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Domestic RHI: What does it mean to a real consumer?

The latest in our series of articles written in collaboration with Ecuity.

The final proposals for the domestic RHI scheme were revealed by Government in July. Following the announcement there was the inevitable flurry of media coverage and industry comment. Most seemed relieved that this announcement has finally been made with a relatively low amount of coverage of how the scheme will work or its potential to succeed.

What most consumers need to know is how the scheme works and who benefits. In other words – what’s in it for them? In the case of a rural home considering a biomass installation the benefits seem loud and clear. 

A good example to illustrate the benefits is a typical 3-bed family home, in an off-gas grid area, currently using an oil boiler to supply heating. The home already has the required cavity wall and loft insulation measures (if not these can be installed using the Green Deal).

For the homeowner to install a biomass boiler would cost around £12,000.  Based on the current RHI tariffs (12.2p/kWh) the homeowner would receive RHI payments of around £1,830 per year for seven years, plus a further £200 in heating fuel savings each year. Therefore the total benefit would be around £2,100 per year with a payback period of six years. Additionally, the homeowner will continue to benefit from the fuel savings (£200p.a) for the lifetime of the system – which is at least 15 years. This example and a similar example for a 4-bed home are shown below.

 

3-bed property

currently using oil boiler

4-bed property

currently using oil boiler

Cost of biomass installation

£12,000

£18,000

Size of system

12kw

15kw

kWh per annum

15,000kWh

24,000kWh

RHI payments per annum

£1,830

£2,928

Fuel savings per annum

£200

£300

Payback period

6 years

6 years

Those interested in the scheme shouldn’t hang about too long. The tariff levels are subject to a budget management mechanism called degression which means that whilst the scheme is here to stay, early adopters may secure better tariff rates. This ‘degression mechanism’ has trigger points to reduce tariff levels gradually as deployment of the technology increases. Until annual expenditure figures are available it is difficult to predict when the first degression might take place but to be sure of receiving the highest tariff it would be prudent to act right away!

James Higgins

Ecuity Consultancy  

Equity's mission is to make sustainable energy mainstream by using our unique strategic insight to connect the commercial day to day reality of running a business and the political challenges of sustainable energy policy making. www.ecuity.com