HM Insights

Heating up your homes using the Domestic Renewable Heat Incentive

The on-going battle against fuel poverty has been helped by the introduction of the Domestic Renewable Heat Incentive (RHI), which was launched in April this year by the Department of Energy and Climate Change.

Registered Social Landlords (RSLs) are among those who could use the RHI to deliver warmer homes and cheaper fuel bills for tenants across Scotland.

The Domestic RHI is a UK government financial incentive to encourage the use of renewable heating systems by paying people for the green heat they generate for their homes. Those who join the scheme will receive quarterly payments for the amount of heat their systems produce over a seven-year period.

Who May Join?

Anyone who meets the eligibility criteria may apply for the scheme. This includes homeowners, private landlords, RSLs and people who build their own homes. It is available to households both on and off the gas grid.

The renewable heating system must only heat a single home which has, or is capable of, obtaining a domestic Energy Performance Certificate (EPC). The EPC is the proof needed by the Government that the property is assessed as a domestic "dwelling". Without this, it is not possible to join the scheme. If the property does not already have an EPC, then this will be issued as part of the Green Deal assessment.

The Green Deal is a separate government initiative to encourage homes to be made more energy efficient. Before applying to be part of the domestic RHI scheme, a Green Deal assessment of the property must have been carried out (the only exemption to this requirement is for self-builders since these self-built houses will have been built to recent building regulation standards). If recommended in the Green Deal Advice Report, loft and cavity wall insulation must be installed, and then an updated EPC must be obtained to verify that such insulation has been installed.

What Type of Heating Systems are eligible?

The eligible renewable heating system types are:

  • Biomass-only boilers and biomass pellet stoves;
  • Air source (to water) heat pumps;
  • Ground source (to water) heat pumps;
  • Floor thermal panels (flat plate or evacuated tube only);
  • All heating systems must provide space heating (i.e. heating rooms in the house) and/or hot water heating through a liquid medium.

Other Requirements

An overview of the other criteria is as follows:

  • The renewable heating system must be certified under the Microgeneration Certificate Scheme (MCS);
  • The heating system must have been commissioned (the date is on the MCS Certificate) on or after 15 July 2009, and no part of the system used to produce heat can have been used before the first commissioning date (i.e. when the installer tested and signed off the system);
  • The application to join the domestic RHI must be made within 12 months of the commissioning date of the heating system. If the system was installed before the domestic RHI launched (9 April 2014), then the application must be made within the first year i.e. before 9 April 2015;
  • The applicant must have made some financial contribution to the equipment or installation costs of the heating system;
  • If the heating system requires metering to be eligible for payments, then an eligible meter or meters must be installed.

In the case of RSLs, in relation to the requirement to contribute to the cost of the heating system, the RSL can use its reserves or an existing loan facility towards the purchase of a renewable heating system. However, if a separate grant is obtained to install such a heating system, then this will be considered a grant from public funds and the amount received will be deducted from tariff payments.

RSL responsibilities

RSLs and also private landlords have particular responsibilities in relation to the Domestic RHI, compliance with which is necessary in order to receive the payments under the scheme.

These obligations cover (i) continuing to own the heating system (so if a property is subject to the 'right to buy', OFGEM must be notified) (ii) keeping the heating system in good working order (iii) obligations in relation to changes to the heating system itself and also obligations in relation to any change in circumstances affecting the eligibility to receive payments (for example, if the amount of time the property is occupied changes from 183 days a year or more, to less than 183 days a year, then a meter will need to be installed) (iv) using only permitted fuels for biomass systems and (v) ensuring the scheme can be effectively administered and evaluated by way of providing information or access to a property for the purposes of an audit.

A word on the Non-Domestic RHI

If the Domestic RHI does not apply, then consideration should be given to whether the Non-Domestic RHI might. Generally, it applies to renewable heating systems which are installed in industrial, commercial or public premises - for example, large businesses, hospitals and schools. It also cover systems heating more than one home, such as blocks of flats, or district heating systems where one heating system serves multiple homes. Different eligibility requirements apply to the Non-Domestic RHI and there is a separate application system.

Reaction to the Domestic RHI

The introduction of the Domestic RHI has been welcomed by the Scottish Federation of Housing Associations (SFHA) and also by Energy Action Scotland.

The SFHA commented that a number of their members have already invested in renewable heating systems which have been more expensive to install than gas central heating systems or electric storage heating. The Domestic RHI should help RSLs with homes in rural areas to invest in renewable energy and cut the fuel bills of tenants.

The SFHA did raise one issue of concern in relation to the requirement under the scheme for a Green Deal assessment to be carried out (please see above for further detail). This requirement may be reasonable for individual homeowners but the view of the SFHA is that this is unnecessary for social landlords with good knowledge of their stock and who have already invested in low cost energy-saving measures where possible.

Energy Action Scotland welcomed the launch of the Domestic RHI and commented that it will be of particular importance to rural off-gas communities as people living in those areas have often not had access to the cheaper fuels.

Find out more

To discuss how the Domestic RHI may help you or to explore how we might help you take advantage of the Domestic RHI, or to obtain information in relation to district heating systems or solar PV projects, please contact Elizabeth MacGregor at [email protected] or on 0141 227 9645.

Elizabeth MacGregor is an Associate in the Public Sector team at Harper Macleod LLP.