What is the renewable heat incentive?

Renewable Heat Incentive is the world first financial support scheme for renewable heat generation. Similar to the Feed in Tariff programme, it provides the owners of renewable heat generation technology with guaranteed payments over a 20 year period.

Why is it being introduced?

The scheme is aimed to help the UK in achieving its legally binding targets of reducing carbon emissions by 80% by 2050. It is also designed to bridge the gap in the cost of conventional and renewable heat generation in a bid to deliver the UK’s 2020 target of 15% of our energy consumption delivered by renewable sources.

How will it work?

The scheme is designed to reward the technology installed at the point of usage and providing space, water and process heating for existing and new applications otherwise met by a conventional gas heating. The owner of the eligible heat generating technology will receive a guaranteed payment for every kilowatt hour (kWh) of metered heat output produced by the system for the contractual period of 20 years. For most technologies, generation tariffs will be based on the type and size of installation, encouraging smaller set-ups; however, small and medium scale biomass boilers will be covered by a tiered, 2-level tariff based on the reasonable load factor of the installation.

What are the benefits?

  • A clean supply of energy for on-site usage
  • A good return on investment (6-12% ROI), linked to RPI
  • A guaranteed 20-year contract for heat generation
  • Increased energy security against rising cost of energy

Are there any drawbacks?

Most of the eligible technologies are not easy to use and require adherence to a strict maintenance regime. 

Additionally, most of the eligible technologies are more suitable for new build and can be challenging to retrofit

Air source heat pumps, an increasingly popular and suitable for UK climate technology, are currently not eligible under the scheme.

When will it become available?

The scheme is delivered in two phases. 

The larger heat energy users in the non-domestic sector will be supported during Phase One. The scheme opened to applications on 28th of November 2011 for installations with the first commissioning date backdated to the 15th of July 2009. In the short term renewable heat installations in residential sector will be covered by Renewable Heat Premium Payment, a one-off government grant towards the installation of the renewable heat generating technology for the households with no connection to the gas grid.

Phase Two of the Renewable Heat Incentive scheme will cover household installations and include a number of additional heat generating technologies. Phase Two is scheduled to be launched in October 2012.The Renewable Heat Incentive scheme is planned to be open to applications until at least 2020, however, the decreasing cost of technology will be reflected in reduced tariff levels reviewed every 4 years.

What technologies does it cover?

  • Biomass boilers
  • Heat from waste combustion
  • Ground and water source heat pumps
  • Deep geothermal systems
  • Solar thermal
  • Heat energy from biogas combustion
  • Biomethane injection to the grid
  • Renewable district or community heating, produced using any of the aforementioned technologies
  • Combined Heat and Power (CHP)

Who is eligible?

The scheme is currently open to non-domestic participants with eligible heating systems. From October 2012 Renewable Heat Incentive is intended to be open to anyone with an eligible renewable heat installation.

Where can I find more information?

Information on Renewable Heat Incentive can be found on the RHI page of the Department of Energy and Climate Change (DECC) website. Information on the Renewable Heat Premium Payment scheme is available on the appropriate DECC webpage. The Office for Electricity and Gas Markets (OFGEM) is responsible for the registration of participants.