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Industry reacts to RHI: The devil is in the detail

Following the announcement of the £860m Renewable Heat Incentive the reaction from the industry has been wide-ranging with concerns about the delay in the roll for the domestic sector and the exclusion of air source heat pumps...
Industry reacts to RHI: The devil is in the detail
The first financial scheme of its kind in the world to subsidise low-carbon heating over the next decade has been largely welcomed by the industry, with businesses and public sector organisations expected to be the biggest beneficiaries of the plan at first, though households will be able to take advantage of the full range of subsidies from October 2012.

Peter Verkempynck, managing director at Daikin welcomes the scheme and is hopeful for the future for air source heat pumps. He said: 'It is a vital step forward that the Government has committed to the RHI, which will provide a crucial boost for renewables within homes, business and industry - and is great news for all the professionals and home owners who have already invested in these technologies.

'Further to inclusion in RHI premium payments, we are keen to see that air source heat pumps are included in the tariff plan as quickly as possible within the scheme and definitely by the second phase in 2012, when the domestic sector can fully benefits from the RHI tariffs. We therefore urge the Government to talk with leading manufacturers and industry associations so they can better understand how air source heat pumps can be installed successfully to achieve the very highest energy efficiency ratings.'

BEAMA (the British Electrotechnical and Allied Manufacturers Association) welcomes RHI, but calls for a 'quick announcement' of 2012 tariffs, as the domestic market will need firm details of 2012 tariff levels by the next heating season starting in September to enable the supply chain to sell the Year One 'premium' offer alongside on-going support. Marketing director Kelly Butler said: 'The renewable heat industry needed a good news story, and a new incentive is just what is required, but the devil is in the detail and long-term confidence is needed. In principle, a Year One premium payment is an excellent theoretical bridge until the tariffs have been fully determined for domestic applications, but will customers see it as enough or will they need to know the tariff levels applicable from 2012?

'Anyone selling heat pumps now has to sell a premium payment (more or less the level of grants available until 2009) with an unspecified tariff return from 2012. The projected market in the coming year for heat pumps is around 20,000 installations and with Government planning to fund all technologies up to around 25,000 homes we need to keep a level head about what the market uptake will be. The industry needed a 'game changer' for domestic renewable heat and the setting of the tariffs from 2012 is now absolutely critical to pull customer demand. There must be no delay in setting, and communicating, the tariffs from 2012. The May target date to set domestic eligibility has to be achieved. We will be pushing hard for firm tariff levels to be set for the domestic sector by July 2011.'

David Bilclough, chairman of Sol2o, an MCS-accredited renewable energy consultancy based in the North East, said: 'The announcement of the RHI scheme is welcomed by the industry as we have been waiting a while for this. Whilst the announcement on the tariff for commercial properties is promising, it is disappointing that no tariff will be in place for domestic customers until October 2012. We hope that the RHI, a guaranteed 'cash back' scheme, will unlock significant commercial investments in our system and encourage commercial property and home owners to adopt a greener approach to their energy consumption.'

Louis Pickersgill, managing director of Ravenheat, described the RHI announcement as a 'small step forward', and echoed the concerns of the industry saying 'the distinct lack of mention regarding the domestic sector is frustrating - in its current state the proposals really only address the commercial sector.'

Simon Allan, director of renewables at Plumb Center, also voiced concerns about the delay in the domestic support which could further restrict uptake of microgeneration and renewable technologies. Mr Allan said: 'The picture is not entirely clear as to what this means for the domestic sector as yet. In the meantime, we will continue to support our customers and their vital role in the UK's move to a low carbon economy and will do all we can to ensure they have information on legislation and initiatives such as the RHI and access to the latest and most innovative renewables products and training.'

