Payments for owners of premises using renewable heating technology- 27/01/2012
The new Renewable Heat Incentive (‘RHI’) scheme, providing for payments to businesses to reward them for using renewable heating technology, was delayed from 30 September 2011, but is now in operation for non-domestic properties.
The RHI scheme provides for regular payments to owners (not tenants) of premises where water or space is heated using renewable heating technologies. The payments are made for 20 years, and increase or reduce annually in line with the Retail Prices Index.
The eligible technologies (‘installations’) include solar thermal panels, biomass boilers, ground and water source heat pumps, geothermal plants and the production of biomethane for injection into the gas grid.
To qualify, installations must provide heating for multiple residential dwellings such as flats. There are plans to extend the scheme to single residential dwellings in 2012. (In the meantime, householders of single dwellings can apply for a Renewable Heat Premium Payment (‘RHPP’) - a one-off payment towards the cost of installing renewable heat technology. Householders have until 31 March 2012 to apply).
Installations must be accredited to qualify for RHI scheme payments. Preliminary accreditation can be applied for once planning permission has been granted. Existing installations already commissioned on or after 15 July 2009 are eligible for accreditation.
The delay to the September introduction date meant some organisations who had intended to take advantage of the new scheme either bought fossil fuel heating systems instead, or decided to defer purchase of installations until next year. Others who had already invested significant sums ready to launch projects on 30 September and claim RHI scheme payments before winter set in, faced potential cashflow problems. All of these reduced the value and impact of the scheme.
In fact, however, the RHI for non-domestic generators opened for applications on Monday 28 November 2011. The scheme is therefore now up and running, with the first payments expected to be made in early 2012. The government hopes the scheme will result in 14,000 industrial installations and 112,000 in the commercial and public sector by 2020.
However, one result of the delay is that the amounts of certain payments has been reduced since the scheme was originally published - businesses will now be paid up to 7.9p per kWh for biomass boilers, 8.5p per kWh for solar thermal and up to 4.5p per kWh for heat pumps, so they will need to look at the new rules to see if the scheme is still worthwhile.
The payments are calculated by reference to the type and size of the installation. They do not apply where the solar or biogas installation has a capacity of 200kW or more – about 40 times the amount used in a year in the average home.
Generally, an installation is not eligible if a public grant has been made, however small, towards its purchase or installation. There are also rules designed to stop payments being made for heat generated using renewable technology which is then wasted.
The regulations require stringent record-keeping – for example, about the fuel bought and used while the RHI scheme applies - and notifications to Ofgem, to satisfy the rules that apply when ownership of the premises changes. Failure to comply with the scheme can mean Ofgem can reclaim the payments. Purchasers of property benefiting from the scheme will want to make sure the seller has kept the appropriate records.
The RHI scheme is administered by Ofgem, who accredit installations, make payments, monitor compliance and make inspections.
- Find out more about the scheme at the Department of Energy and Climate Change website. [LINKTO: http://www.decc.gov.uk/en/content/cms/news/pn11_101/pn11_101.aspx
- If eligible, and if commercially viable, consider whether to apply under the scheme.
- If in any doubt, consider taking specialist professional advice.
For further guidance on any property related matter, please contact a member of our Commercial Property Team.