Commercial Renewable Heat Incentive
About the Commercial RHI Scheme
This phase of the scheme was launched in November 2011 and is aimed at non-profit-making, charity, commercial and public sector companies.;
Payments are made every year over a period of 20 years and are index-linked according to the amount of heat they produce and use. What’s more, when a commercial enterprise uses biomass instead of fossil fuels, they can cut their fuel bills in half, if not more. All this equates to a payback within approximately five to six years* (including cost of finance). Once your biomass installation is accredited by Ofgem, the submission of quarterly heat meter readings determine the quarterly payments that will follow. The RHI tariffs are reviewed every three months and are adjusted on the basis of the increase or decrease in the Consumer Price Index (CPI).
Changes to the RHI Scheme
In November 2015, the UK government renewed its commitment to the transition to a low carbon economy, by confirming a continued budget for the RHI out to 2020/21. Following a series of consultations from March-April 2016, the government finalised a package of reforms to the RHI schemes in December 2016. The General Election announcement delayed the plans to implement the proposed changes to the scheme.
It has now been decided that the government's raft of changes to its world's first Renewable Heat Incentive will be implemented on September 20, 2017, whilst declaring intentions for more of the proposed changes to follow later in 2017/18. The changes being implemented includes new non-domestic biomass tariffs, new domestic tariffs, domestic heat demand limits, and provisions to extend these to anyone accredited since December 14, 2016. The Department for Business, Energy and Industrial Strategy (BEIS) has subsequently announced that no tariff degressions will be applied to either the domestic or non-domestic scheme on October 1, 2017, with the next potential degressions being applied January 1, 2018.
A tariff guarantee process is being introduced for larger projects, with the amount of heat covered limited to 250GWh per year. This relates to large biomass boilers (above 1MW in capacity), large biogas plant (above 600kWth), GSHPs (above 100kW, including shared ground loop systems) and all capacities of biomethane, biomass-CHP and deep geothermal plant. Tariff guarantees are intended to help larger, more cost-effective projects to come forward by providing applicants with greater certainty regarding their eventual tariff earlier in the project cycle.
The new implemented changes to the RHI scheme mean that the biomass tariff bands are reduced from three (small, medium, large) to one, which will be tiered according to heat use. The tier threshold is equivalent to a 35% load factor (3,066 hours) from the previous 15% (1,314 hours).
As of Spetember 20, 2017, the RHI rates for biomass are:
|Tariff name||Eligible technology||Eligible sizes||Tier 1 (p/kWh)||Tier 2 (p/kWh)||Tier threshold|
|Small non-domestic biomass||Solid biomass including solid biomass contained in waste which is not a new solid biomass CHP system||Less than 200kWh||2.96||2.08||35% (3,066 hours)|
|Medium non-domestic biomass||2,00-999kWh|
|Large non-domestic biomass||1,000kWh+|
Potential RHI payments
So as a guide based on these new rates, a country estate with main house and offices converting to a 200kW heating system would receive approximately £18,151 for the first year and a total of £441,015 over 20 years. A farm house with cottages and a holiday let using 100kW system would earn upwards of £9,075 and £220,507 over the duration of the scheme. The tariffs are reviewed every three months and are adjusted on the basis of the increase or decrease in the Consumer Price Index (CPI). Due to the changes implemented to the RHI scheme from September 20, 2017, the Department for Business, Energy and Industrial Strategy (BEIS) has subsequently announced that no tariff degressions will be applied to either the domestic or non-domestic scheme on October 1, 2017, with the next potential degressions being applied January 1, 2018.
As for a large commercial drying system with a boiler size of 1MW and 75% of run hours at full output, it would generate a significant RHI income over 20 years. For the first year alone, the RHI generated would be approximately £163,637. Over the course of the scheme, the income would equate to approximately £3,975,944. It is easy to see how the project would pay for itself many times over, whilst continuing to generate a healthy income for the business for 20 years, reducing the overall and ongoing carbon emissions significantly as well as helping the UK achieve the targets as set out in the Paris Agreement.