The Solar Trade Association have expressed disappointment at the uncertain future of solar thermal technologies in the UK. A spokesperson said: 'The domestic sector which makes up the vast majority of the solar installations in the UK has suffered yet another blow under the Tory led coalition government. In the first weeks of the new regime the grant scheme that was meant to carry the sector through until the launch of the RHI was cancelled. [The RHI announcement] effectively sees it being re-launched at a reduced rate whilst we wait for the detail of the proposed RHI which will follow in October 2012.'

Chairman Howard Johns added: 'Solar thermal is such simple effective and easily applicable technology and it is once again being given a back seat. This announcement really shakes the confidence of the industry in the commitment of the 'greenest government ever' to deliver. With the backdrop of the FIT review this announcement will no doubt result in job losses in a sector that should be growing.'

Chris Davis, business development director at Dimplex Renewables, said the announcement falls short of expectations: 'In its current form, the scheme is unlikely to provide the growth stimulus the industry needs if we are to work together to achieve the government's target of 12 percent of heat from renewable sources by 2020. We'd like to see some of the scheme's gaps filled in, in particular with regard to domestic tariff payments, and also we see a clear need to work with government on getting non-domestic and communal residential air source systems included under the scheme. It's crucial to maintain the momentum from this announcement and not lose sight of the need to continue moving ahead.'

He added: 'It is absolutely imperative that the government announces details of the domestic tariff rates alongside confirmation of the Renewable Heat Premium Payments in May to prevent a major slowdown in the domestic renewable heat sector while the market waits for the full details to be made available.'

Viessmann's products range from traditional oil and gas-fired boilers to renewable solar thermal and photovoltaic systems. Having manufactured renewable heating systems for almost 40 years, Peter Frost, managing director of Viessmann, says that the Government has chosen a 'careful' route to introduce renewable technology into the domestic market. He said: 'We are surprised to hear that the RHI starts later than expected in October 2012, but bringing this in line with the Green Deal scheme makes sense. Also, introducing a premium payment from July should help to quell industry disappointment. It is still not clear what tariffs, by technology type, will be introduced in 2012. Air source heat pumps (ASHPs) appear to have been singled out and will be the biggest loser. The decision to provide a one-off cash payment of £850 for an ASHP today, without any tariff information for next year, could be counterproductive. ASHPs are as good as any other renewable technology when used correctly and we worry that this uncertainty may lead customers to move away from this technology.'

Mark McManus, managing director of Stiebel Eltron, is positive about the RHI and said 'Anything that promotes renewable energy is to be welcomed'. He added: 'We understand that the RHI will take time to settle in, and though it may not be perfect to start with, it is essential that the government and the green industry supports the RHI and work together to make sure it does not meet with any delays. The public needs to be incentivised to use green energy and hopefully the RHI, together with the Green Deal in Autumn 2012, can be the ace up the sleeve for the renewable sector.'

Thomas Farquhar of Easy MCS thinks the RHI is a huge step forward for the industry, and said: 'Reading between the lines it appears that although most people may think the Domestic market is being neglected until 2012, the DECC appears to be trialling the Renewable Heat Incentive with the commercial market thus allowing them to iron-out all the creases before hitting the domestic market in October next year.'

Mr Farquhar added: 'On the issue of Air Source Heat Pumps we I do not see this as having major impact on the industry as the Government has shown its support for the technology in the upfront payments (RHIPP) being given... We are speaking to increasing numbers of Heat Pump, Biomass and Solar Thermal installers on the back of this announcement and the feedback is not one of concern but one of positive anticipation.'

Richard Smith, managing director at Verdo Renewables, is also positive about the scheme: 'Presently, 90% of the wood pellet output at our two plants in Grangemouth and Andover is exported. The RHI will allow us to start using UK wood pellets in UK boilers, as it will unlock significant commercial investments in our sector. In a time of very difficult economic conditions, this will provide welcome green jobs and support high technology routes to the low-carbon economy.'

