The renewable heat incentive – hot or not?

A pair of rugged, manly and strong hand cupping a portion of wood pellets.
A handful of biomass pellets, yesterday
producing your own heating could shave megabucks off your utility bills
  • | by Rachel England

Over the last few years we’ve seen a flurry of interest around renewable energy. Feed-in tariffs for solar and wind power have made generating your own energy an attractive proposition, but over-supply and government cuts mean it’s become a complicated area, and not as lucrative as it once was.

But now there’s a new scheme on the cards: the Renewable Heat Incentive (RHI). In a nutshell, this means you could be eligible for a quarterly payout from the government for producing your own heat through renewable technologies.

One slight problem, though; the scheme is being introduced in phases, with the domestic part of the programme originally due to come into effect this October (2012). Of course, best laid plans and all that... and now the RHI is not likely to be implemented for residential properties until October 2013.

However – and that’s a big however – getting on board with renewable heat can pay dividends, RHI or not, plus there’s still money to be made ahead of the scheme’s formal kick off. Here’s what you need to know now:

What’s in it for me?

We all know energy costs are soaring, and they’re not going to get any cheaper, so producing your own heating could shave megabucks off your utility bills. As well as saving money on your bills, you’ll stand to make money from the RHI when it’s formally implemented next year, plus if you apply for the scheme by 31 March 2013, you’ll get a nice one-off ‘Premium Payment’ (PP), designed to help with the costs of installing the technology.

How much are we talking, here?

It all depends on the kind of technology you go for. There are four main types:

  • Wood-fuelled heating, also known as biomass systems, could save you between £100 and £720 a year* on your energy bills, depending on what heating system you’re replacing, and you can claim £950 in PP to help towards the costs of installation.
  • Ground source heat pumps could save you up to £610 a year*, and command a PP of £1,250.
  • Air source heat pumps could save you up to £610 a year*, depending on the system you’re replacing, and could net a PP of £850.
  • Solar water heating could save you up to £80 a year on your bills*, and come with a PP of £300.

As for the RHI scheme itself, it’s not yet clear how much homeowners will be entitled to, although the government’s draft consultation suggested it could be as much as 18 pence per kilowatt hour of energy generated by a small solar thermal system. Based on original projections, then, a family home with a biomass boiler and a solar thermal installation could benefit from payments of up to £825 per year.

Anyone who has taken up the RHI Premium Payment will be eligible for the tariff, as will anyone that has had eligible equipment installed since July 2009. Payments will be made every quarter for 20 years.

Ground source who? Thermal what?

A quick breakdown of the technologies on offer, and the costs involved:

Wood fuelled heating

Wood-fuelled heating systems, or biomass installations, provide warmth to a single room or power central heating and boilers by burning wood chips, pellets or logs. A pellet stove, to heat a single room, costs around £4,300, and a boiler costs in the region of £11,500. You’ll have to ‘feed’ it pellets or logs, which can cost as little as £190 per tonne, working out a great deal cheaper than traditional energy tariffs.

Ground source heat pumps

A ground source heat pump involves burying pipes into your garden to extract heat from the ground, which is then used to heat radiators and hot water in your home. The pump circulates water and antifreeze around a length of pipe (a ‘ground loop’), and the heat from the ground is absorbed into the fluid, which is then transported into your house.

The amount of ground loop you’ll need depends on the amount of heat you’ll need. Longer loops need more space in the garden, but vertical boreholes can be drilled if space is a premium. Believe it or not, under-surface ground in the UK stays at a pretty constant temperature throughout the year, so ground source heat pumps are effective even in the middle of winter. A typical system costs between £9,000 and £17,000 depending on the size of the installation.

Air source heat pumps

Air source heat pumps absorb warmth from the outside air and use it to heat radiators and water. According to the Energy Saving Trust, an air source heat pump extracts heat from the outside air in the same way that a fridge extracts heat from its inside, and can get heat from air as cold as -15° C. They do require some electricity to run, but the costs involved in this are marginal compared to the figure you stand to save on your heating bills. A typical system costs less than £10,000.

Solar water heating

Solar water heating systems collect heat from the sun via solar panels on your roof, and use it to heat hot water stored in a water cylinder. This technology is not so suited to the winter months, and you’ll need a conventional boiler to help boost water temperature and act as a backup if necessary. A system costs around £4,800.

Is it worth it?

Possibly, if you want to be rid of escalating energy costs and take advantage of the forthcoming RHI scheme. Industry boffins reckon participants will earn enough money from the tariffs to pay off their installation costs in around seven to nine years. Remember, though, the RHI will not make you rich – it’s designed to help the UK get the ball rolling on renewable technologies and save Brits money on energy costs in the long-term.

What next?

Like the solar and wind incentives, there’s likely to be a lot of interest around the RHI, so it pays to start investigating your options now while you’re still entitled to a Premium Payment and can take advantage of the initial tariff rates (which will likely decrease in the future). Seek out a reputable renewable energy company that will take the time to help you understand what’s right for you and advise you on the best way to maximise your financial return. The Energy Saving Trust offers comprehensive advice on all aspects of renewable energy.


*According to Energy Saving Trust calculations