuestion: Q04

Yes

Comments: In principle satisfactory

AgreeQuestion: Q05

No

Comments: None

Question: Q06

22 June 2010 Page 1323 of 1348

No

Comments: Whilst the GLA welcomes the broad range of technologies which are to be included we are concerned that renewable cooling is to be excluded. The rationale proposed does provide clear reasoning, keeping the RHI focused upon provision of secure and affordable warmth, but we believe there is a real necessity to explore renewable cooling and the carbon dioxide savings that could be realised from this approach. As an illustration, 2003 was the first year in London when the total summer energy demand actually exceeded the total winter energy demand and this is likely to occur increasingly in the future as the impacts of climate change affect London.


Yes

Comments: None

AgreeQuestion: Q08

Yes

Comments: The GLA supports the introduction of emission standards for biomass boilers below 20MW. There is a risk that without controls, the widespread inclusion of biomass boilers in development could compromise the achievement of air quality objectives in parts of London. For example, depending on the type of fuel used and the design of the particular device, unabated biomass boilers can emit more particulate matter (PM) than gas fired and oil fired boilers. The GLA believes that the emission limits should not rule out biomass boilers currently available on the market, but suggests that the Government incentivises future technological development (both plant and abatement technology) by progressively tightening the emission standards for the RHI. In preparing the Mayor's draft Air Quality Strategy, consultation was undertaken with stakeholders in the renewable energy sector. Evidence provided by stakeholders has shown that abatement technology is available for biomass boiler plant of all sizes to reduce emissions of particulate matter. Therefore, the Mayor proposes in his draft Strategy that new biomass boilers in Air Quality Management Areas for PM10 should be fitted with particulate matter abatement equipment. The Mayor encourages Government to introduce type approval for particulate matter abatement equipment to ensure that the equipment used is effective.There is no realistic equivalent technology for reducing emissions of nitrogen oxides (Nox) from small-scale plant and the GLA encourages the Government to work with industry to develop such technology.Nevertheless, the Mayor has proposed in his draft Air Quality Strategy that data provided through the RHI process on emissions from different types of biomass boilers should be used to set London-wide emission limits for biomass boiler plant for both particulate matter and nitrogen oxides. We would be keen to discuss with the Government how relevant data could best be made available to the GLA, as well as other regional and local authorities, so that we are able to set appropriate standards for London

AgreeQuestion: Q09

Yes

Comments: We believe that there needs to be a mechanism that ensures that householders have undertaken at least some basic measures, to include cavity wall and loft insulation where appropriate, for them to be eligible for the full RHI support. This would help ensure complimentarity between Government’s approaches to reducing the carbon footprint of households; this means linking the recently released Household Management Strategy (HEMS) with the Feed-In-Tariff (FIT) and then the RHI to ensure that money is most effectively spent and the maximum amount of carbon dioxide savings are ultimately made.

In London we have developed a pan-London homes retrofit programme, in partnership with all 33 London boroughs, called RE:NEW and this is a delivery mechanism for reducing the carbon dioxide emissions related to the residential sector in London. It is designed to create the optimum delivery mechanism for London Boroughs’ to both spend the funding that is available through Government programmes and access the finance that will be available through CERT and CESP and their successor programmes. Whilst this programme will be looking at easy to deliver measures first it will be moving to a whole house approach as the financing options become available to deliver this so it would be beneficial to integrate the FIT and RHI into this delivery model to enable London to maximise the benefits of these various programmes for Londoners and so deliver the maximum carbon dioxide reductions possible in London’s homes.

Question: Q10

Comments: In the same way as is being promoted for the zero carbon definition for homes a threshold for energy efficiency could be stipulated, say through the ‘deeming’ mechanism suggested or Energy Performance Certificates, that must be achieved that then assumes a minimum level of energy efficiency so that only the heat required above that threshold for a building is eligible for RHI payments.

Question: Q11

Yes

Comments: Acceptable in principle

AgreeQuestion: Q12

22 June 2010 Page 1324 of 1348

Yes

Comments: None

AgreeQuestion: Q13

Yes

Comments: None

Question: Q14

Comments: In principle satisfactory, but the level of support for both must follow the same principles for quantification as heat produced from other sources. Biomass CHP heat should not receive a lower level of support, simply because the installation is also supported by the ROC system for the electricity generated.

Question: Q15

Comments: None

Question: Q16

Comments: None

Question: Q17

YesComments: There are a variety of different technologies for generating biogas and the proposed Table of Tariffs does not differentiate between these technologies. Since they have very different cost bases they should have different levels for the RHI and currently the larger level tariffs may not be enough.The banding arrangements and level of support must not mask the underlying cost effectiveness of each technology relative to the others. To do so will lead to higher costs for consumers. A way of achieving this is to ensure that in calculating the difference between upfront capital and on going costs between renewable and conventional heat, where possible the ‘renewable cost’ is calculated on the basis of the deemed circumstances of that cost being incurred being optimal for the technology concerned – e.g.: ground source heat pumps being installed very expensively in dense living accommodation, where district heating is the optimal cost effective solution. Another option could be to index link the tariff level against mains gas prices. Also additional bands for biomass boilers are required above the 500 kW to ensure that boilers are not sized to meet the best financial conditions rather than heat output. Biomass is a limited resource, hence it will be important for the Government support mechanisms (e.g. ROCs, FITs and RHI) to consider and perhaps encourage the optimum carbon dioxide emission savings possible.

Question: Q18

No

Comments: For clarity and consistency we believe the best approach is to apply the same rules as are applied to the Renewables Obligation.

Question: Q19

Yes

Comments: Yes absolutely as the network is as integral to the operation as the heat production, because the heat production is pointless without a network as the means of delivery to heat users.

The RHI provides a real opportunity to support the development of district heating networks that can support the large-scale generation and consumption of renewable heat as the network has the opportunity to have a range of heat users with different diurnal heat demands as well as the opportunity to integrate heat stores that allow heat to be stored during times of high generation and low demand and then used during times of high demand.

AgreeQuestion: Q20

Yes to all district heating networks

Comments: We certainly do not think that the uplift should be confined to ‘hard to treat’ properties. The important criterion for support is whether district heating is the cost effective solution in any given situation. If it is not, then the network will not be built and no RHI uplift will be claimed. If it is, then that means the project is the most cost effective solution. There is therefore no need for any special test, the matter is best being left for the market to determine.

Question: Q21

22 June 2010 Page 1325 of 1348

Yes

Comments: Tariffs must be fixed for their duration of any projects entitlement in order to provide certainty in the market and the success of the scheme. Degression should apply only to new schemes and certainly not retrospectively to existing schemes.

Question: Q22

Yes

Comments: Degression should apply only to new schemes and certainly not retrospectively to existing schemes.

AgreeQuestion: Q23

Yes

Comments: Degression should achieve that and also the ‘optimal application’ of all technologies as the basis for setting their tariff levels (see Q18 above).

AgreeQuestion: Q24

Comments: None

Question: Q25

Yes

Comments: None

AgreeQuestion: Q26

Comments: None

Question: Q27

Comments: None


Comments: None

Question: Q29

Comments: None

Question: Q30

669 GT Energy Private Company

Geothermal


22 June 2010 Page 1326 of 1348

Dear Sir / Madame,

Please find attached our response to the Consultation on the proposed Financial Support Scheme, I attached two documents;

1.RHI Response templateCompleted RHI response template with summary responses to relevant questions. More detailed responses to the core questions for GT Energy are contained in item 22.GT Energy RHI Consultation response, the following is the table of contents contained therein;1)Executive summary2)Geothermal energy3)Geothermal potential of the UK4)GT Energy5)Response to the consultation6)References7)Appendices

We welcome the opportunity to discuss all aspects of the consultation with DECC should DECC require clarification on any of the issues / recommendations outlined. We have the necessary resources, reference sites and documentation to aid DECC in allocating our recommendations;

-That deep geothermal energy be allocated a dedicated tariff of £0.05 per kWh

Regards,


YesComments:Deep geothermal energy has not been allocated a dedicated tariff. This should be rectifiedimmediately so as to kick start the deep geothermal industry, a potential significantcontributor to the renewable energy mix in the UK

Question: Q01

None noted

Question: Q02

No comment


No comment


No comment

Question: Q06

NoComments:Please see our response to Q24 highlighting the potential deep geothermal energy tomake significant contributions to the renewable energy targets in the UK. Deepgeothermal while not widely used in the UK is an established energy resource utilisedsince the first deep geothermal plant was developed in 1892. It is imperative that DECCprovide adequate development framework to kick start this industry in the UK.CoolingDeep geothermal energy can also be used to supply cooling through the use of absorptionand adsorption chillers and is ideally suited alongside district heating. DECC shouldconsider the inclusion of cooling in the RHI framework


No comment


22 June 2010 Page 1327 of 1348

Yes & NoComments:The requirement to oblige receivers of RHI payments to install a minimum level of energyefficient measures should be avoided. While energy efficiency is an integral part of thedrive to meeting the climate change goals, it would act as a disincentive to households,commercial and industrial energy users. The upfront cost in addition to the installation ofthe technology of the energy efficient measures for large industrial and commercialcustomers would be prohibitive. Given the difficulty in financing and the potentialdowntime in the customers processes may result in the retention of the fossil fuel optionwith no impact on renewable energy uptake.

Question: Q10

No comment

Question: Q11

No comment


No comment


No comment

Question: Q14

No comment

Question: Q16

No comment

Question: Q17

NoComments:We do not agree with the proposed approach for deep geothermal. Deep geothermal is not acomparable technology to GSHP’s. Investment levels, installation sizes, efficiency and carbonreduction levels are fundamentally different to GSHP’s. We fully support the REA’srecommendation that a dedicated tariff of £0.05 kWh. It is imperative that this be implementedimmediately in order to kick start the development of the deep geothermal sector. We have over40MWth in planning which would assist in the UK’s ability to achieve its 2020 targets. Please seethe document attached to this response for a detailed discursive on this question.


No comment

Question: Q19

YesComments:Yes, an uplift for the development of district heating should be made available. District heating is afuture proof “Plug and Play” technology as it can use various sources of energy as its heat supply i.e.geothermal, biomass, fossil fuel, residual heat from industrial processes. District heating is ideally suitedto provide renewable energy to urban areas where the installation of an alternative renewable energysource is prohibitive due to spatial requirements. District heating is widely used around the world.Please refer to our detailed response in the attached document.


22 June 2010 Page 1328 of 1348

NO:Comments:We are recommending the following;1. Banding of the uplift based on delivered heat per linear meter of network2. Delivered heat per linear meter of network to be deemed by an appropriate bodyUplifts should pay for the costs of developing a network in hard to treat areas, eg urban areas.Setting a minimum number of customers on a network for the purposes of eligibility is not theoptimal solution. To ensure adequate investment in district heating schemes, DECC shouldconsider setting a minimum level of delivered heat per linear meter of network. In order toencourage the development of district heat networks in areas that do not have high heat densitiesDECC should consider banding the uplift based on delivered heat per linear meter of network andoffering higher uplifts for these areas. In order to ensure the efficient operation of the scheme,DECC will need to consider each project on a case by case basis to the extent that the deliveredheat per linear meter will be required to be deemed. Please see our detailed response to thisquestion in the attached document with supporting evidence.


Comments:Yes. In order to ensure the maximum level of investment in renewable technologies isachieved a fixed RHI is necessary for projects to raise finance to fund the project.

Question: Q22

No comment


NoComments:We welcome the intention to include deep geothermal. However, GSHP’s are not comparable todeep geothermal heat generation: the output and level of investment required for deepgeothermal is much greater, and the source of the energy is completely different. The RHI in itscurrent format is not sufficient to encourage the development of deep geothermal heatgeneration, a significant energy source. Deep geothermal is a developed renewable energyresource widely used around the world. It has been documented that the UK has significantpotential to utilize this resource and the sector believes that a potential 180MWth could beinstalled by 2020 with a further 500MWth in planning. Please see the detailed response to thisquestion in the attached document.We support REA in calling for a dedicated tariff of £0.05 per kWh for deep geothermaldevelopment


No comment

Question: Q25

NoComments:It is imperative that DECC act immediately and allocate a dedicated renewable heat incentive fordeep geothermal. Deferring this until the first review will delay current planned deep geothermalprojects and reduce the ability for the UK to achieve its renewable energy goals.


No comment

Question: Q27

No comment


No comment

Question: Q29

22 June 2010 Page 1329 of 1348

YesComments:District heating is a future proof plug and play technology where a number of technologies can beencouraged to supply clean, renewable heat to the network. The potential also exists for wasteheat to be supplied to the network. Deep geothermal energy is the ideal provider of base loadenergy to a district heating scheme. Potential mid and peak load technologies would includebiomass, solar thermal and biogas. The long term contracts for the supply of heat to the networkwill be required. RHI’s applicable to renewable technologies should be made available for thesupply of heat to the network. Please refer to our response included in the attached document fora detailed response to this question and to our response to Q20 and 21


671 Scotch Whiskey Association Trade Association

The Scotch Whisky Association (SWA) welcomes this consultation on the proposedRenewable Heat Incentive. The SWA is the representative body of the Scotch Whiskyindustry. Our membership covers approximately 90% of the industry; members includedistillers, bottlers, brand owners and those engaged in the wholesale and export trade inScotch Whisky.The following background information on the Scotch Whisky industry will help understandour response. There are over 100 distilleries in Scotland. Seven are grain distilleries whichaccount for approximately 60% of total spirit production. Six of the grain distilleries arecovered by EUETS. The main product of a grain distillery is new-make grain whisky spiritwhich after maturation (legal minimum of 3 years) forms the backbone of Blended ScotchWhisky. The remaining distilleries are malt distilleries which produce new-make maltwhisky spirit which, after maturation, may be sold a Single Malt Scotch Whisky or blendedwith other Scotch Whiskies to form either Blended Scotch Malt Whisky or Blended ScotchWhisky. The production process differs between malt and grain distilleries (malt distilleriesoperate pot stills and production is on a batch basis; grain distilleries operate column(Coffey or Patent) stills which run continuously).The production of Scotch Whisky, particularly the processes of mashing and distillation, isenergy (heat) intensive and requires a high quality heat load (often 9-12 bar steam).Approximately 90% of the energy input into a typical distillery is heat related, most of whichis used to produce steam. One grain distiller has suggested a steam requirement of 2tonnes steam to produce 1,000 litres of pure alcohol (alcohol with an abv of 100%),although this is likely to be greater for malt distilling. Grain distilleries also require heat tocook (under pressure) unmalted cereals such as maize and wheat. Some distilleries alsoprocess distillery co-products by converting spent grains and pot ale into animal feed.Those 'drying' process also require considerable amounts of heat. Some distilleries alsoincorporate maltings where malting barley is malted to produce malted barley. The maltingprocess also energy intensive.Whilst natural gas is the preferred fuel, a large number of malt distilleries use fuel oils(particularly Heavy Fuel Oil) for heat. This is because they are located in remote areas whichare not connected to the gas grid. For those distilleries, biomethane injection into the gasgrid will not be possible.Distillers are increasingly looking to utilise the energy embedded in distilling co-products.Rather than process spent grains into animal feeds, plans are in place to use the co-productsas a source of renewable energy, although at present they are restricted to larger distilleriesor, as in one example (Combination of Rothes Distillers), a clustering of malt distilleries onSpeyside. Generally speaking, malt distilleries do not produce sufficient quantities of coproductsto turn into renewable energy to make them totally self-sufficient. Some examplescan be found in our Environmental Strategy, launched in June (http://www.scotchwhisky.Org.uk/swa/96.html).Away from the distilleries, the industry's heating requirements will be similar to otherindustries, i.e. space heating in packaging plants and offices.


