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The changes to the Domestic Renewable Heat Incentive (RHI) explained

The changes to the Domestic Renewable Heat Incentive (RHI) explained

You may have seen that changes have been made to the Domestic RHI, the government incentive which provides homeowners with cash payments as a reward for switching to a more environmentally friendly heating option. We’ve gone through the many complicated documents relating to this and compiled a short, simple summary of the immediate changes and how these will affect those who already have renewable heating, and those considering it.

The Domestic RHI was originally launched in April 2014 to encourage a shift to low carbon heating and is administered by the official regulator Ofgem. It was introduced to support households choosing to change to renewable heating and provides quarterly payments for seven years for the amount of clean, green renewable heat produced.
The government’s Department of Energy and Climate Change (DECC) has now made some amendments to the scheme eligibility and the first set of changes came into force on 1 April 2016. Having studied the report outlining the changes we were pleased to see that both ground and air source heat pumps were seen by the DECC to be strategically important in the long term, compared to other forms of renewable energy. As one of the longest established renewable heating companies in the UK, this is something we have always believed. It is why we chose to specialise solely in becoming experts in the design and installation of heat pumps.
The DECC is currently seeking industry feedback regarding further changes, including a cap on the amount of RHI received, which is anticipated for Spring 2017. We will continue to keep you updated as and when they come into effect.

These are the three key things we have picked out from the immediate changes introduced for this financial year:

1. No more delays for self-build RHI applications

Previously the occupancy requirements needed to qualify for domestic RHI payments did cause some problems for self-builders. In most cases the domestic RHI payments are calculated on the annual heat demand specified for the property’s Energy Performance Certificate (EPC), however if the property was lived in for less than 183 days in a year a heat meter had to be installed to measure the renewable heat used and to determine the payments.The idea behind this was to ensure that Domestic RHI delivered value for money for the tax payer by not overpaying for renewable heating installed in properties which weren’t regularly occupied, for example in second homes. But this did have an unintended impact on homeowners of eligible self-build properties, as they had to wait around 6 months before being able to apply for payments as they were unable to prove that they had lived in their homes for at least 183 days in the year before.
Under the new changes, eligible new build properties will be exempt from the 183-day occupancy requirement in the 12 months before applying for the RHI. However, after that, they will still be subject to the standard ongoing obligations which include declaring each year that the property has been lived in for at least half of the year.

2. Green Deal Assessments no longer needed

Homeowners previously needed to have a Green Deal Assessment (GDA) report to be eligible to apply for Domestic RHI payments. However, not only was this seen as an unnecessary hassle to completing the application, but this particular scheme has now also been closed. Those applying for Domestic RHI will still need to meet minimum insulation requirements of loft and cavity wall insulation and provide a valid Energy Performance Certificate (EPC) which is no more than two years old. But there is no longer the need to have to go through the additional rigmarole of having to complete the GDA as well.

3. RHI payments now adjusted in line with Consumer Prices Index

There has also been a change to the way in which RHI tariffs are changed to reflect inflation. The RHI payments homeowners receive are based on a tariff rate per kWh of the amount of clean, green heat produced. The current tariffs for heat pumps are set at 7.51p/kWh for Air Source Heat Pumps and 19.33p/kWh for Ground Source Heat Pumps. For most homeowners these tariffs will be used to calculate a payment based on an estimated heat output for the home, although in some cases meters need to be installed.
If you are receiving the RHI you will be locked in to whatever tariff rate was in place when you first applied and this is the rate you will receive for the seven years. Previously this was adjusted for inflation using the Retail Price Index (RPI) each year. However, those receiving payments from 1 April 2016 will now see the tariffs rise annually in line with the Consumer Prices Index (CPI) instead of the RPI. Both the RPI and CPI measure changes based on buying a ‘basket’ of products but different calculations and measures are used. While CPI is often lower than RPI, your payments will still continue to increase each year in line with inflation, to ensure that the real value is maintained. Homeowners will still usually cover the cost of installing renewable heating within five years. For example, a homeowner of a typical four-bedroom house would receive around £3,400 a year if they had a ground source heat pump or a £1,300 a year for an air source heat pump, which costs less to install.
To read more about the changes to the Domestic RHI visit: https://www.gov.uk/government/publications/renewable-heat-incentive-amendments-to-scheme-eligibility/renewable-heat-incentive-amendments-to-scheme-eligibility