Heat pump manufacturers welcome RHI tariff announcement

Published:  16 July, 2013

Heat pump manufacturers have warmly welcomed the domestic Renewable Heat Incentive announcement from the Department of Energy & Climate Change, which came just two days short of four years since the scheme was first confirmed.

The scheme, due to launch in Spring 2014, will provide payments for renewable heat generated for a period of seven years. Tariffs have been set at 7.3p/kWh for air source heat pumps, 18.8p/kWh for ground source heat pumps and 19.2p/kWh for solar thermal. Private householders and social housing providers are among those eligible for payment by the tariffs.

“The package should kick-start a market that has been waiting to take off since the RHI was first announced in 2009,” said BEAMA's marketing director Kelly Butler, speaking on behalf of key heat pump manufacturers. “We are pleased officials have listened to our concerns and kept eligibility reasonably simple alongside a range of tariffs that should provide an impetus to invest in renewable heat.”

Chris Davis, business development director for Dimplex Renewables and chairman of the BEAMA Domestic Heat Pump Association, said he firmly believes the RHI will stimulate the market in the way that DECC hopes.

“After years of frustrating delays, the government has finally stepped forward and shown its commitment to renewable heat with a scheme which will undoubtedly boost demand for domestic scale renewable heating solutions,” he said.

“Rates have been set at an encouraging level and it is also pleasing to see changes to the tariff levels and value cap for ground source heat pumps and solar thermal, both of which were things that the industry commented on in last year’s consultation,” Davis added.

Davis explained initial modelling shows that, for typical ground source and air source heat pump systems, the combination of fuel saving and RHI payments should result in a payback for customers of around five years. This makes it a very attractive proposition for consumers who inevitably look for the financial benefit and installers should be aware of this shorter payback period, he said.

“The domestic RHI now gives a tangible incentive for householders who will get a solid return on investment for reducing their carbon output,” agreed Mark McManus, managing director of heat pump manufacturer Stiebel Eltron UK.

“In the past many people who had been considering renewable energy were sticking with traditional heating solutions such as oil and LPG due to the uncertainty of government incentive schemes – we hope this will now change.”

In addition to the tariffs, Davis said one of the most important aspects of the new scheme is that DECC is rewarding higher efficiency with higher RHI payments.

“RHI payment for heat pumps will be based only on renewable heat produced which means higher efficiency heat pump systems will benefit from both a larger payment and better savings on running costs,” he said.

“Together with additional funding for metering and monitoring, this will encourage end users and installers to focus on higher quality, higher efficiency systems – good for the consumer and good for our overall renewable energy targets.”

All installations from July 2009 will be eligible for domestic RHI payments, subject to meeting the necessary criteria. This means anyone installing now can receive Renewable Heat Premium Payment (RHPP) funding to help with upfront costs and still be eligible for the RHI. Upfront cost is inevitably the biggest barrier to installations and with this in mind, now is the time to act says Davis.

“We should now see a transformation in the use of renewable heat in this country and welcome the certainty that this will bring to the domestic sector,” said John Kellett, general manager of Mitsubishi Electric’s Ecodan heat pump range, who fully expects a rise in interest, particularly in off-gas areas.

However, there are continuing concerns among manufacturers over the requirement for a Green Deal Assessment, which has proven a stumbling block under the RHPP.

Chris Davis adds: “Green Deal Assessments could lead to additional costs that in many cases are not necessary and may confuse customers with alternative proposals for non-renewable heat systems such as oil boiler system upgrades. RHPP applications have halved since the assessment requirement was announced, despite an increase in the RHPP payments, and there is a concern that it could have a similar effect on the RHI.”

RHI at a glance:

· RHI payment for heat pumps will be based on system efficiency so if you specify higher efficiency heat pump systems, your customers can benefit from both a bigger RHI payment and better savings on running costs.

· Although the RHI does not start until Spring 2014, all installations from July 2009 will be eligible, subject to meeting the necessary criteria. With the RHPP still in force, it means homeowners who act now can receive RHPP funding to help with upfront costs and still be eligible for RHI funding over the next seven years (RHPP payments will be deducted).

· In particular it creates new opportunities for off-gas grid social landlords who may have previously been put off by the upfront cost and most likely restricted to oil boiler technology. Now they can install renewable solutions at the capital investment of non-renewables, using the RHI over seven years to help deliver fuel cost savings for tenants.