22 June 2010 Page 1330 of 1348

YesComments:We are concerned that the consultation does not cover financing of the RHI. This is a keyarea of concern for the Scotch Whisky industry. Weare particularly concerned with DECC’sadmission that, “whilst the levy will be placed on fossil fuel suppliers, we appreciate that, inpractice, they may decide to pass on the cost of the levy to their customers”. Members facea plethora of complex, conflicting, and costly climate change mitigation measures, includingthe Climate Change Levy, CRC Energy Efficiency Scheme and EU Emissions Trading System.Although they are able to obtain a CCL rebate at their distilling sites (industry packagingsites still remain ineligible to enter our Climate Change Agreement (CCA)), that rebate willreduce to 65% at the same time that the RHI is due to be implemented. Distillers aretherefore likely to face a significant cost increase in April 2011.The RHI is likely to have a very significant impact on the Scotch Whisky industry. We arekeen to understand more about how the scheme will be funded.

Question: Q01

NoComments:We believe that RHI support should be available for biogas produced by anaerobic digestion(AD) that helps to keep AD plants operational. As our Environmental Strategy outlines,distillers are looking increasingly at AD as a way of generating heat from distillery coproducts(e.g. spent wash). Those effluents require some form of treatment before theycan be discharged. AD is one treatment option. The alternative to AD is to treat liquideffluents in a treatment centre – a process requiring energy. Biogas will be generated byAD, and although itmight not always be required for heat purposes, an operational AD planthelps to reduce energy demand by avoiding other treatment technologies. AD requiressignificant investment. We therefore believe that distillers which generate biogas by usingAD should be eligible for payments under RHI.


Comments:We appreciate that basing payments on heat generated may create an incentive foroperators to produce surplus heat in order to gain more RHI support. We agree that RHIpayments at large scale installations should be related to the amount of heat produced andmeasured through the meter, although as our response to question 7 states we believe thatthere is scope to also allow biogas generated by AD to be eligible if it helps keep the plantoperational.We do have concerns on how heat demand will be “deemed” for small and medium sizedinstallations. In the distilling industry heat demand is closely tied to throughput. The graphbelow shows how throughput (new-make malt and grain whisky spirit) in the Scotch Whiskyindustry fluctuates on an annual basis. Clearly, given this cyclical approach, there aredifficulties in predicting what the heat demand will be from one year to the next. Manymalt whisky distilleries will fall into the medium scale installation category.


Comments:On the perverse incentive – it will be difficult to demonstrate that the heat loadis always present to match heat generation. This will be easier where there are continuousprocesses (with a constant heat load) which can use renewables to replace existingconventional fossil fuel heat sources. The total heat load (renewable and fossil) can then berelated to output through an overall specific energy assessment.Where the entire heat load is being supplied by renewables there should also be somemeasure of the efficiency of its use, such as the relative specific energy consumption targetsthat are in place in the Climate Change Agreements.Steam meters are notoriously unreliable. If this is the only practical and approved methodof monitoring heat output then they should be installed with suitable isolations/bypasslpa: Litres of pure alcoholarrangements to allow easy replacement and regular calibration. The requirement to meteroutput would appear to preclude fuel mixing, e.g. burning biogas and natural gas in thesame boiler. If this was contemplated then the metered fossil fuel input would need to besubtracted at an assumed efficiency from the steam output to calculate the renewablecontribution.The basis of heat measurement should be clearly stated as being the mass flow of steamtimes the enthalpy of dry saturated steam (rather than latent heat) since poor boilerfeedwater preheat should not be rewarded by allowing for low feed temperatures – whichwould also make it more difficult to calculate by energy uplift rather than mass flow.

Question: Q14

22 June 2010 Page 1331 of 1348

Comments:The stated aim (page 40) to calculate the proposed tariff for biomethane injection on thebasis of parity with Feed-in-Tariffs appears desirable. However, both electricity generationfrom biogas engines and biomethane injection incur energy losses (eg cooling systems orgas cleaning and compression) which mean that both will always deliver less carbonreduction than direct biogas burning to generate heat (which is a direct replacement forfossil fuels). Any incentive should encourage the most efficient carbon reductionmechanism by rewarding the same net overall saving equally. Because ROCs are marketpriced,and as it is proposed that RHI will be a fixed tariff, divergence is likely to occur. Thismay then bias the decision on renewable fuel use, against the stated intent.

Question: Q16

Comments: Although there are benefits in fixing the RHI tariff for the duration of a project,our response to question 16 suggests that there will be a divergence of support forrenewables between the incentive schemes (ROCs/FITs and RHI). Where renewables can beused to generate either electricity or heat, should consideration be given to tie the RHI tariffto the value of the alternative use mechanism, i.e. the price of ROCs. This may help preventdivergence. Equalising the incentive payments between the two schemes will help ensurethe most appropriate use of the renewable fuel source. This will also reduce the uncertaintyfor decision making. In effect if 1MW renewable heat output is the same as say 0.4MWrenewable electrical output, saving the same amount of carbon, then would it not bepossible to issue ROCs at the lower rate for heat and have a single market which both gassuppliers and electricity generators would use?

Question: Q22

YesComments:We agree with the proposal to link the timing of the RHI review with that for otherrenewable support mechanisms.

AgreeQuestion: Q26

NoComments:Projects that were completed before 15 July 2009 should also be eligible for RHI support.The proposed start date penalises those companies that have taken early action to reduceemissions. We propose that the qualification period begins 5 years prior to the start of thescheme.


672 Peter & Jane Harris (individual) Other

I feel that the whole approach is wrong because you are not looking at not using energy in the first place I live in a newly constructed house we designed ourselves that only has water rates to pay plus a small amount of firewood for a wood burning stove lit for 4/5 hours per day on 75 days of the last 12 months I feel that that is the way forward The Green Man House

Peter & Jane Harris


673 Biomass Heating Solutions Ltd Private Company

22 June 2010 Page 1332 of 1348

[Please also see Appendix 1 - BHSL Technology attached in email, containing diagram and table]

Biomass Heating Solutions Ltd (BHSL) is based near Limerick in south-west Ireland.BHSL have miniaturised proven power plant technology to create a sophisticatedfluidised bed combustor small enough to be operated on a site with an available fuelstock to process into heat and energy. The automated system is suitable for a varietyof high mineral, high ash and variable moisture content fuel stocks including poultrylitter and spent mushroom compost. Demonstration sites within Ireland have beenoperated under a strict regime overseen by the Irish Department of Agriculture.BHSL wish to quickly bring the benefits of this innovative new energy recoverytechnology to other markets starting with the UK. The Renewable Heat Incentive(RHI) is a key enabler for this expansion and we therefore compliment the BritishGovernment on a ground-breaking initiative which will go a long way to providing thenecessary financial support to enable English farmers to adopt renewable heatgeneration.Our submission, which is set out in the accompanying Appendix provides anoverview of the BHSL technology together with our response to the consultationwhich we very much welcome the opportunity to comment upon.The potential benefits of heat from animal manures and other ‘non wood’ basedbiomass streams including spent mushroom compost are very significant and mayplay a key role in reducing carbon dioxide emissions up to 2020.Our technology has been successfully demonstrated on poultry farms over severalyears to the satisfaction of a number of authorities, agencies and experts such asIreland’s Environmental Protection Agency and the Department of Agriculture Foodand Forestry, the University of Limerick who are experts in FBC research and theDepartment of Energy and Sustainable Energy Ireland who both consider BHSL tobe amongst the leading alternative energy innovators in the use of biomass. Therehas also been active interest from across the border in Northern IrelandIn addition to generating heat and electricity for poultry sites, we recentlycommissioned our first spent mushroom compost installation on a mushroom farm inIreland. We are in discussions with other potential fuel stock suppliers in regard torunning similar trials on their sites.The appendix following first describes our technology for your consideration and thenprovides answers to those questions in the consultation that are of relevance orwhere we have concerns to raise.Chief amongst these are the questions of MCS registration and air quality standards.We submit that the MCS qualification and 150g/MJ Nox standards are inappropriatefor ‘non wood’ based biomass fuel stocks in agricultural settings. On site systems toprocess chicken litter or spent mushroom compost will in every instance have tocomply with some of the strictest health, safety and environmental rules in the worldapplicable to the on farm locations in which they will be exclusively operating.That is why we are cordially submitting that the final set of qualifying rules for the RHIscheme as it applies to innovative processes for the recovery of energy on farm fromanimal by-products is sufficiently flexible to recognise the permissions granted to doas largely meeting the qualifying criteria for participating in the RHI scheme.Thanking you in anticipation for your consideration of this submission and if you haveany question or wish to secure more detailed information (or indeed to see ourdemonstration units in operation) please do not hesitate to contact me.The environmental impact of our technology is extremely positive and we believe thatit could play a key role in enabling UK agriculture to make a significant contribution totackling Climate Change, creating a sustainable future and strengthening the greeneconomy. We hope your ambitions to foster innovation are successful and wouldseek some flexibility around MCS registration, air quality and eligibility while thedetails for operation are agreed with the relevant policy makers.

Appendix 2 -

General comments on the RHI ConsultationBHSL strongly support the development of the RHI which is expected to become amodel for other countries in the years to come. Renewable heat has not historicallybenefited from the same type of financial assistance as renewable electricity and yethas a critical role to play in the battle to reduce carbon emissions. In the biomasssphere, the lack of financial assistance given to renewable heat has led developersto focus on electricity-only projects which are often not the most efficient use ofbiomass in terms of carbon reductions per pound spent.While the existing Renewables Obligation provides for additional ROCs for biomasswith CHP projects, this is of limited assistance to heat dominated projects such asours. The RHI is intrinsically a much fairer and better way of rewarding projects forrenewable heat whether produced in heat-only or CHP applications.


22 June 2010 Page 1333 of 1348

The tariff levels in the RHI have obviously been developed with other technologies inmind. However, the proposed 6.5p/kWh tariff level for 45-500kW biomass plantsprovides adequate financial assistance – our fuel costs will be low compared to awood burning biomass plant but other costs are higher. Given the movement towardslarger broiler farms it is likely that many sites would require up to 1.5MW of heat butthe significant drop in tariff above 500kW (to 1.6-2.5p/kWh) would not provideadequate assistance and would effectively discourage us from developing sitesabove 500kW unless separate boilers on a facility were individually metered.As outlined below, we are concerned about the proposed need to qualify for MCScertification. MCS certification is clearly relevant for standardised products such aswood-pellet boilers to ensure a certain level of efficiency and to provide guidance toconsumers. In such cases, where a number of competing products are available andthere is a good historical record, it is possible to make meaningful comparisons andthe need to obtain MCS certification will not reduce the market for renewable heat.In contrast, ours is a developing technology for new fuel stocks and has fewerexisting comparables. Poultry litter or spent mushroom compost are difficultsubstances to deal with and our units have been expressly designed to replicate thestrict standards in combustion attained in very much larger plants in our micro units,such as the need to cope with varying moisture and still maintain temperatures of850ºC for 2 seconds.These requirements are not included in the MCS. In order to promote innovation werespectfully submit that MCS not be required where alternative standards foroperation have been agreed with the permitting regulatory authority(s).Within Ireland we are strictly regulated by the Dept of Agriculture and we are indiscussions with DEFRA and EA in the UK regards replicating this in the UK. Inparticular we believe that together the RHI and the revised EU Animal By-ProductsRegulation (1069/2009) due to come into force early next year (ie 4/3/11) can betransformational in accelerating the acquisition and use by UK farmers of CHP unitsto convert what’s now considered a problem into a new source of alternative energy .

We are concerned about the proposed need to qualify for MCS certification. MCScertification is clearly relevant for standardised products such as wood-pellet boilerswhich are relatively basic in terms of the controls and protections provided by thestraightforward burning process that most utilise in order to ensure, and in theabsence of other direct regulatory compliance a certain level of efficiency and toprovide guidance to consumers. The MCS is not designed or applicable to ourtechnology which in any case will be subject to other, stricter regimes.We would suggest providing some flexibility in registering innovative technologies orfuel stocks to provide time for the industry and policy makers to agree acceptableand appropriate standards.Separately, it would be helpful if it was possible for the owner of the equipment toassign the RHI payments to another party. This would facilitate alternative businessmodels – e.g. if a poultry farmer wished to own the machine but wanted an expertprovider such as BHSL to operate, maintain and handle revenue streams.

Question: Q03

Where there are a large number of installations where nothing more is required of theuser than the buying of a unit and having it installed then it is reasonable, indeednecessary, to make MCS accreditation a prerequisite for RHI registration. This would,for example, be the case with small wood pellet boilers. We cannot comment onwhether there are sufficient accredited installers of such products and we think thatcare needs to be taken that competition in installation is not adversely affected bymaking MCS accreditation a prerequisite in cases where there are relatively fewaccredited installers in a particular geographical area.We also question whether it is necessary for installers to be specially accredited forall but the smallest domestic type installations (they must of course be suitablyqualified in terms of their technical task, such as for electrical installation).

Question: Q04

22 June 2010 Page 1334 of 1348

We strongly disagree with this requirement. The MCS is not suitable for all solidbiomass fuel stocks and if applied would fail in its objective to maintain confidence inthe industry. For our installations the acquired unit cannot be operated without the purchasersecuring the approval of one or more regulatory authority in order to ensure it has nonegative impact on health safety or the immediate environment. Where anotherauthority has given approval for operation we submit that manufacturers should notbe required to complete the MCS route.Within Ireland our units are operated to strict standards, some of which are notincluded by the MCS and are required by the nature of the fuel stock beingprocessed.It is proposed that it will be necessary to use an MCS installer. Part of the reasonsuggested is to bolster consumer confidence in renewable heat applications. Whilethis may be appropriate for domestic type installations it seems wholly inappropriatein our circumstances. These machines will be manufactured in the UK where weexpect to retain overall operation and maintenance responsibilities while the units arein service and we would not currently be confident in anyone else performing thisactivity. It would therefore seem perverse to force us to use an MCS certifiedinstaller and unnecessarily burdensome to effectively require that we become anMCS certified installer.


Standards currently in place such as EN303-5 (biomass boilers <300kW) aredesigned for wood based biomass products.Demonstration sites in Ireland are permitted by the Department of Agriculture underthe current Animal By-Products Directive (EC/1774/2002). A strict regime ofoperation has been agreed, including having the units constantly monitor andmaintain a combustion temperature of at least 850ºC for 2 seconds.We feel strongly that emerging technologies must demonstrate their benefits andclean credentials but should not be hamstrung by an absence of applicablestandards while this approval process is ongoing.

Question: Q06

We understand the need to ensure that the RHI applies only to “useful heat” to avoidperverse incentives. In our poultry installations we expect heat demand to increasecompared to the status quo as the dry heat is of better quality and can be employedwith greater effect for the benefit of bird welfare and performance. We describe thisas optimal ventilation rather than minimum ventilation. There comes a point whenadditional heat has a negative effect on poultry growth and should this occur it willhave a significant impact on bird performance so we feel within this industry perverseincentives are unlikely.For Spent Mushroom Compost applications (and potentially poultry sites) the abilityto employ absorption chilling technologies to convert heat into cold water and thereby cool facilities would seam preferable to using electricity to perform the same function.Restricting this technology from the RHI on the basis that it is not heat may be amissed opportunity unless a Renewable Cooling Incentive is planned in the shortterm or the problems associated with including this technology would delay the widerimplementation.We agree that the CHPQA standards should not apply to CHP. We feel that thesestandards do not adequately take into account the greater difficulty of dealing withpoultry litter as a fuel and are, in any case, superfluous when you are directlyrewarded for the quantity of heat produced.Our understanding is that our technology when applied on a poultry or mushroom sitequalifies for the RHI as it satisfies the definition of biomass solid under theRenewable Energy Directive: “The biodegradable fraction of products, waste andresidues from biological origin from agriculture (including vegetal and animalsubstances), forestry and related industries, including fisheries and aquaculture, aswell as the biodegradable fraction of industrial and municipal waste”.