Woodpecker Energy UK, a full service provider of domestic and commercial biomass boilers, has also welcomed the announcement. Tim Rook, executive chairman, said: 'Biomass heating systems can play an important role when it comes to shifting away from fossil fuels, reduce our carbon emissions and encourage growth in the renewable energy sector. We are delighted that the Government has now announced the details of the Renewable Heat Incentive, and that the non-domestic sector is set to benefit from this year onwards. We are proud to say that Woodpecker Energy is the only MCS accredited UK installer and manufacturer of wood pellet boilers that is RHI ready.'

Patrick Sherriff, marketing director of Geothermal International, is delighted the Government has committed to encouraging a national switch to low-Carbon heating. He said: 'Ground Source Heat Pumps have a vital role to play in meeting targets to reduce the UK's carbon emissions by 2050 - the technology is a proven renewable energy heating and cooling solution for the 21st century.'

Boiler and renewables manufacturer, Vokèra is also encouraging the industry to see the positive in the RHI. Marketing director Eleanor Fox, commented that although it was disappointing to see that the domestic tariffs are still yet to be announced, they are pleased that the scheme is now starting to take shape. Ms Fox continued: “Vokèra is also pleased that a range of technologies have been recognised within the scheme. This means homeowners can choose the right solution for their needs, as opposed to feeling pushed into a particular technology because of the financial assistance they could access.”

Graham Meeks, director of Combined Heat and Power Association (CHPA), said: 'This is an important step forward in opening up the opportunity to develop new renewable CHP plant, at a range of scales and in many new applications. By placing an explicit value on renewable heat supplies, we hope to see an end to the wasteful practices that see much of our precious bioenergy resources dumped into the atmosphere through cooling towers.'

William McGrath, chief executive, AGA Rangemaster, is sure that the scheme will be a success. He said: 'The volatility of oil prices, especially in recent days, has led many people to look for ways of gaining some independence in their fuel supply. Over recent years, we have seen an enormous surge of interest from our customers in generating energy from renewable sources - from solar hot water and electricity to wood-burning and biofuel. The RHI, when it is fully up and running, will make choosing renewables like our solar or Eco-Connect systems an even more logical and sound investment for our customers.'

Chief executive of the Energy Saving Trust, Philip Sellwood has said: 'The fact that insulation levels are a key criteria for the RHI Premium Payment is good news.' He added: 'We know that laying the groundwork for a heat technology with basic energy efficiency is absolutely crucial in getting the best possible system efficiencies, bill and carbon savings from domestic installations.'

The regional impact of the RHI will also be felt across the breadth of the UK. Sonya Bedford, head of renewables at Stephens Scown, an Exeter-based law firm, also said: 'In the South West there are more than 100 companies working in the heat pump sector alone so the availability of additional funds to effectively reward people for generating renewable heat is a great opportunity for suppliers, installers and technicians, and will have a positive knock-on effect in the supply chain.'

Darran Smith, product manager at Alpha Heating Innovation commented that the RHI was a mixed bag for the construction industry. He said: 'Following the abolition of the carbon reduction scheme in 2009, many installers were told that systems fitted after the deadline date could still be eligible for grants from future legislation. By the time the RHI rolls in for homeowners this could mean a two year backlog of claims pulling money from the pot even before the new claims go in.' He added: 'Only a small number of households, approximately 25,000, will be able to apply for a special grant from this July to assist with the cost of installing green heating. With the domestic market accounting for a large proportion of the potential renewables sector this could severely rein in the job potential that Chris Huhne anticipates.'

From July the RHI will mean up to 25,000 installations will be supported by a RHI Premium Payment to help people cover the purchase price of green heating systems - this is expected to be around £300 per unit for solar thermal systems. Those taking up the Premium will then be eligible for a RHI tariff from October 2012 when the Government's Green Deal begins, as will anyone else who has had eligible equipment installed from July 2009. Full details of the Premium Payment and how to apply will be announced by the Government in May 2011 and the tariffs will be consulted on later in the year.

View the RHI announcement from the Department of Energy and Climate Change

BLOG: Is the RHI bad for multi splits?
by Graham Hendra Heat pump consultant
11 March 2011


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