Question: Q07

22 June 2010 Page 1335 of 1348

The PM limit we aim for as a company is 15g/GJ so we would have no difficultycomplying with the proposed standard of 30g/GJ.For poultry litter the NOx limit of 150g/GJ will present some problems. We consideran emission standard of 300g/GJ is more appropriate. We justify this based on therural context and in light of:• The initial composition of Poultry Litter and the quantities processed in an onsite application• Reduced CO2 emissions as result of not using Fossil Fuels• Reduced Ammonia emissions die to dryer litter• Reduced transportation and related emission reductions• Biosecurity advantages• Nutrient Management advantages of recycled Phosphate and PotassiumWe would strongly urge emission standards appropriate for the fuel supply,geographic context and wider site advantages in order to not rule out innovativetechnologies such as our own. Sites in Ireland are operated to a strict standardagreed with the Department of Agriculture and this standard includes maintainingcombustion at 850ºC or higher for more than 2 seconds.

Question: Q09

It is not clear to us whether it is proposed that our facilities would be classified as“medium-scale” or “process heating”. We think it is likely to be the latter so that theproposal appears to be that our heat use would be metered.In principle we are ambivalent as to whether deeming or metering is used. Howeverthis depends on whether the deemed demand is realistic. The variable nature ofpoultry sheds and the variations in demand depending on climate, production levelsand the stage of poultry growth, mean that it would be difficult to establish reliabledeemed figures. It would also not be sufficient to examine records of historic heatingdemand since, as noted previously, the optimal ventilation strategy means that usefulheat demand will rise.

Question: Q12

As noted previously, we are doubtful about the applicability of deeming in the specificcase of the Poultry industry. We would encourage flexibility in choosing betweenmetering and deeming in applications where the type of heat created differs to thetraditional mechanism.

Question: Q13

In the case of animal husbandry, we agree the incentive to over generate is low dueto the adverse effects on production that would result. There is also a variety ofexisting animal welfare standards that would be compromised.

Question: Q14

It seems appropriate to reward heat-only and CHP applications equally in respect ofthe heat used. The FIT and RO will reward CHP producers for the electricitycomponent (which will presumably lose the CHP uplift element). This will ensure thatthe design of CHP schemes is not distorted by an artificial incentive to produce moreelectricity vs heat and vice versa.

Question: Q15

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We are broadly content with the proposed tariff level for medium-sized biomassinstallations (45-500kW).The capital costs of a Propane heating system within a poultry site are fairly lowwhen compared to the fuel handling, combustion, heat exchanges, ash handling, fluecleaning and plumbing required for using chicken litter as an indirect heat source.There is also a significant operation and maintenance cost as servicing is requiredbetween each batch.Within the poultry market which is our initial focus, 1.5-2 MW thermal heatrequirements are not uncommon for larger poultry farms. We expect to install anumber of separate units on a site in order to deliver this demand.It is important that individual boilers on a site be metered separately just as individualtechnologies are metered separately. Since the capital cost of multiple boilers willrise proportionate to the number of units installed we feel that it is appropriate forindividual boilers on a site to be separately metered and have the tariffs applied onan individual rather than site basis.Separately, we feel any cut off will create artificial sizing boundaries unless the tariffsare considered on an aggregated basis. For instance, where 550kW could beusefully used it will not be if the full 550kW is subject to the lower tariff of 2.5p. Thisartificial banding could be removed if the first 45kW were at 9p, the next 455 kWwere at 6.5 pence and any subsequent amount would be at 2.5p. 550kW wouldtherefore be worth £34.62 per hour of operation. Conversely, if this were notimplemented then 550kW would be worth just £13.75 per hour (550*0.025). Indeedthere would be no additional incentive to produce a solution for sites until they werelarger than approx 1.4MW in size.

Question: Q18

Our facilities use diesel in the start-up process. We assume that this will beacceptable under the RHI but that the associated heat output will be excluded. Thediesel could be metered and deducted or the heat meter during start up could be bypassedin order to accommodate this.

Question: Q19

We are perhaps in an unusual situation in that our fuel source is produced on siteand provision of the fuel can effectively be secured for the lifetime of the plant. Assuch, an inflation linked price which is fixed for the duration of the project’sentitlement to RHI support suits us best and will be the most attractive structure forpotential investors and lenders.

Question: Q22

Degression is perhaps a useful concept for more standardised technologies. Ourtechnology is so specialised that the concept seems of little value.

Question: Q23

Yes – at present our view is that the 6.5p/kWh tariff for medium sized biomass plantsis adequate. As mentioned previously we remain concerned about the ‘cliff edge’above 500kW.Our technology is innovative but following £2m in investment and three years ofdevelopment from a prototype to pre-production model means it is ready forcommercial adoption and use. We feel solid biomass fuel stocks including animal byproducts such as manure or agricultural by products such as spent mushroomcompost have the potential to provide significant reductions in carbon dioxideemissions. Since the RHI tariffs have been set for a wide variety of technologies andsolid biomass covers renewable fuels including manure based animal by products wefeel the approach for innovative and emerging technologies is appropriate.We respectfully submit that some flexibility on MCS registration and air quality beallowed for where the MCS is not appropriate and alternative standards for operationhave been agreed between the manufacturer and relevant regulatory authority.

AgreeQuestion: Q24

674 Scottish Environment Protection Agency OGD / Statutory Agenc

Fuel Poverty


22 June 2010 Page 1337 of 1348

The Scottish Environment Protection Agency (SEPA) welcomes the opportunity to comment on this consultation. SEPA has an important role in considering the environemntal impacts of energy decisions and, within our remit, contributing to reducing these impacts. The RHI will stimulate renewable heat generation, contributing to Scotland's target of generating 11% of our heat from renewable sources by 202. SEPA strongly supports the introduction of the RHI to help reduce the carbon intensity of heat. The incentive will need to be promoted to the public, business and industry, and the capacity and skills of decelopers and installers increased to meet these targets.

It is important that a more renewable energy system also protects the wider environment and human health, for instance via air quality standards. SEPA supports appropriate sustainable biomass combined heat and power (CHP) developments, supporting exploitation of waste biomass, as well as sustainable virgin biomass. The sustainability of biofuels must be considered very carefully to ensure policies do not inappropiately promote unsustainable and potentially damaging biofuels.

The RHI forms part of an overall policy framework, and consistency between the many policy instruments is essential to ensure that unitended consequences can be avoided [1]. Support mechanisms for CHP need to be considered, to enable the best use of all available energy, including waste heat from non renewable sources and potential for electricity export from heat intensive industries.

As heat is a devolved matter, SEPA is pleased to see that the RHI incentive is being developed in close consultation with the devolved adminsitrations. SEPA has been working with the Scottish Government on the development and implentationof its Renewable Heat Action Plan for Scotland, which includes incentivising uptake of renewable heat as a tool to deliver the renewable heat target.

Detailed comments and responses to the consultation are shown below in Annex 1.

As a public body committed to openness and transparency, SEPA feels it is appropriate that this response be placed on the public record.


YesComments:Although thorough, the scheme has omitted a few considerations.

This scheme will have potential implications for the water environment and, whilst renwable heat is to be encouraged, it may increase the number of renewable energy schemes that have potential to have significant adverse impacts on the water environment. Open loop geothermal energy systems will require a SEPA authorisation.

As the initiative stands there is little distinction made between systems and relative efficiency ratings are not considered; is it possible to develop some measure for heat productivity that would link efficiency and generation, favouring the most efficient systems?

Installation of renewable systems needs to be planned prior to existing system breakdown and will likely require training and wide publication to get the public to consider options. Tradiontional methods will be installed more often in emergency scenarios. Steps need to be taken to raise awareness of the possibilities.

There has been no consideration given to incentives for lower carbon heat and waste heat from non renewable sources. This may actively disincentivise CHP. To incentivise district heating from all sources, including waste heat, developers could receive payments bridging the district heating funding gap. This would result in a 'low carbon heat incentive' enabling includsion of use of waste heat in the scheme.

Funding of the RHI through a levy on fossil fuel suppliers raises some concerns in Scotland where there are a greater proportion of areas off the gas grid. This could have consequential impacts on many homes and businesses. Suppliers of fossil fuels particularly in rural areas tend to be small businesses and could be extremely vulnerable to such a levy. The RHI funding model will need to ensure that any levy on fossil fuels does not act to unfairly penalise UK producers.

Scotland faces particular issues concerning its old housing stock and significant rural communities that are off the gas grid. The RHI should consider these issues and fuel price variations over time and distance, especially for biomass.

Question: Q01

YesComments:There may be barriers to RHI and capital allowances under the current provisions in the Energy Act 2008. Also 'ownership' status for payments may preclude those with poor credit records access to financing. An altenrative scheme where the RHI payments could be made directly to financing body avoiding investor risk would address this issue. How the RHI contribute to tackling fuel poverty in Scotland needs to be considered further.

Question: Q02

YesComments: SEPA supports the simple and clear registration and payment approach proposed.

Question: Q03

22 June 2010 Page 1338 of 1348

Yes Comments: However it is important to avoid increased cost to consumers as the demand/ supply balance will change rapidly with RHI introduction and an initial shortage of accredited installers leading to potentially increased system costs.

AgreeQuestion: Q04

YesComments: A minimum advice and installation standard is necessary and as such it is essential that certification is achievable quickly and at low cost to existing installers.

Question: Q05

Comments:SEPA recognises the need for some form of equivalency that could enable a European contractor access to the UK as should be the case with the Single Labour Market. It would be useful to ensure that this was a reciprocal arrangement and could potentially open export markets for Scottish and UK suppliers.

Question: Q06

Yes

Role of CHPQA standard and CHP plants: SEPA agrees that RHI eligibility should not be based on achieving the CHPQA standard. However, this raises concerns that the merhods and guidance provided for in CHPQA could be undermined or ignored especially for larger installations. There may be an unintended breach of Directive 2004/8/EC on Congeneration (although RHI may fill the requirement) which CHPQA fulfills in the UK setting. Further, SEPA's thermal treatment of waste guidelines rely on the CHP QA framework to support the Heat and Power plan. SEPA suggest that for medium to large scale CHP that the CHP QA framework is still used to report overall CHP efficiencies against the Cogeneration Directive's requirements even though there is no threshold to be exceeded to be eligible for RHI. A form of words such as 'unless otherwise required by different standards' would avoid this potential loophole.

Exclusion of stoves; could the fuel attract some incentive, rather than the heat?Those with back boilers for water are useful and known technologies. A low level of RHI support for these would help build a market and offer a stepping stone to full automated systems? This could be particularly relevant to rural areas and those off the gas grid.

The exclusion of cooling except as part of a tri-generation system (and then only for heat) is surprising. Even though this is a heat incentive; energy is energy whatever form and energy generation cooling is the same as energy generation for heating.

AgreeQuestion: Q07

YesComments: Other systems are in process fo development but thses are for bio-ethanol and bio-butanol and more suitable for transport rather than domestic blended fuel oil and SEPA would not recommend making them eligible RHI.

AgreeQuestion: Q08

YesComments: SEPA agrees with the proposal but, how compliance would be demonstrated is not mentioned in the consultation. For small plants this could be done as part of the certificationi scheme; i.e. some form of type approval as with Clean Air Act appliances where a list of approved appliances ensures compliance.

Scotland has tighter air quality standards than the rest of the UK and this should be considered. SEPA supports the need for emissions performance standards. Some monitoring of the levels of uptake is required and a measure of the impact it has on the ambient concentrations of pollutants. This would require more stringent performance standards air quality management areas and smoke control areas.

AgreeQuestion: Q09

YesComments: As the efficiency of a home within the deemed category will dictate the rate of return on the investment, a more efficient home will increase the level of incentive received relative to the costs incurred, and vice versa. Minimum actions could be required, such as installing insulation and double glazing etc, but absolute standards are too blunt to take all house types and ages into account. Listed buildings and other hard to heat homes would be a particular concern, and Scotland has particular issues due to ists older housing stock.


Comments:High accreditation standards and justification in the certification scheme coupled with a random inspection regime would reduce the likelihood of intentionally reduced standards.

Question: Q11

22 June 2010 Page 1339 of 1348

YesComments: The proposed methodology seeks to minimise costs and potential profiteering in a pragmatic manner and is a cost effective solution.

AgreeQuestion: Q12

YesComments: There are difficulties with SAP for different house types- historical buildings and others suffer from inaccurate estimates. Balancing this information with that from the EPCs should even this out.

AgreeQuestion: Q13

YesComments: Users of heat for a production process are less likely to overproduce however there is always the potential to over heat space and open a door/window. Metered usage should be randomly checked for ground truth periodically to highlight concern, which could hopefully be resolved by correspondence at minimum cost.

Question: Q14

Comments:Tiered banding would help avoid inappropriate sizing of installations, and ensure true fitness for purpose, especially with biomas. CHP should be incentivised differently, to ensure an additional return for CHP investment; providing an additional 1/2 ROC uplift for CHP should reduce occurences of wasted waste heat! This is a process that could be refined over time as an evidence base is developed. The bluntness of the bands could lead to inappropriate system designs with potential for undersizing to be within the higher band for payments. Particularly with biomass at the 500kw band. More efficient larger systems with district heating are disincentivised through such banding. Also banding does not account for differential loading factors required for different hearing technologies.There may be an unintended consequence of this policy. There is an interaction between electrical and heat productivity in CHP and an electrical penalty from the use of too much heat. It appears that under the RHI, the rate of return for heat requires loss of electrical production in CHP units, and this means that the ROC remains a better rate of return, at a larger scale.

Question: Q15

Comments: SEPA agrees that it is appropriate to have a separate tariff for direct injection of biomethane. A tiered approach would be beneficial as well as looking at systems that maximise efficiencies whether through CHP or heat alone, rewarding the most efficient technologies promotes best environmental practice.

Question: Q16

Comments:No data available. In the absence of data a flexible approach should be recommended with an initial short term review.

Question: Q17

YesComments: The proposed system seems fair and should encourage take up. The deeming nature provided a degree of financial stability which is beneficial. SEPA also welcomes the proposed 50% RHI for municipal waste on Pg 51 which should increase the uptake of district heating.

Question: Q18

YesComments: SEPA aggrees with the principle of only large scale mixed fuel but there may be cases that an appliance may have the ability for dual fuel. For example what would be the consequences if there was no supply of biomass? SEPA suggests that standby fuel provision needs to be clarified. It may be appropriate that mixed fuel cannot be used (i.e. stand alone biomass) but does not preclude the use of fossil fuel if there is no biomass. The alternate would be that you may need two appliances, one biomass and one fossil, to ensure security of heat. As written this could cause industry some risk.

Question: Q19

YesComments: Agree with concept of uplift to promote district heating. This is in line with the objectives of SEPA's Thermal Treatment of Waste Guidelines.

AgreeQuestion: Q20

YesComments: As the primary aim is to encourage and speed the take-up of renewable and sustainable heat; SEPA supports eligibility criteria that achieve these desires in the most cost effective manner. The increased burden of attempting to assess the take up of hard to heat properties, which will vary enormously across the country, is likely to be difficult to measure and contentious.

Question: Q21

22 June 2010 Page 1340 of 1348

YesComments: The RHI is designed to allow initial capital costs to be recouped and for market failure to be addressed. This is best achieved with a grandfathering commitment. As with any investment decision prices may fluctuate over time and distance from supply and investors would need to consider this.

It is however the case that fuel costs are variable (biomass particularly, but also electricity for heat pumps) therefore the guaranteed rate of return is uncertain, relative to operational costs. There are also significant regional variations, as remote areas may not have access to some fuels, such as biomass in bulk transport, without a significant transport cost. This is not accounted for and is currently seen in conventional fuels. RHI should seek to review and address this for remote and island communities.

Question: Q22

YesComments: There needs to be full transparency of the potential introduction of degression from the outset, This should encourage early adopters to take what could be perceived as a greater risk. Once the potential revenue streams are better understood it seems reasonable to consider the implementation of actions that will save public money as the market failure is addressed.

AgreeQuestion: Q23

YesComments: Always difficult to foresee the future and the proposed methodoloty enables future technologies and innovations to be accounted for.

AgreeQuestion: Q24

Comments:Solar space heating typically requires three times the size of solar collector (than for hot water alone) and this is likely to make it less attractive (more costly) to the individual domestic unit, however there is potential for solar thermal community heating and SEPA would welcome the RHI supporting such investments

Question: Q25

YesComments: By adopting grandfathering, existing investors would have a high degree of investor security and this is conducive to early adoption. It is beneficial to adhere to the same timetable as the Renewables Obligation and to limit expctations from the first review.

AgreeQuestion: Q26

Comments: Sudden dramatic price changes in renewables feedstock and/or gas, oil or overall electricity prices could be precursors to an emergency review.

Question: Q27

YesComments: SEPA agrees provided that it is clear that networks/heat collection devices installed at existing generators after the original construction which was before the qualifying date, are eligible for RHI. For example in Shetland at the Lerwick Energy Recovery Plant the existing District Heating systems will not qualify but any new network (i.e. new houses) added after July 2009 would qualify.

Question: Q28

NoComments: The proposals are well thought out and providing the first review is thorough, instances of abuse should be infrequent. SEPA has proposed discussions with Ofgem to discuss the administrator role, and share experiences.

Question: Q29

Comments:Ownership may be an issue and it is not clear how the payment would work in large scale district heating schemes. There is the cost of installation of the generation equipment and the cost of the user installation to make use of the heat (a third party arrangement). It is not clear how such costs would be supported e.g. would it be htrough uplift and who would then be the owner?

Question: Q30

675 Go Green GB Ltd Private Company

22 June 2010 Page 1341 of 1348

LETCHWORTH AD UPDATE @ 22nd April 2010Site Details5 acre site selected close to A1 near Letchworth in Hertfordshire..Nearest post code is SG4 7EQSite has 2 entrances.Site is away from housing etc on waste land.Previous use of land was as site construction site for bypass builders.Site has been entered for the Herts waste planVerbal approval from planner.Inputs - Feedstock40,000 tonnes of food waste as follows :-o20,000 tonnes of commercial food wasteoAdditional 5000 tonnes of Hertfordshire hospital food waste.o5000 tonnes of grass cuttings ( summer buffer).o10,000 tonnes of (winter buffer) maize crops.Outputs 480 m3 biomethane per hour to be sold directly to Altro Group in Letchworth.30,000 tonnes of digestate to Weston Park Farms 2500 acres of arable farmland.StakeholdersoLandlord as part of sustainability strategy (key influencer)oLetchworth Transition TeamEquity PartnerFarmer to put in £250,000 for 10% share (valuation PWC)Capital costs£10mEnvironmental BenefitAltro group currently uses 7.3m kilowatt hours of gas. They propose to use renewable Gas from our plant as part of their sustainability strategy. They manufacture flooring etc and have a huge heat demand 24 hours a day.The case for increasing RHIAccording to the Carbon Trust, producing biogas & selling it direct to an industrial user is the most efficient methodology for Anaerobic Digestion.We have followed the environmental recommendations but government incentives are not geared to do the same.We have a long-term year round heat demand from a nearby company.In the current climate, funding is based on the economics of a project and not on its environmental aspirations. Gas to grid is not an option because of pressure limitations.Our site is not suitable for CHP because we do not have a use for the waste heat.Please reconsider the value of rhi to ensure that environmental projects such as ours are developed.


676 Gaia Power Limited Other

22 June 2010 Page 1342 of 1348

Body of email:the political uncertainty of the last few days has been unprecedented in modern times, as so many journalists and commentators have hardly ceased reminding us. It appears now to be at an end with the appointment of a Conservative led Government in coalition with Liberal Democrats. This means the situation considered in my attached covering letter, i.e. a totally new administration in Government, will be the outcome of the recent general election. In this context I would like to reinforce our primary concern. Our jobs as developers, but more importantly many hundreds of future jobs in the UK, result from investment in renewable energy assets. We have been pleased to see the high level commitment from all parties to continue policies which support such investments. However this investment depends directly on political and regulatory certainty. We have brought forward investments structured to work under the support mechanisms which have been the subject of discussion and development, including through consultation, over years. Our project is ready to be financed. We are unable to take this forward now solely owing to the lack of clarity in the regulatory framework. Radical change to the renewable energy support mechanisms at this point will severely delay our investment and others like it, and in cases may cause some of them to be abandoned. We trust that the decisions of the new administration, and the consideration by the new ministers of the results of consultations (such as this on the RHI and the still current biomass grandfathering consultation), will have this need for long term stability and certainty at the forefront of their minds as they consider how best to take energy policy forward.

Cover letter:Gaia Power has brought together a proven team of highly experienced energy professionals in order to develop, build, own and operate biomass to energy projects in the UK. Our initial focus has been the use of recycled wood to produce renewable electricity through the development of sub 50MWe recycled wood to energy power plants across the UK. Our first project is located on Teesside and it received its planning permission without objection in October 2009. It is now in the last stages of finalising all remaining contractual arrangements in order to raise limited recourse bank finance and commence construction.

Although this response is submitted after the closing date, a new Government has yet to be formed following the UK General Election on May 6. Hence, as the civil service was in election “purdah” at the time of closure or the consultation and remains so still, we trust that our comments may still be taken into account.

Indeed through delaying our response to this time we have the benefit of knowing a little more about the political backdrop to further development of renewable energy policy, at least for the next few months. The General Election has failed to produce a single party who can form a new government with a majority in Parliament. At this time of writing it appears that a coalition government is likely. If the outcome is that the Conservative and LibDem parties find a way of working together then the new administration will be totally new and we are unclear about the status of existing policy developments promoted by the previous Labour administration such as this RHI consultation.

The detrimental impact of “weak government” on the financial markets and investment community is clearly at the forefront of politicians’ minds as they seek to negotiate with each other. We welcome that focus. We further welcome the statements from all major parties about their commitment to continue to support investment in renewable energy, and the early indications that this element of government policy will form part of the basis of common working together across the political spectrum.

We would therefore plead above all this high level cross-party enthusiasm is translated into clarity and long term certainty on the mechanics of renewable energy support. Indeed we would go further and urge that there be far greater focus on the implications of change to legislation / government policy and the negative impact this has in relation to attracting finance. Our experience is that this has been largely absent over the last two years in our specific area of biomass to energy and this has had a profoundly negative effect on our ability to deliver a financeable project in a timely and cost effective way.

The most recent statements affecting our projects in consultation documents lead to uncertainty unacceptable to our sources of funding. As a consequence we are currently unable to proceed into financing. The positive impact on investment, jobs and ultimately tax revenues as well as the environment is thus delayed.

As with all developers, we at Gaia Power manage our resources extremely carefully as these are finite. Not only is delay very costly to us, but changes to the regulatory environment in which energy projects are developed undermine confidence in our counterparties and lead to them giving us lower commitment. We have experienced this directly in both oral and written responses from potential equity investors, potential lenders and some of those whose long term contribution of skills and technology are essential if projects such as ours are to become operational. Such counterparties are global players who have opportunities outside the UK. They perceive the UK as a country with a high level of political and regulatory risk and this directly affects if not the willingness then certainly the cost of their doing business here.

We therefore trust that recommendations arising from this consultation will be implemented clearly and speedily, leading to the stable and attractive regulatory framework which is essential if the UK’s renewable energy targets are to be achieved.


22 June 2010 Page 1343 of 1348

No

The time at which accreditation can be obtained under the RO currently is at the start of operation. On the basis of the statements in the consultation document (p24) we assume a similar definition would be applied for the RHI.

The period of construction or installation (which lies between this point in time and the time at which an investment decision is made) creates a period where uncertainty exists concerning regulatory changes which may be made in the intervening period. For short construction periods this may be manageable, but for larger scale projects seeking debt finance the uncertainty relating to the basis of the revenue stream results in a risk profile that is perceived as considerable.

The construction period for Gaia Power’s Tees Valley project is anticipated to be about three years. (We can provide a programme on request but this is commercially confidential and so would be subject to disclosure restrictions.) Development work commences typically 2 years prior to that. When coupled with the proposed 5 year review period (see later), this means that projects would commence development facing uncertainty as to the level of RHI support that they would receive.

Gaia Power believes that the appropriate time to seek and receive accreditation under both the RO and the RHI would be the receipt of planning permission (or Section 36 consent for larger projects). This would enable projects to proceed with their remaining contractual commitments and investment appraisal with certainty as to the level of remuneration they would eventually receive. An alternative would be “financial close” for limited recourse debt funded projects, or (where other funding sources are used) the date on which Notice To Proceed is issued under construction contract(s) covering the majority of capital cost required.

If the RHI continues to use the start of operation as the relevant date for seeking full accreditation then this perpetuates the already unsatisfactory situation with the RO.


Yes with proviso

We agree with the focus on established technologies. We support metering of heat at an industrial scale.

With regard to CHP, we note the proposed approach to RHI eligibility of useful heat and support this for future projects conceived and developed after the issue of this consultation. However in the light of the delays imposed on us through the lack of clarity on grandfathering of biomass for ROCs we believe that those CHP projects like ours, with finalised designs prior to the release of the RHI consultation document (as demonstrated through existing certification as CHPQA), should be entitled to the number of ROCs under the banding for their technology at the time that CHPQA certification was first achieved. They should not be forced to be subject to the deadline of April 2013 before becoming compulsorily within the RHI rather than having the option of ROC uplift.

AgreeQuestion: Q07

No

We believe that all biomass burning plants should be subject to the same emissions standards. Allowing smaller plants to have more relaxed standards creates an uneven playing field and is logically hard to justify. If a level of emissions is deemed unacceptable for human health or the wider ecological environment then it should not be allowed at any level of output. If it is acceptable at smaller sizes then it raises the question why more onerous obligations are placed on larger plants.

Therefore we believe that manufacturers of smaller biomass boilers should be forced to develop their technologies such that their emissions do comply with environmental legislation. We would assume that the emissions would be released at levels closer to the ground and therefore would have greater proportionate effect in the immediate locality. Further small installations would not be required to undertake dispersion modelling and would not be subject to the same ongoing onerous emissions monitoring as is applied to larger plants. Hence we believe the “precautionary principle” should be adopted. The approach proposed appears to create a dangerous precedent by allowing the air quality of the local environment to be sacrificed unnecessarily, given that larger scale plants are able to achieve the tighter emissions standards already.

This is particularly important given the potential lack of requirement to obtain planning permission (p36) which therefore removes a potential safety check on the environmental aspects of installations.


22 June 2010 Page 1344 of 1348

Comments:Although not directly relevant to Gaia Power’s business, we would comment on the very existence of this question as it seems to indicate a level of “micro management” of outcomes which we view as unhelpful. We find it hard to conceive why builders would deliberately pursue lower standards of energy efficiency simply to increase entitlement to the RHI. Existing regulations such as the Energy Performance Certificate require sellers of houses to benchmark their houses against an objective standard (as stated on p44). Would purchasers be willing to buy houses with a lower standard of insulation, exposing them to higher future energy bills, on the basis that they would receive a higher entitlement to RHI income in future?If existing building standards are not adequate then they should be changed as a matter of urgency anyway regardless of the primary fuel used for heating. If building standards are deemed satisfactory then the choice of fuel and its associated entitlement to RHI should be made on its merits by developers, builders and purchaser demand.“Let not the best be the enemy of the good”. A scheme may not be perfect, but the legal obligations imposed by the EU Renewable Energy Directive are extremely challenging. The RHI should be as simple as possible and not seek to close every potential loophole by imposing increased administration or investment or standards on certain types of application whilst leaving others with more lenient obligations.

Question: Q11

YesWe agree with the proposals on heat metering for larger scale schemes, subject to the comments in Q14 below.

AgreeQuestion: Q12

Q14: Do you agree that at the large scale/in process heating, where we propose metering, the risk of metering resulting in a perverse incentive to overgenerate is low? Yes

Do you see any practical difficulties concerning use of heat meters (such as on availability, reliability or cost of heat meters)? No

The RHI provides additional revenue to compensate for the additional cost of using renewable rather than fossil fuel. Our calculations, based on our assessment of fuel costs for biomass, show the RHI will not cover the full cost and there will still be a need for a contribution from the consumer towards energy used. Therefore provided the RHI level remains above the marginal cost of fuel there remains an incentive overall to reduce energy use in order to reduce cost.

The RO biomass grandfathering consultation being run concurrently with this RHI consultation contemplates a two component ROC scheme, where a “fuel ROC” and a “capital ROC” add together to provide the renewable energy support. Adopting this principle for the RHI would be analogous to a traditional power purchase agreement for independent power producers, which has a capacity charge paid on availability and an energy charge based on actual production. In this structure part of the RHI would be paid regardless of energy use, to compensate for the additional capital cost incurred through installing renewable rather than fossil based energy production equipment. The remaining part would be paid only on metered energy, to compensate for the additional cost of renewable fuel compared with the fossil fuel alternative.

We do not think that this additional complexity is appropriate – for the same reasons that we believe it to be inappropriate within the RO. For example one problem this creates is setting the appropriate split between the fixed and variable elements, which may be (and in future move in ways which are) materially different for the alternative fuels and technologies.

We believe that existing metering technology for water and steam is adequate at an industrial and commercial scale, as is demonstrated by it being used for existing commercial agreements in many existing fossil fuelled CHP schemes. We would strongly urge that any adopted metering standards should only apply for new installations from that point forward and existing metering installations should be grandfathered for a reasonable period i.e. where a heat meter is fitted that is accepted as giving sufficiently accurate readings at the time of its installation there should not be an obligation to upgrade the meter before the end of its useful life were an improved technology or accuracy of metering to be developed subsequently.

Question: Q14

22 June 2010 Page 1345 of 1348

Comments:Our comments relate solely to the level of incentive for large scale solid biomass (i.e. 500kW and above) which is shown in a scale of 1.6-2.5p/kWh.

Note 2 (p48) states that tariffs have been rounded to the nearest half pence, yet this range is quoted to a degree of accuracy of 0.1p/kWh. We believe such accuracy to be spurious, as is self evident from the use of a range rather than a single value.

As a developer of a CHP plant using biomass we broadly support the response of the REA to this question. The level of support offered under the RHI does not provide equivalent remuneration to that provided under the RO uplift except at relatively high heat to power ratios. In developing a 50MW electrical output project we have sought to optimise between the economies of scale of a larger plant (both in lower capital cost per kW and in higher thermal efficiency) and the logistics of fuel supply. A key element in the attractiveness of our project as an investment is its extra 0.5 ROC entitlement which it gains as a consequence of being GQCHP.

As energy in the form of electricity is more valuable than energy in the form of heat, we could see the sense in encouraging the maximum production of power from each unit of primary energy. The GQCHP scheme parameters set the overall power and heat outputs which needed to be achieved to obtain the 0.5 ROC uplift.

We would not have chosen to develop the project without the existence this level of revenue, as we would have assessed its profitability to have been inadequate given the other cost and revenue parameters. Our project was conceived and has been optimised to meet the constraints and opportunities of the renewable incentive mechanism as defined in the 2009 RO Order. We gained confidence from the statements on grandfathering of the 0.5 ROC uplift even after the introduction of the RHI, and hence are dependent on that revenue regime being applied to our project for it to proceed.

In order to achieve a higher heat to power ratio (and so achieve the same level of revenue per unit of fuel from the RHI as we will do under the RO) we would have needed to reduce the size of the plant, but this would have led to a higher capital cost per kW of installed capacity and so made the project profitability unattractive to investors. We also note that the RHI is available for only 15 years, whereas the RO duration is 20 years. This further reduces the attractiveness of the RHI as an alternative biomass to energy support mechanism for CHP. (We do not have design or performance information on biomass only boilers, so cannot comment on the statement made in Note 4 (p48) about the relative tariff requirements for biomass only boilers compared with CHP.)

Not only do we therefore consider the level of RHI proposed for this category insufficient for us to consider development of projects similar to the Gaia Power Tees Valley project – without the continuation of the entitlement to 2 ROCs the Tees Valley project itself will be put at grave risk and be very unlikely to proceed. We would be happy to meet with officials in DECC/ORED and share our experience with them and discuss the issues we face but are subject to commercial confidentiality restrictions in placing data within the public domain via this consultation response.

As noted in answer to Q7, we face an increasingly big risk of not being able to achieve operation and hence accreditation for the 0.5 ROC uplift by the proposed cut off date of April 2013. This position has arisen primarily because of the delay created by the regulatory uncertainty surrounding the treatment of biomass under the grandfathering provisions in the ROO 2009. We suggest that the criterion for entitlement to the option should be the existence of CHPQA certification for a scheme. This demonstrates that a substantial degree of design work has been performed on a specific scheme and that it is therefore at a more advanced stage of development than simply having planning permission.

The minimisation of costs to consumers is a worthy aim which we support – as individuals we are also consumers of energy ourselves. Unfortunately this desire, i.e. to ensure that an occurrence of a “super profit” for a project can be prevented on future projects by changes to regulations, creates uncertainty. Such regulatory change cannot be forecasted in either magnitude or timing. Investors fear uncertainty and adjust for it either by raising their rate of return criteria or refusing to invest at all. Paradoxically this therefore raises the cost of capital for investment in UK renewable energy projects as the pool of potential investors is reduced and remaining investors demand a premium for taking the regulatory risk.

Experience will show whether the proposed tariffs bring forward the desired level of renewable heat schemes or not. This is better than any theoretical analysis. Given the overall challenge of substantially decarbonising the UK economy by 2050 It is hard to see there being a surplus of renewable energy capacity – all that will happen is targets will be achieved early – and this will be the result if an RHI tariff is inadvertently set higher than the target theoretically requires. By contrast a lower than required tariff will see the UK falling behind in its achievement of renewable energy investment with the loss of all the employment opportunities as well as environmental cost that would bring. Therefore we believe that erring on the high side when setting tariffs is preferable even if this brings slightly higher short term costs to consumers. We think the overall benefit to the economy and environment over the long term justifies this approach.

Finally we believe the proposal made by the REA – which allows GQCHP schemes achieving the CHPQA level to earn the RHI on additional useful heat supplied above the GQCHP baseline – to be worth serious consideration as a way of providing the incentive of maximising the supply of useful heat from a GQCHP scheme. CHP schemes are bespoke and their design and resulting operation and investment economics typically depend on the characteristics of the heat load. With respect to our Tees Valley project the implementation of this proposal would enable us to offer more attractive terms to potential adjacent heat loads than we can currently, and so likely to lead to increased offtake of renewable heat from our project displacing their fossil fuel generated heat.

Question: Q15

22 June 2010 Page 1346 of 1348

No

Our response is covered partially in answer to Q15.

For large scale biomass we believe a 20 year RHI term is appropriate to match that of the RO. We do not think the level proposed for large scale biomass is sufficient and would not be pursuing development of similar projects if this level were implemented. We note the REA has commissioned analysis to support a level of 4.1p/kWh for biomass CHP and believe this to be a more reasonable level.

The target rate of return varies for different investors, but as we describe it is most affected by the perceived risk of an investment. The greater the certainty the lower the rate of return required by an investor. The lack of clarity in regulatory policy and its interpretation that we have experienced (as Gaia Power) during the years that we have been developing our project have led to us viewing the sector as relatively high risk. The difficulties we have experienced in attracting finance, owing to this risk factor alone, affect not only the willingness of our target investors to commit to fund the capital required but also will affect our willingness to consider attempting to develop further projects in the UK and the rate of return that we will seek to see from those projects.

If renewable energy projects of whatever scale or technology are actually being built at a rate that exceeds the targets set then it follows that the incentive arrangements are overly attractive or ill-structured. To date the UK has not achieved its renewable energy production targets for electricity by a substantial margin. Banding of the RO has led to a significant increase in development activity for renewable power, but the ongoing uncertainty for biomass specifically has hindered almost all these projects actually proceeding into construction and operation. This suggests that the level of incentive is broadly right, but the risk attached to it actually being paid is perceived as unacceptably high and this has stopped actual investment being committed.

Question: Q18

We broadly support the position of the REA on this issue.

Question: Q19

No

We believe that an uplift for district heating distorts the decision making over the appropriate application for biomass to heat. If a single tariff is proposed for a specific fuel then the application which offers the lowest cost of converting that fuel to useful energy will utilise the fuel. This achieves the lowest cost to consumers.

District heating remains a “holy grail” within the UK. Its economics are compromised simply because the UK is not consistently cold enough for long enough. The fixed cost of the infrastructure has to be amortised across a comparatively small number of hours of supply. We therefore do not consider that district heating should be given additional incentives as there are typically more economic ways of supplying peak heat energy.


This question does not arise if district heating is not treated as a special case.

Question: Q21

Yes to both parts

Comments:We are in complete agreement with the theses proposed on p56 and p57 of the consultation document.•we agree that there is currently no reliable price index that covers ALL biomass satisfactorily; indeed, given the variety of types of biomass and their sources we believe there would never be one single index•we agree that investor uncertainty would increase if the support were allowed to fluctuate in any subjective way, and this would lead to a perception of higher risk with a consequent premium attached to target investment rates of return•investors in energy assets are experienced in assessing the supply/demand balance and other costs and risks associated with energy markets, and are able to take decisions based on this analysis. At an industrial scale this exercise can be carried out on biomass fuels as readily as on the historic fossil fuels; however this requires a stable regulatory framework with any changes to the level of support able to be forecasted with confidence•the different treatment of biomass is subject to a concurrent consultation. As Gaia Power we had a totally different interpretation of the statements made by Government on grandfathering biomass. We believe that a fixed level of subsidy which is grandfathered presents a future within which commercial and financing arrangements can be entered into to provide the requisite level of investment certainty. We would therefore support a fixed level of subsidy which is grandfathered for biomass as for other renewable heat technologies.

Question: Q22

Yes

AgreeQuestion: Q23

YesEnhanced support for new technologies can be provided via capital grants and this may be preferable rather than requiring investors to take long term investment performance risk on an unproven technology.

AgreeQuestion: Q24

22 June 2010 Page 1347 of 1348

We believe that simple capitalist drivers of maximising profit and minimising cost will naturally drive towards lower cost and higher performance.

Question: Q25

No

Reviews create uncertainty. A reduction in the frequency of reviews would therefore be welcome. Once underway they should be concluded as rapidly as possible. This may well conflict with the desire to consult and to obtain the widest possible evidence base.

Gaia Power is already experiencing the impact of uncertainty created by the forthcoming RO banding review. There is a risk that both the banding allocation of biomass could be changed and that the number of ROCs allocated to that banding could be changed. As identified in answer to Q3 above, the construction time for a project such as Gaia Power Tees Valley is around 3 years, with development time in advance of that typically 2 years. The risk of a detrimental outcome from a banding review five years away effectively rules out the development of similar sized projects, and leaves the market open to projects which can be constructed in a shorter time even though these may not make as efficient use of the renewable energy.

It is thus essential that some way is provided for projects to secure an entitlement to a level of support at an early stage, provided they achieve “financial close” within a certain timescale. This provides developers (and particularly small, independent developers rather than major utility companies) with sufficient confidence to take the remaining development risks, in the certainty that once fully developed a revenue stream of a certain level will be available. Failure to meet the development timescale would place the project at risk of revenue changes, but this provides a spur to reduce development time and encourages development at sites which are most suitable.

Once “financial close” is reached (i.e. binding contracts to construct the plant are entered into) then the level of support must be guaranteed, regardless of how long the plant takes to construct. Without this assurance it will become difficult to convince investors that the downside risk of losing necessary revenue support is acceptably small.

If there is the ability to hold an emergency review then we would suggest that no review is held until 2018 and the experience of the scheme is allowed to determine the timing and scope of reviews in the interim.


As stated in answer to Q26 above, reviews create uncertainty. We would suggest that the trigger for a review should be the capacity actually built (or unequivocally committed) as against the target. Over or under achievement of the target by a set amount should trigger the review.

The breadth of application of the RHI in both technologies and scale/size of projects make it almost impossible to set absolute criteria on different identified parameters for triggering a review.

Finally, the outcome of any such review should be forward-looking rather than seeking to implement changes to capacity that has already been developed or is under construction.

Question: Q27

22 June 2010 Page 1348 of 1348

677 EAGA Eaga – Background Eaga welcomes the opportunity to respond to this Department of Energy and Climate Change Renewable Heat Incentive Consultation on the proposed RHI financial support scheme. We believe that the programme is ground-breaking and offers the opportunity for the UK to lead in this field and thereby attract significant industrial and manufacturing interest. In order to put our comments into context, it may be helpful to outline briefly our role in the provision of services across the UK and Ireland. Eaga is the largest provider of residential energy efficiency solutions in the UK; we are a co-owned business working for Department of Energy and Climate Change and the Welsh Assembly Government., we also have experience of managing the Warm Homes initiative in Northern Ireland and the Central Heating and Warm Deal programme in Scotland. We also worked closely with Utilities and Local Authorities in managing the delivery of energy efficiency programmes throughout the UK for the past twenty years. Since our establishment in 1990, we have grown considerably and now employ more than 4,500 Partners, the vast majority of whom are involved in our energy efficiency work. As well as our energy efficiency work, we are committed to helping the environment and combating climate change. Eaga Renewables provide renewable energy solutions to private housing, specifically through the installation of solar thermal panels. We carry out work in the private sector, both with private-funded work and public-funded work. For further information on eaga and our work across all sectors, please visit www.eaga.com.

Q1: Are there any issues relevant to the design or operation of the RHI that are not addressed in this consultation document? If so, how should we deal with them?

Yes.

Comments:

The consultation covers most of the areas of relevance for the RHI proposal. However Eaga believes that greater clarity on the proposed process of operation would be useful. We note that the recent feed-in tariff approach did not provide this detail until relatively late in the process and there was a risk that the programme could have been compromised. To avoid such risks, it would be helpful to consider implementation issues at an early stage in the RHI programme.

Q2: Do you see any barriers to such financing schemes coming forward? In particular, are there any limitations in leasing and finance legislation that you feel inappropriately restrict the development of RHI financing models?

Potentially.

Comments:

Industry experience to date suggests that households are doubtful of the cost reduction benefits of technologies and so a financed solution will be important to allow take up at the domestic level.

http://www.eaga.com/

However for this to be successful, it is important that the tax and property treatments of such investments are determined carefully in advance. Otherwise there is a risk that due to the intricacies of property and tax law, planned investments may not be able to proceed.

Q3: Do you agree with our proposed RHI registration and payment approach? If not, can you suggest how this approach can be improved?

Yes. The proposed approach appears reasonable.

Q4: Do you agree with our approach of requiring products and installers for installations up to 45kW within RHI to be accredited under MCS or equivalent?

Yes

Comments:

Having worked with households on low incomes and in fuel poverty for two decades in addition to pioneering the installation of renewable technologies over recent years, Eaga would stress that the reassurance and certainty provided by using properly accredited installers is invaluable in building public confidence in installations delivered.

Q5: Where MCS product and installer certification is extended beyond this limit, do you agree that we should introduce the requirement of using certified installers and equipment for eligibility for the RHI?

Yes.

Q10: Do you think the RHI should be structured to encourage energy efficiency through the tariff structure (in particular the use of deeming), or, additionally, require householders to install minimum energy efficiency standards as a condition for benefiting from RHI support?

Eaga believes that a minimum standard should apply with deeming used to reward more expensive works.

Comments:

Eaga believes that there is a risk of renewable heat technology being installed on non-energy efficient buildings. Therefore it is important for a minimum standard of energy efficiency measures to be required. For example this should cover loft and cavity wall insulation where possible.

Using the deeming process, Eaga believes incentives should be created to encourage householders to invest in more expensive measures such as solid wall insulation.

By doing so, the RHI programme will support any Green Deal funds and thereby accelerate a change in householder behaviour.

Q11: Can you provide suggestions for how to ensure that developers do not build to lower energy efficiency standards as a result of the RHI in advance of 2013 and 2016 building regulations taking effect?

A requirement on minimum standards to qualify under RHI may offer a suitable route.

Q12: Do you agree with our proposals on where we should meter and where we should deem to determine an installation’s entitlement to RHI compensation?

Yes.

Comments:

Eaga supports the proposal to use deemed measures for smaller scale installations; a requirement for accurate metering without a legal requirement and standard (in addition to the industry standard) for heat meters would be likely to act as a deterrent.

However we have concerns regarding how deeming will be implemented across England and how it will recognise the differences between, for example, the North West and South East in terms of their climactic impacts on the technologies installed.

Q13: Do you agree that a process based on SAP or SBEM for existing buildings or the Energy Performance Certificate for new buildings is the best way of implementing deeming? Do you have any suggestions on the details of how this assessment process should work?

Potentially.

Comments:

The difficulty with using SAP for domestic installations is that it does not allow for the minimum standard approach and deeming incentives suggested earlier. Instead Eaga would prefer a simpler process that checked the potential to install basic and then more advanced energy efficiency measures.

Q18: Do you agree with the proposed approach to setting the RHI tariffs, including tariff structure and rates of return? Do you agree with the resulting tariff levels and lifetimes? If not, what alternatives would you prefer, and on the basis of what evidence?

Yes, though see below.

Comments:

As noted earlier, Eaga suggests there is value in setting the deeming levels to encourage households to install more expensive energy efficiency measures. This is important in the context of achieving the overall carbon targets for the UK.

Q20: Do you believe that we should provide an uplift for renewable district heating?

Yes where it is proven that the system does use biomass or such like. Eaga is concerned that many district heating schemes may be reliant on conventional gas-fired boilers to a larger extent than was expected.

Q21: Do you believe that an uplift should be available to all eligible district heating networks, or that eligibility should be determined on a case-by-case basis depending on whether a network contributes to the objective of connecting hard-to-treat properties (and, if the latter, how should we determine this for each case)? Do you agree that situations of one or a small number of large external heat users should not be eligible for an uplift, and, if so, what should be the minimum eligibility requirement for an uplift (expressed for instance as a minimum number of external customers)?

Comments:

Eaga would favour the case by case approach to ensure value for money, and to ensure that the uplift is used as an incentive to make improvements on hard to treat homes.

Q22: Do you agree that RHI tariffs should be fully fixed (other than to correct for inflation) for the duration of any project’s entitlement to RHI support? Do you agree that we should include bio-energy tariffs, including the fuel part of those tariffs, in such a grandfathering commitment?

Yes.

Comments:

To allow for financed solutions, it is important that tariffs are not subject to change. Without this commitment, it would be difficult to meet the risk criteria set by lenders.

Q23: Do you agree with our proposal not to introduce degression from the outset of the scheme but consider the case at the first review?

Yes. This is important to allow time for projects to be prepared and the necessary approvals obtained. By nature, this is likely to take some time to achieve.

Q28: Do you agree with our proposed approach to allow access to RHI support to new projects where installation completed after 15 July 2009, but not before? Do you have any evidence showing that in particular situations RHI support for installations existing before this date would be needed and justifiable?

Eaga is aware of concerns that those who have pioneered in the installation of renewable heat technologies in their homes are likely to feel aggrieved at being ineligible for the RHI, in the same way that those who have found themselves ineligible for FIT have raised these concerns. It would appear reasonable to suggest that these installations be eligible for some form of incentive as they were installed by those most likely to continue greening their homes in future, and would note that there have been suggestions that those homes with such installations could have them ‘removed’ and ‘replaced’ to become eligible for the RHI.

However, we agree that as an incentive the RHI must be forward looking and an effective use of funds, and would support the proposed cut-off date.

678 Dave Howarth Q1: Are there any issues relevant to the design or operation of the RHI that are not addressed in this consultation document? If so, how should we deal with them? Yes Comments: The major problem with the RHI consultation is the timetable. The consultation document is explicitly still at an explorative, formative stage and yet the limited time for responses preclude fully developed responses to such a broad range of possibilities. Further it is not possible to respond now to the specific measures that will be brought into force, since we don't yet know what they are. So another round of consultation is essential once the measures are more well identified. The main issue with the RHI itself is that it addresses the wrong problem. The major, related problems are to reduce the quantity of carbon dioxide and other greenhouse gases generated by people and to reduce the quantity of energy consumed by people. Providing an incentive to consume more energy is a perverse way to address both these problems. Designing that incentive to reward the production of carbon dioxide in some cases is even more unhelpful (coal and gas fired grid electricity powers heat pumps and organic materials are burnt in biomass systems). Using indirect measures like the RHI instead of addressing the problems at source causes many edge cases and other difficulties where inequity arises. There are also significant problems in this proposal with the ways all the technologies are treated and these need to be resolved before sensible comparisons can be made. As well, there are major questions of social policy in the financial scheme and in issues such as deeming. These policies need to be decided before detailed schemes can be prepared using their guidance. I personally believe that social policy is best implemented by social policy legislation rather than scattered widely through other unrelated legislation such as this. However, I have pointed out some cases where issues are obvious. One of the main obstacles to the uptake of the RHI will be the planning system. The government should remove planning restrictions on the installation of such equipment - for example it should not allow local councils to remove GPD rights for such equipment or to refuse planning permission where there is no reasonable and economical alternative way to install the equipment. The document does not offer questions on all sections, so I must interject responses where necessary. Here are the first: Not all solar thermal systems use a liquid heat transfer medium. Some use air and it is possible to use solids or other gases. Similarly, some systems use solid heat stores such as the fabric of the building. Such devices should not be excluded from the RHI by loose wording such as that on page 11. The summary of CHP systems is likely to mislead readers since it makes it appear that a CHP system is an electricity-generating station that produces heat as a byproduct. In reality, CHP systems are heat-producing stations that generate electricity as a by-product. It is the need for heat that determines the power generated from the system at all times, perhaps slightly modified by a heat buffer store. There are problems with subsidising the use of biomass as a fuel. Biomass requires land on which it is grown. Other uses for the land & crops that should be preferred instead include: - food and drink for humans and animals - animal bedding - construction materials for buildings (poles, beams, sheets, blocks, fibre reinforcement, insulation etc) - decorative materials (cloths, mats, etc)

- conversion to chemical products - conversion to transport fuel Such uses are beneficial in that they either have a higher intrinsic worth (food, chemicals, transport fuels) or they preserve the biomaterial and sequester the carbon they contain (other uses) Also, high temperatures are reached when things are burnt. These temperatures should be used for processing or electricity generation prior to the use of the heat (i.e. maximise the benefit derived from the exergy). In a subsidy-based regime, heating systems that do not do this should receive less subsidy than systems that do. So basically, burning things is a poor option and should not be subsidised unless all other applications for the material are also subsidised. i.e. in the case of biomaterials, the growing should be subsidised. This is not usually a sensible option. Biomass illustrates again that the RHI is aiming at the wrong target. We should be aiming to reduce energy use, not paying to increase it. A carbon tax is one appropriate incentive to reduce carbon production, and 100% rebate of that tax is the best way to prevent undesirable side-effects on the economy. Electrically-powered heat production is a bad idea until the electricity grid has been substantially 'decarbonised'. Electrically-powered heat production increases the demand for electricity, except in the case it replaces resistive electric heat production. This exacerbates the very significant problems we face in keeping the grid able to sustain supply over the next decade, and is also likely to increase the carbon emissions of the grid. So electrically-powered heat-production should not be encouraged at this time. Q2: Do you see any barriers to such financing schemes coming forward? In particular, are there any limitations in leasing and finance legislation that you feel inappropriately restrict the development of RHI financing models? No Comments: The proposed model still makes it more difficult for those with less capital to access the RHI since they need to 'jump through more hoops' than those who already have capital. Q3: Do you agree with our proposed RHI registration and payment approach? If not, can you suggest how this approach can be improved? No Comments: MCS is a blunt instrument. It prevents DIY installations, even where certified by qualified persons. It essentially duplicates the installer certification already in place for certified schemes, such as electricians and plumbers, significantly increasing costs with no benefit to safety. Furthermore, there is no evidence that MCS provides better quality installations or causes better business practices in MCS-registered firms than in other firms. For example, the top two firms highlighted for poor service and possible illegal activity by 'Which' magazine were both MCS-registered. (http://www.which.co.uk/news/2010/04/ solar-panel-sellers-slammed-in-which-probe-212256) I believe a better system would allow installations to be certified by an independent inspector, however they were installed. It would further either disallow selfcertification by registered installers or require annual random audits of all selfcertified systems. Ways should also be found to allow the reuse of equipment. Forcing the use of new

equipment increases the carbon footprint of systems as well as the cost. Q4: Do you agree with our approach of requiring products and installers for installations up to 45kW within RHI to be accredited under MCS or equivalent? No Comments: Please see my answer to question 3 Q5: Where MCS product and installer certification is extended beyond this limit, do you agree that we should introduce the requirement of using certified installers and equipment for eligibility for the RHI? No Comments: Please see my answer to question 3 Q6: Can you provide details of any UK or European standards that should count as equivalent to MCS? How should we recognise these standards for the RHI? Comments: Installations should comply with relevant safety legislation and regulations. There should not be additional obstacles to free trade. Equipment should comply with relevant safety legislation and, unless metered, its performance should be certified by independent testing (as installed or by using tested components in a tested design, confirmed by random auditing of installed systems) Q7: Do you agree with our proposed approach to eligibility of energy sources, technologies and sites? No Comments: As already stated, it should be possible to reuse equipment rather than install completely new equipment on every system, to reduce carbon footprint and to drive down costs. It will also lead to more local jobs. Heat pump output is subject to a number of variables, depending on the system design, the installation and the conditions under which it is operated. They consume a carbon-intensive fuel (grid electricity) so it is important that they achieve the designed performance. The control systems for heat pumps measure the variables that control the performance. The RHI should be paid only where heat pumps are fitted with a sealed logging device that records such information and only to the extent that such device confirms the actual performance. Q8: Do you agree with our proposed approach on bioliquids? Are you aware of bioliquids other than FAME that could be used in converted domestic heating oil boilers? If so, should we make them eligible for RHI support, and how could we assess the renewable proportion of such fuels to ensure RHI is only paid for the renewable content of fuels? No, No Comments: Existing oil boilers are likely to be inefficient. Converting them to renewable fuel will not be sufficient. They should be replaced by efficient condensing units. Q10: Do you think the RHI should be structured to encourage energy efficiency through the tariff structure (in particular the use of deeming), or, additionally, require householders to install minimum energy efficiency standards as a condition for benefiting from RHI support?

No but ... Comments: This is the most difficult area of the entire proposal. The document states that "Conserving heat (e.g. insulation) will be the first and often most cost-effective step in the control of energy demand". But the RHI will cause additional capital to be allocated towards heat generation instead of heat saving (e.g. heat pumps instead of insulation). This is particularly the case for the existing housing stock and so will increase carbon emissions. This is a fundamental problem with the whole approach proposed. We should instead be seeking to incentivise people to reduce energy consumption in whatever form it is used. Certainly RHI must require energy efficiency standards to be met as a precondition. The proposed minimum level of energy efficiency is a ridiculously low level of insulation - 270 mm should be the absolute minimum for loft insulation. Properties that are not suitable for cavity insulation should be required to have a similar standard of insulation (and planning rules should be changed so this is always possible via external insulation where physically practicable) The proposals about deeming are not clear. The document states that “Anyone who had already installed or exceeded the minimum standard of insulation would not lose out under our proposed approach” but the proposed approach involves a SAP evaluation that would cause a lower deemed basis. Q11: Can you provide suggestions for how to ensure that developers do not build to lower energy efficiency standards as a result of the RHI in advance of 2013 and 2016 building regulations taking effect? Comments: A fundamental rewrite of the RHI proposal. No question is asked about the section on Planning permission: While I agree that RHI eligibility should not be conditional on planning, I believe RHI should require planning authorities to always grant permitted rights for the installation of RHI-eligible equipment. Q12: Do you agree with our proposals on where we should meter and where we should deem to determine an installation’s entitlement to RHI compensation? No Comments: As well as answering no to this question, I must record my strong objection here to the biased nature of the questions in the document. The questions concentrate on very specific topics while excluding any consultation on the other major subjects covered in this chapter. This must be remedied by more explicit questions in a subsequent review. In particular, I question the step-changes in tariffs. Tariffs should be continuous and smooth, such that there are no especially good or bad configurations. I also question the different rate of return used for solar thermal systems. Heat pumps are at least as well-developed a technology as solar thermal since they are in widespread usage worldwide and are derived from refrigeration and airconditioning technology that is long established. So it seems perverse that heat pumps receive a rate of return that is double that for solar thermal. Unless and until the national grid is substantially 'carbon free', heat generated using mains electricity generates substantial carbon emissions. It is perverse to incentivise such equipment while gas boilers (LPG-fuelled where necessary) offer an established, simpler and cheaper alternative. Q13: Do you agree that a process based on SAP or SBEM for existing buildings or the Energy Performance Certificate for new buildings is the best

way of implementing deeming? Do you have any suggestions on the details of how this assessment process should work? No Comments: (1) No, I don't agree, SAP is deeply flawed. In addition the practical process must be improved such that faulty analysis (typically based on incomplete or erroneous assumptions about the structure) are easy to resolve at minimal cost to the householder (2) No, I don't agree, EPCs are deeply flawed - especially as practised as opposed to theory (3) For houses to which it is applicable, PHPP is a better choice and has already been extensively field-tested on the continent. (4) Deeming will reward poorly built houses and in particular will penalise people who build better-performing houses. It will thereby cause fewer such houses to be built. (5) (p44) The method used for deeming must take account of the different possible goals of systems such as solar thermal such as: a fraction of annual DHW demand, 100% of DHW demand, a fraction of space heating, 100% of space heting, 100% of DHW and space heating. This is likely to cause major practical difficulties where assessors are not sufficiently experienced. (6) Deeming will also give unfair rewards to people living in large houses (witness Annex 2 - 3-bed flat 8914 kWh, 2-bed detached of same area 24861 kWh). Incentives should also be limited by floor area per person. Annex2 (7) The proposed numbers in Annex2 imply that poorer-performing houses (e.g. solid wall) will receive greater income than better-performing houses. This leads to a perverse incentive to fit RHI-eligible equipment to poorer performing houses instead of insulating them, since the gains are greater. This is a bad policy unless/until it is combined with a policy to ensure the existing building stock is retrofitted to the same standard of insulation. (8) 150 mm of loft insulation is not 'reasonable'; it is only half that required by current building regs, which themselves will be made stricter. What is the reason not to require compliance with current building regs in this area? Q14: Do you agree that at the large scale/in process heating, where we propose metering, the risk of metering resulting in a perverse incentive to overgenerate is low? How could we reduce it further within the constraints of using metering, to ensure only useful heat is compensated? Do you see any practical difficulties concerning use of heat meters (such as on availability, reliability or cost of heat meters) and, if so, how should we address them? No Comments: Any financial incentive will drive people to find ways to maximise it Q18: Do you agree with the proposed approach to setting the RHI tariffs, including tariff structure and rates of return? Do you agree with the resulting tariff levels and lifetimes? If not, what alternatives would you prefer, and on the basis of what evidence? No Comments: I don't agree that the installer should determine what proportion of heat is provided by what mechanisms. Such a choice should be up to the owner and their advisers, who may well be different to the installer. The installer is simply a contractor who implements a given design. Of course, the roles may also be combined in some cases. (I also find it implausible that a house without loft and cavity insulation would only

save 1,300 kWh annually by fitting both!) I don't agree that solar thermal should receive a lower rate of return than all other Technologies Q20: Do you believe that we should provide an uplift for renewable district heating? Yes but ... Comments: see answer to Q21 Q21: Do you believe that an uplift should be available to all eligible district heating networks, or that eligibility should be determined on a case-by-case basis depending on whether a network contributes to the objective of connecting hard-to-treat properties (and, if the latter, how should we determine this for each case)? Do you agree that situations of one or a small number of large external heat users should not be eligible for an uplift, and, if so, what should be the minimum eligibility requirement for an uplift (expressed for instance as a minimum number of external customers)? It should be open to all systems. Comments: It seems to me more sensible to provide specific support for the building of district heat networks, if these are thought to be beneficial. If such support is supposed to be included within the electricity and heat-generation incentives, it will be more economic to NOT build the district heat network but still claim the incentives, thus leading to slower growth of district heating. The effectiveness of district heating is already proven in countries such as Denmark. Q22: Do you agree that RHI tariffs should be fully fixed (other than to correct for inflation) for the duration of any project’s entitlement to RHI support? Do you agree that we should include bio-energy tariffs, including the fuel part of those tariffs, in such a grandfathering commitment? Yes Comments: Yes I agree and yes I agree that biofuels should be included. This removes incentives to arbitrage. Q23: Do you agree with our proposal not to introduce degression from the outset of the scheme but consider the case at the first review? Yes Q24: Do you agree with our proposed approach on innovative and emerging technologies? No but ... Comments: I agree with the principles stated but the way MCS certification of installers and most especially of equipment is required strongly conflict with these principles. Requiring expensive type-certification of products is not a good way to encourage innovation; it is rather a strong incentive to continue with existing unchanged products. Q25: Do you have any views on how we should encourage technology cost reductions through the RHI, particularly on solar thermal heat? Comments: Encouraging more freedom of choice of solar thermal equipment and installers (including DIY) is the best way to reduce costs. Q28: Do you agree with our proposed approach to allow access to RHI support to new projects where installation completed after 15 July 2009, but not

before? Do you have any evidence showing that in particular situations RHI support for installations existing before this date would be needed and justifiable? No Comments: I disagree. Early adopters should not be treated less well than later participants who seek only financial reward. Otherwise the message is that the government discourages innovation and rewards cynical self-interest.

679 Scottish Power Ltd & Scottish Power Renewable Energy Ltd We welcome the publication of the RHI consultation as an opportunity to consider how renewable heat can play an important role in addressing the UK’s stringent renewable energy and CO

2 reduction targets.

Because of the significant costs of the programme in difficult economic times, we think that it will be important to focus resources on the most cost effective options that can deliver in significant volume. In the domestic sector, these are likely to be mainly air or ground sourced heat pumps, while on the commercial side there are a variety of mid scale applications that look promising. We think that degression or other mechanisms are needed to constrain the risk of solar thermal heat failing to be cost effective. We would also draw the following points to your attention: ��Timing – We have some doubts as to the feasibility of an April 2011 introduction, given

that a lot of work remains to be done on the design of the RHI and the necessary systems and processes required to ensure the scheme operates effectively. In our view, an interim sub-optimal solution has the ability to quickly destroy the scheme’s credibility and ultimately hinder the ability to meet the renewable heat target. We urge Government to consider moving the timing of its introduction to later in the year or possibly April 2012 in order to ensure that the scheme is properly thought through, thereby ensuring initial success as well as a sustained growth in take-up.

��Funding the RHI – Given the very clear pressures on public spending, we think that identifying the funding source is critical to the development and ultimate success of the scheme. We ask that Government is transparent about the cost of this programme to consumers so as to secure acceptance from those who will ultimately bear the cost. It will be particularly important to consider how the cost of the scheme is attributed between industrial and domestic consumers, having regard to impacts on both competitiveness and fuel poverty, and the fact that there will be both domestic and commercial installations undertaken.

��Scheme Administration/Role of Ofgem – A robust payment process capable of dealing with potentially complex billing requirements and a customer service function with experience in handling inquiries, queries and disputes and providing high quality customer care will be vital to the success of the RHI. We support Ofgem’s intention to investigate the potential benefits of tendering for an appropriately experienced organisation (or organisations) to design, build and operate the payment system. We ask that the necessary time is taken to ensure that this system is fit for purpose. We are keen to work with Ofgem and share our experience in this area.

��Assignment – Critical to accessing lower cost funding and facilitating wider market participation and the necessary uptake, is the ability to assign the RHI to the financier. The ability to assign would reduce the risk attached to the investment, which will be crucial in providing the investor confidence, stability and predictability needed to facilitate the development of a greater number and more innovative financing models. We urge Government to amend the legislation to enable this.

��Deemed Approach/Use of SAP – We support the proposal to introduce ‘deemed’ compensation under the RHI. Whilst in theory we support the use of SAP in order to calculate the deemed output and associated payments, in its current form we have concerns about the accuracy of such a tool and ask its reliability be validated. As a minimum, we ask that a detailed SAP assessment is carried out across a number of geographies to take account of the higher heat requirement in more northerly regions.

��Network Up-lift – Subject to considerations of cost-effectiveness, we support need for a network uplift to support the delivery of renewable heat in the UK. As there is no standard site, we do not believe it is practicable to have a standard default network to use as a benchmark. Instead, we advocate a site specific application for network uplift with the

uplift reflecting the actual costs or a review of the sensible infrastructure costs for that site.

��Risk of Over Generating – We suggest that DECC should ensure that sufficient analysis has been done to ensure that the RHI does not result in a significant disincentive to invest in less energy intensive processes. While we agree in principle with the implementation of a simple tariff structure, care should be taken to ensure that benefits are not outweighed by the costs associated with long-term underinvestment.

The attached annex provides a more in-depth response to the specific questions outlined within the consultation document and expands on the matters noted above. If you would like to discuss these or any other issues in further detail, please do not hesitate to contact me.

ANNEX A CONSULTATION ON THE PROPOSED RHI FINANCIAL SUPPORT SCHEME

Introduction Scottish Power Limited is a subsidiary of Iberdrola SA and is a major UK energy supply, independently regulated networks and generation business. This response is provided on behalf of ourselves and ScottishPower Renewable Energy Limited (the UK’s leading renewables developer and another subsidiary of Iberdrola). References to “ScottishPower” and “we” are to any or all of the above companies as the context requires. ScottishPower Renewable Energy Limited is part of Iberdrola Renovables, which is 80% owned by Iberdrola. Iberdrola Renovables is the largest developer of renewables globally. Among our projects is the Whitelee wind farm which, at 322MW, is the largest onshore wind farm in Europe. The Renewable Heat Challenge The Climate Change Act 2008 sets a statutory target of reducing greenhouse gas emissions by 80% by 2050. The EU Renewable Energy Directive has set the UK a target of achieving 15% of all energy from renewable sources by 2020; in order to meet this, projections assume that the level of electricity generated by renewables will increase from 5.5% today to around 30% by 2020 and the level of heat generated from renewables will increase from 1% today to 12% by 2020. This is a challenging task. Heating accounts for 47% of the UK’s CO

2 emissions and 60% of average domestic bills. Therefore, in the context of the European Commission’s Directive on renewable energy and the targets on Member States to reduce greenhouse gas emissions, determining a strategy for the decarbonisation of heat at this time is vital, particularly given the already challenging and interdependent renewable electricity and transport elements of this target. We therefore welcome the introduction of a new incentive to support deployment of renewable heat in the UK. However, the scale of the RHI challenge should not be underestimated. Not only is this the first example of an incentive for heat of this scale, it is being introduced into a market where heat users across all sectors have little or no experience of using renewable heat, where access to finance is more difficult than it has been for a number of decades, and where, although the technologies are largely proven, there is currently no significant supply chain to support delivery. Because of the significant costs of the programme in difficult economic times, we think that it will be important to focus resources on the most cost effective options that can deliver in significant volume. In the domestic sector, these are likely to be mainly air or ground sourced heat pumps, while on the commercial side there are a variety of mid scale applications that look promising. We think that degression or other mechanisms are needed to constrain the risk of solar thermal heat failing to be cost effective.

We have provided a summary below of our key views on the proposed RHI financial support scheme. This is then followed by our response to those questions outlined in the consultation document that are relevant to our current or future business activity. Consultation Questions Q1: Are there any issues relevant to the design or operation of the RHI that are not addressed in this consultation document? If so, how should we deal with them? Timing We have some doubts as to the feasibility of an April 2011 introduction, given that a lot of work remains to be done on the design of the RHI and the necessary systems and processes required to ensure the scheme operates effectively. In our view, an interim sub-optimal solution has the ability to quickly destroy the scheme’s credibility and ultimately hinder the ability to meet the renewable heat target. We urge Government to consider moving the timing of its introduction to later in the year or possibly April 2012 in order to ensure that the scheme is properly thought through, thereby ensuring initial success as well as a sustained growth in take-up. Funding of the RHI Given the additional costs involved in renewable versus conventional heating systems and the significant overall costs involved in meeting the target for renewable heat, identifying the funding source is critical to the development and ultimate success of the scheme. Given the very clear pressures on public spending, it will be imperative to the design of the scheme for the funding aspect of the scheme to be confirmed. Whatever decision is made in relation to the funding source, we ask that Government is transparent about the cost of this programme to consumers and the UK economy and secures acceptance from those who will ultimately bear this cost. Cost Recovery It will be important that the cost recovery mechanism is equitable such that no fuel type, or sector, faces a disproportionate share of the cost. It must also be cost effective overall, proportional to the scale of the market and manageable in terms of volume. In our opinion, requiring all downstream fossil fuel heat suppliers to contribute to the scheme funding is likely to be overly complicated and onerous. We believe funds should be collected from all suppliers of fossil fuels used for heating i.e. gas, LPG, oil and coal suppliers etc. For LPG, oil and coal, funds should be collected at a higher level i.e. from the wholesalers as opposed to smaller individual suppliers, in order to minimise the number of bodies from whom the money must be collected. It is imperative to the ultimate success of the scheme that an interim sub-optimal solution which involves a levy on gas suppliers only is not deployed to ensure that those who pay are also those who benefit, thereby minimising cross subsidy and preventing a potentially regressive approach. We urge Government to find adopt an equitable solution and ensure this is properly embedded, even if that means a delay to the schemes introduction. We are happy to work with Government to identify the best model. Fuel Poverty and competitiveness It is essential that the RHI design is cost effective, delivering the greatest potential for renewable heat at the lowest possible cost. This means that only measures which are likely to contribute at reasonable cost should normally be included. Where it is judged necessary for strategic reasons to pump prime new technologies which are currently very expensive, the volumes should be limited. Large or unlimited scale deployment of high cost technologies risks being very costly. It will be important to ensure that the amounts levied on industrial users are consistent with maintaining an acceptable degree of industrial competitiveness, Similarly, the level of any

levy on consumers will need to be carefully considered, especially in conjunction with the other levies such as CERT, CESP, the RO, FITs, CCS and EU ETS. A high RHI charge may be seen as socially unjust and particularly detrimental to vulnerable and fuel poor people who chose not to or who are unable to take up the necessary measures. It will be important that these issues are further considered by the new Government. The Payment Body and Role of Ofgem A robust payment process capable of dealing with potentially complex billing requirements and a customer service function with experience in handling inquiries, queries and disputes and providing high quality customer care will be vital to the success of the RHI. In our view, at present, Ofgem, as the payment body, do not currently have the billing and customer service capability necessary. As such, given the short timescales involved, it may be worthwhile, at least in year 1, Ofgem inviting tenders from organisations who currently have this capability, with Ofgem having responsibility for procuring the best service and managing the contract, as well as auditing and reporting. We welcome Ofgem’s intention to investigate the potential benefits of tendering for an appropriately experienced organisation (or organisations) to design, build and operate the payment system. There will also be a strong need for clear separation of Ofgem’s role as a regulator, the scheme administrator and the payment body. Assignment Critical to accessing lower cost funding and facilitating wider market participation and the necessary uptake, is the ability to assign the RHI to the financier. This would enable e.g. social landlords to receive the RHI payment in return for installing renewable heat technologies in their properties where the tenants will receive the benefit of lower heating costs. Assignment will also be important in ensuring full access to the scheme for all sectors including those on low incomes, or with poor credit records Heat Networks We support need for a network uplift to support the delivery of renewable heat in the UK. As there is no standard site, we do not believe it is possible to have a standard default network to use as a benchmark. Instead, we advocate a site specific application for network uplift with the uplift reflecting the actual costs or a review of the sensible infrastructure costs for that site, as opposed to using a ‘reference network’ approach, in order to prevent the situation where there are some winners and some losers. We would also question whether the cost implications of a network uplift been fully understood. If district heating is seen as a key component of a renewable heat strategy then network costs could be huge. As such, it will also be important that a cost ceiling or some other mechanism of ensuring heat networks are built in the most economical way possible is put in place to prevent excessive costs. Planning The planning regime must facilitate the installation of renewable heat technologies. Implementation of the Government’s recent proposals on permitted development rights for small scale renewable and low carbon energy technologies as well as the recently published Planning Policy Statement 1, which requires local authorities to devise local strategies and planning frameworks that consider ways to support low carbon / sustainable development, will make a significant contribution to tackling existing planning barriers. Minimising Perverse Incentives The RHI must be designed in such a way that it results in installation of the optimum renewable heat technology to meet a particular heat application, rather than merely the system (or systems) that deliver the best return. This requires consistency of approach towards the development of tariffs for different technologies within the RHI as well as consistency between schemes.

Communications Strategy There is a real need for the clear and effective communications strategy to ensure potential heat generators have access to impartial information and advice prior to the launch of the scheme. It will also be important in meeting the targets that awareness of the scheme and its benefits are widely communicated and understood, particularly given this is a new market. Q2: Do you see any barriers to such financing schemes coming forward? In particular, are there any limitations in leasing and finance legislation that you feel inappropriately restrict the development of RHI financing models? Security over assets will be vital in bringing forward financing schemes. In our view, the key barrier will be the current inability to assign payments to the financier or another third party e.g. landlords, suppliers etc, where they are not the ‘owner’ of the plant. The ability to assign payments to a third party for a preset period would reduce the risk attached to the investment, which will be crucial in providing the investor confidence, stability and predictability needed to facilitate the development of a greater number and more innovative financing models. Without this there is a risk that finance options will be constrained with higher risk consumers (often the poorest in society) being unable to access many forms of finance and/or finance providers seeking higher rates of return which could, in turn, could create upward pressure on tariff levels at reviews. The ability to assign will also enable the simplification of payments and maximise overall take-up. Assignment will also be necessary for the effective operation of the PAYS initiative in reducing the risk to energy suppliers of customers’ circumstances changing and repayments not being affordable. Without assignment, suppliers may seek to credit vet prospective customers, which could mean that higher risk consumers taking up a scheme under the RHI would be less able to access competitive energy prices. Assignment would also encourage greater numbers of landlords to install renewable heating systems within their housing stock. As such, we ask that Government amends the legislation to enable assignment and clarifies how these arrangements will operate and what measures will be put in place to prevent abuse. At present there are no firm descriptions of the financing options that may be available to fund the upfront costs of renewable heat installations. We therefore urge Government to further engage with the financial sector to establish if they will be willing to provide loans against the rates proposed in the consultation and provide details as soon as possible on what those loans may look like. Finally, it will be crucial that the installation of a renewable heating system does not result in increased business rates for business premises or council tax banding fro domestic households as this would undoubtedly be a significant barrier to uptake. Q3: Do you agree with our proposed RHI registration and payment approach? If not, can you suggest how this approach can be improved? In the main, we do agree with the proposed RHI registration and payment approach subject to our previous comments under Q1 and 2 above relating to assignment of payments to a

third party and the importance of customer care and billing capability and the points detailed below: Consistency of Approach: We ask where possible, that compatibility and consistency of approach should be sought between the RHI and the FIT and RO to ease understanding and to enable information to be shared or held in one place to assist with whole house or building solutions. Frequency of Payments: Given many of these technologies involve high input fuel costs, to assist with cash flow issues, and to align the payment approach to the FIT, we ask that in these circumstances in particular that payments be made quarterly as opposed to annually. Maintenance: In the case of deeming, we agree that there needs to be a means of monitoring continued usage with regular evidence of ongoing maintenance and repair being a pre-requisite prior to RHI payments being made. Consumers must provide proof of maintenance by certified installers in line with any required maintenance programme necessary to support technology performance guarantees (this requirement should be in line with normal maintenance requirements of system rather than creating a new system or requirement). Q4: Do you agree with our approach of requiring products and installers for installations up to 45kW within RHI to be accredited under MCS or equivalent? Yes. We agree that accreditation is essential for the integrity of the scheme. We agree that smaller scale installations should be subject to the requirement for MCS certified installers and equipment to whatever limits apply to the scheme from time to time. Given MCS is the only viable scheme available for installers in the UK and as it is currently used for the FIT scheme, to ensure consistency, we agree that this is the most appropriate approach. However, we ask that Government undertakes a review of the MCS in its current form ensures it is brought up to the necessary standard to enable it to meet the requirements of the RHI thereby improving industry and consumer confidence. We also ask that similar standards developed in other countries are allowable under the scheme, with a presumption that international standards will be acceptable unless there is a clear reason why they should not apply. We ask that the scheme administrator considers some of the more well known international standards in this area and if possible, publishes a list which is capable of being updated on an ongoing basis. Q5: Where MCS is extended beyond the current limit, do you agree that we should require the use of MCS certified installers and equipment for eligibility for the RHI? We support the extension of MCS provided that there is a thorough review to determine the improvements that are required to and it is upgraded to meet the requirements of the RHI. We believe that installations above the current or any future limits for small scale installations should be required to register and seek accreditation directly from Ofgem. This allows for synergies with the accreditation process within the Renewables Obligation (RO). However, if the upper limit for the MCS is to be increased, then care should be taken to ensure that businesses will not be required to register with Ofgem for some installations and have MCS installers for other installations. We suggest that the proposed RHI be amended so that businesses with at least one installation that qualifies for Ofgem accreditation are given the option to register all of their projects in the same way, regardless of the size of the smaller projects. This gives business the option of aggregating smaller projects together, giving them more control over project costs and the ability to reduce administration costs and inconvenience, as suits individual business models.

Q6: Can you provide details of any UK or European standards that should count as equivalent to MCS? How should we recognise these standards for the RHI? No comment. Q7: Do you agree with our proposed approach to eligibility of energy sources, technologies and sites? Yes. We agree with the proposed approach to eligibility of energy sources, technologies and sites under the scheme. We also agree that the RHI should only support useful renewable heat generation. In terms of emerging heat technologies that are not yet market ready and do not yet qualify for their own dedicated band, Government must ensure that they are able to access appropriate funds to allow them to reach a level of maturity that enables them to be fully included within the RHI. Q8: Do you agree with our proposed approach on bioliquids? Are you aware of bioliquids other than FAME that could be used in converted domestic heating oil boilers? If so, should we make them eligible for RHI support, and how could we assess the renewable proportion of such fuels to ensure RHI is only paid for the renewable content of fuels? No comment. Q9: Do you agree with the proposed emissions standards for biomass boilers below 20MW? If not, why, and do you have any evidence supporting different ones, in particular on how they safeguard air quality? No comment. Q10: Do you think the RHI should be structured to encourage energy efficiency through the tariff structure (in particular the use of deeming), or, additionally, require householders to install minimum energy efficiency standards as a condition for benefiting from RHI support? The key objective of the RHI needs to be the rapid deployment of renewable heat. However, it is important that the RHI is compatible with other schemes and does not create perverse incentives to operate in an inefficient way. We support the proposal to introduce ‘deemed’ compensation under the RHI. Whilst in theory we support the use of SAP in order to calculate the deemed output and associated payments, in its current form we have concerns about the accuracy of such a tool and ask that the reliability of SAP is validated. Consideration should be given particularly to establishing the impact of regional temperature variations when calculating the deemed heat demand of individual properties. As a minimum we ask that a detailed SAP assessment is carried out across a number of geographies and the higher heat requirement in more northerly regions is taken account of either through a change to the SAP rating system to reflect regional weather patterns/temperature differences or through different payments according to which part of the country the installation has taken place. This will be particularly important in ensuring those in fuel poverty in hard to heat homes located in more northerly regions are not unfairly discriminated against. We support the fact that the deemed heat demand assumes that the minimum energy efficiency measures will have been installed to encourage take up where this is not the case. In our opinion, any additional requirement to go beyond the minimum level of energy

efficiency would be a significant barrier to the take up of renewable heat technologies and that any requirement to prove they have been installed would be overly onerous and unnecessary. We also believe the deeming approach will encourage the adoption of other energy efficiency measures as this would result in them using even less heat than needed but receiving the same payments. In our opinion, calls to require the installation of more expensive insulation measures before the RHI can be claimed, will be a significant barrier to the take-up of the scheme. Q11: Can you provide suggestions for how to ensure that developers do not build to lower energy efficiency standards as a result of the RHI in advance of 2013 and 2016 building regulations taking effect? We believe this can only be addressed through building regulations themselves. Q12: Do you agree with our proposals on where we should meter and where we should deem to determine an installation’s entitlement to RHI compensation? Yes, we do agree with the proposals surrounding where it is appropriate to meter or deem. It will be important to the feasibility, simplicity and economics of the scheme that metering is not required for smaller installations. However, we also feel it will be important to have a method of dealing with metered sites with higher tariffs than fuel costs to prevent heat dumping. It may be appropriate to have a two part tariff, with the contribution to the capital recovered over a relatively few units of heat, and the remainder of the tariff set at a rate which makes using the renewable fuel similar in cost to (but slightly more attractive than) the counterfactual fossil fuel. This may be more practical than seeking to make heat dumping impossible by prescribing pipe layouts – which may or may not work in safety or process management terms. Q13: Do you agree that a process based on SAP or SBEM for existing buildings or the Energy Performance Certificate for new buildings is the best way of implementing deeming? Do you have any suggestions on the details of how this assessment process should work? We do support the use of SAP/SABEM and EPC’s as appropriate. However, it will be important for the integrity of the scheme that the reliability of these approaches is validated through a rigorous assessment of predictions against real situations across different geographical regions. Any inaccuracies must then be addressed as a matter of urgency. It will also be vital that MCS accredited installers are able to provide realistic estimates of the deemed heat load for differing forms of renewable heat installations using these tools. Q14: Do you agree that at the large scale/in process heating, where we propose metering, the risk of metering resulting in a perverse incentive to over-generate is low? How could we reduce it further within the constraints of using metering, to ensure only useful heat is compensated? Do you see any practical difficulties concerning use of heat meters (such as on availability, reliability or cost of heat meters) and, if so, how should we address them? On the assumption that heat dumping is not physically possible, then as the heat generated in larger installations will be for business operations not related to the RHI, we agree that there is a low risk of metering creating a perverse incentive to over-generate heat, in terms of short-term operational decisions. However, with respect to investment decisions by the firm to improve productive efficiency, the bundling of the capital recovery component with the additional energy cost component in a single per kWh rate may provide a disincentive to invest in more energy efficient production

processes because the value of energy saved will be reduced compared to the conventional fossil fuel case. We think that there is an option to structure the tariff so that the “deemed” level of payment is actually made at around half the deemed level of output, with smaller metered payments above that point. The advantage of that is that the user sees a marginal heat price close to the counterfactual fossil cost both above and below the deemed level and therefore has an incentive to continue to improve energy efficiency. Q15: What is the right incentive level required to bring forward renewable heat from large-scale biomass including in the form of CHP while minimising costs to consumers? We do not have sufficient data to offer a view of the absolute level of support required for large-scale biomass heat-only plant. However, for CHP, the RHI needs to provide at least the same support as the RO does for the electricity that the heat supplied would otherwise have produced. The biomass heat uplift is equated to the 0.5ROC power uplift for biomass CHP. However the base 1.5 ROC/MWh for dedicated biomass is currently under review and possibly subject to some form of “top up” for fuel costs. Given this uncertainty, it is difficult to evaluate the economic model for ROC v RHI. We suggest that the existing RO mechanism should be retained and the RHI should apply only to heat in excess of that required to produce a Quality Index of greater than 100 under the RO CHPQA. Furthermore, we believe the lifetime for Biomass under the RHI should be 20 years as per the RO, not 15 years, to ensure alignment and assist investor confidence. Finally, industry should be able to comment on the exercise to review the actual RHI uplift. It is important that the RHI fully covers heat infrastructure costs if it is to work or developers will just stick with the RO and most likely minimise any heat use. Q16: What is the right incentive level required to bring forward renewable heat from biogas combustion above 200 kW including in the form of CHP while minimising costs to consumers? Do you have any data or evidence supporting your view? No comment. Q17: Do you have any data or evidence on the costs of air source heat pumps above 350 kW or solar thermal above 100 kW? No comment. Q18: Do you agree with the proposed approach to setting the RHI tariffs, including tariff structure and rates of return? Do you agree with the resulting tariff levels and lifetimes? If not, what alternatives would you prefer, and on the basis of what evidence? We think the approach to setting the tariffs will tend to concentrate resources on the least cost effective technologies, rather than the best ones. The rates of return should be highest for the most cost-effective technologies and any generous support for very high cost technologies should be in limited volumes, sufficient to pump prime the technology. Q19: Do you agree with our proposed approach on mixed fuels? Do you agree with our proposal that, at larger sites, with the exception of EfW, RHI will require the use of a dedicated boiler for the renewable fuel? Where our approach is to follow the

Renewables Obligation, do any aspects need to be adapted to account for the different situation of renewable heat? We agree with the proposal to provide a RHI Tariff for the renewable component only of any mixed fuel load (i.e. where generation of heat comes from using renewable and non-renewable fuels). We also agree that the RHI would require the use of a dedicated boiler for the renewable fuel in order that all renewable heat used can be metered. Aligning the approach with the RO appears to make sense and would simplify the process as we are already familiar. If this does not prove to be the case in practice, it can be reviewed in the future. Q20: Do you believe that we should provide an uplift for renewable district heating? Subject to the cost effectiveness point below, we believe there should be an uplift for renewable district heating and where possible this should be calculated on a site specific basis. This allows the uplift to reflect the true development costs incurred in consideration of and carrying out detailed feasibility studies, stakeholder engagement, logistics, design complexity, financing opportunities / costs, and complexity of construction, or a review of the sensible infrastructure costs for that site, as opposed to using a ‘reference network’ approach. The tariff should also recognise environmental benefits demonstrated as well as long-term community benefits arising from any District Heating scheme. We do not agree with the proposal that a district heating uplift would only be available where the network is built simultaneously with the installation of the boiler eligible for the main RHI Tariff as often developments are phased (particularly in housing and large scale commercial or retail developments) and the commercial viability may depend on CHP Engine running (and exporting electricity to the grid) from the outset with key heat loads coming on line as the development progresses (and these timelines may be entirely at odds with one another). If district heating is seen as a key component of a renewable heat strategy then network costs could be huge. As such, it will also be important that a cost ceiling or some other mechanism of ensuring heat networks are built in the most economical way possible is put in place to prevent excessive costs arising under the scheme. Q21: Do you believe that an uplift should be available to all eligible district heating networks, or that eligibility should be determined on a case-by-case basis depending on whether a network contributes to the objective of connecting hard-to-treat properties (and, if the latter, how should we determine this for each case)? Do you agree that situations of one or a small number of large external heat users should not be eligible for an uplift, and, if so, what should be the minimum eligibility requirement for an uplift (expressed for instance as a minimum number of external customers)? In order to bring forward the greatest amount of renewable heat possible, we believe that an uplift should potentially be available to all district heating networks, regardless of size or scale as opposed to only those which contribute to the objective of connecting hard-to-treat properties. We do not agree that any restriction should apply to one or a small number of large external heat users who should not be eligible for an uplift. These individual and small scale schemes can often be more efficient than larger schemes and this may act as a disincentive for large Industrial and Commercial users. We also suggest that the uplift should reflect the true development costs incurred in consideration of and carrying out detailed feasibility studies, stakeholder engagement, logistics, design complexity, financing opportunities / costs, and complexity of construction. The tariff should also recognise environmental benefits demonstrated as well as long-term community benefits arising from any District Heating scheme. However, it will be important that this case by case approach examines the merits of each particular scheme under consideration and ensures costs are proportionate and are not excessive.

Q22: Do you agree that RHI tariffs should be fully fixed (other than to correct for inflation) for the duration of any project’s entitlement to RHI support? Do you agree that we should include bio-energy tariffs, including the fuel part of those tariffs, in such a grandfathering commitment? See response to Q14. In line with the FIT, it will be important that the RHI is fixed, index-linked, grandfathered and reviewed periodically for new installations. In terms of grandfathering, it is vital for all installations that the part of the tariff that covers non fuel costs and provides the return on capital must be fully grandfathered. It seems sensible that the fuel (or fuel price differential) element, where this exists could be reviewed as part of the regular banding reviews and reset to reflect any movements in fuel price/ fuel price differentials as appropriate. Q23: Do you agree with our proposal not to introduce degression from the outset of the scheme but consider the case at the first review? We think that it would be wise to consider degression or volume caps for the most high cost technologies from the start so that excessive resources are not spent on them and the incentive to improve their cost effectiveness is improved. Q24: Do you agree with our proposed approach on innovative and emerging technologies? Yes. It is important for the long term development of the scheme that arrangements are in place to support emerging technologies that don’t have their own dedicated band. Government must ensure that they are able to access appropriate funds to allow them to reach a level of maturity that enables them to be fully included within the RHI. Q25: Do you have any views on how we should encourage technology cost reductions through the RHI, particularly on solar thermal heat? It is unclear to us that solar thermal heat is justifiable at current cost levels, This may be a technology where volume caps or a degression factor may be needed early on in order to prevent excessive resources being spent on the least cost effective solutions. As supply chains develop and installation volumes increase, these measures should assist in driving technology cost reductions. Q26: Do you agree with our proposed approach to reviews, and the timing and scope of the initial review? Yes, we support three yearly reviews aligned across the different schemes. Q27: Can you provide examples of situations that could be taken into consideration in determining criteria for an emergency review? We support the inclusion of provisions that would allow for emergency reviews. However, to deliver sufficient confidence in the market and to enable supply chains to develop and grow, it will be essential for Government to clearly set out the circumstances under which an emergency review could be expected to take place e.g. changes in the energy market that will have a material and adverse impact on the roll out of renewable heat under the RHI or which could adversely impact on security of supply etc. It will also be important that any changes as a result of an emergency review are only applicable to new installations so as to retain investor confidence in the scheme.

Q28: Do you agree with our proposed approach to allow access to RHI support to new projects where installation completed after 15 July 2009, but not before? Do you have any evidence showing that in particular situations RHI support for installations existing before this date would be needed and justifiable? Yes. We agree with the proposed approach. In terms of general interaction with other policies, Government must ensure that the RHI is in line with the overall policy landscape and commit to avoid overlap or clashing with existing or forthcoming regulations whilst keeping in mind our longer term climate change goals. Q29: Are there any parts of the proposals set out in this consultation that in your view would allow for unacceptable abuse of RHI support, or other unintended consequences? If so, how could we tighten the rules while keeping the scheme workable, and avoiding an overly high administrative burden? The key aspect of the proposals that we believe could potentially allow for unacceptable abuse if the scheme is the absence of ongoing running and maintenance requirements in the case of deemed installations. We firmly believe the owner or user of the equipment must be required in some way to keep the system going given they will receive the same payment irrespective of usage. In our view, forcing maintenance or running certificates on people is likely to lead to increasing the overall cost of the scheme and as such would perversely require an increased subsidy. However, one alternative to consider would be monitoring the level of gas usage etc and removing the RHI payments where gas usage has returned to pre-fitted levels. This would require access to billing details. As stated before, it will also be important to ensure provisions are in place to prevent the over-sizing of installations with the associated dumping of heat where there are metered sites with higher tariffs than fuel costs. The most effective approach will be to operate a two tier incentive payment, so that the capital contribution is paid back against less than 100% of the deemed level of output and further heat generation is supported at a rate sufficient to get the fuel cost just below the counterfactual fossil fuel level. Q30: Do you agree with our proposed overall approach to setting the level of the uplift? Can you provide evidence that would help us to determine the level of uplift? In particular:

• Can you describe typical district heating networks that would be appropriate as reference networks, and what are their network costs, heat loads, and customer numbers and characteristics?

• What proportion of the heat load of such networks is typically supplied to hard-to-treat properties? What proportion of the total network of the reference installation(s) supply heat to hard to treat properties?

• Should we choose one reference network and determine one uplift (in p/kWh) applicable to all sizes of networks, or should there be several based on a number of differently sized reference networks?

See response to Q20 and Q21.

680 Stef Gibson

Q4: Do you agree with our approach of requiring products and installers for installations up to 45kW within RHI to be accredited under MCS or equivalent?

yes one of the things that concerns me is the cost , I have a heat pump witch is a few years old bought from a factory in china a company called Deron they are not MCS accredited however make an excellent product , and at an affordable price , factories like this are not MCS accredited because of the large investment / cost to get accredited so I think the law should change , I don’t think you should give grants just to products that carry the MCS , I think it should be available to products that carry the EN14511 that has been provided by a testing body that is iso en17025 accredited ,, this is the equivalent to the UKAS /and BREE, Q5: Where MCS product and installer certification is extended beyond this limit, do you agree that we should introduce the requirement of using certified installers and equipment for eligibility for the RHI?

yes but why should a installer be certified by MCS if that person has been to school and got his qualification , then that should be enough I can’t help but see the MCS as a money spinning venture

Q8: Do you agree with our proposed approach on bioliquids? Are you aware of bioliquids other than FAME that could be used in converted domestic heating oil boilers? If so, should we make them eligible for RHI support, and how could we assess the renewable proportion of such fuels to ensure RHI is only paid for the renewable content of fuels?

yes I argree Q10: Do you think the RHI should be structured to encourage energy efficiency through the tariff structure (in particular the use of deeming), or, additionally, require householders to install minimum energy efficiency standards as a condition for benefiting from RHI support?

Yes totally Q11: Can you provide suggestions for how to ensure that developers do not build to lower energy efficiency standards as a result of the RHI in advance of 2013 and 2016 building regulations taking effect?

yes by carrying out on site survey because all builders are interested in is ticking boxes they will opp for the lease cost effective way of complying with building regulations you only have to look around they are installing cheap solar systems , and in most cases they are wrongly sized , but they don’t care because they don’t have to live there , if I want to build a extension on my house they have to check my footings to make sure I have the right depth , and supports why dose this not happen to the conduction company’s building companies that are building and installing renewable energy products . In the vast estates all over the uk!! Q14: Do you agree that at the large scale/in process heating, where we propose metering, the risk of metering resulting in a perverse incentive to over generate is low? How could we reduce it further within the constraints of using metering, to ensure only useful heat is compensated? Do you see any practical difficulties

concerning use of heat meters (such as on availability, reliability or cost of heat meters) and, if so, how should we address them?

Yes/No I think its very important that whoever looks at installing this kind of technology that there house / business is suitable for this kind of low temperature heating , so it does not spiral out of control because you have company installing just to make money , even if they know that it’s not really a suitable property for a heat pump , even now it happens , they sell to an old couple that don’t understand the technology , for exsaple you go to a house that as been built is the last 25 years all radiator and not so good insulation but as had a new combi condensing boiler fitted , well if you wear to talk them in to fitting a heat pump you would be doing them no favours or yourself so there needs to be control , and the house most meet the criteria, before installing the heat pump Q18: Do you agree with the proposed approach to setting the RHI tariffs, including tariff structure and rates of return? Do you agree with the resulting tariff levels and lifetimes? If not, what alternatives would you prefer, and on the basis of what evidence?

Yes Q19: Do you agree with our proposed approach on mixed fuels? Do you agree with our proposal that, at larger sites, with the exception of EfW, RHI will require the use of a dedicated boiler for the renewable fuel? Where our approach is to follow the Renewables Obligation, do any aspects need to be adapted to account for the different situation of renewable heat?

Yes Q22: Do you agree that RHI tariffs should be fully fixed (other than to correct for inflation) for the duration of any project’s entitlement to RHI support? Do you agree that we should include bio-energy tariffs, including the fuel part of those tariffs, in such a grandfathering commitment?

Yes Q24: Do you agree with our proposed approach on innovative and emerging technologies?

yes 100% Q28: Do you agree with our proposed approach to allow access to RHI support to new projects where installation completed after 15 July 2009, but not before? Do you have any evidence showing that in particular situations RHI support for installations existing before this date would be needed and justifiable?

no

new question: q23 agreee680/energy/energy_links/rhi/... · 2011. 2. 2. · benefiting from the rhi....

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