Simon Lomax discusses the potential impact of the revised Renewable Heat Incentive (RHI)
In December, the Department of Business, Energy & Industrial Strategy (BEIS) published its long-awaited response to the March 2016 Renewable Heat Incentive (RHI) consultation and revealed its proposals for the revised scheme, which is expected to launch in April.
The outlook for ground source heat pumps (GSHP) is promising and there is every reason to expect a substantial increase in sales over the coming years.
Within the BEIS response is the encouraging statement that ‘The Government recognises that GSHPs are likely to be a strategically important technology for decarbonising heat, and anticipates potential for significant growth in deployment of this technology through the period to 2050.’
Of course, many observers would argue this vote of confidence is long overdue; the Committee for Climate Change’s Fourth Carbon Budget called for 4 million heat pumps to be installed at residential properties by 2030. Right now, the UK’s heat pump estate numbers no more than 200,000 installations and deployment has remained static over the past few years at around 18,000 units per annum.
Against this backdrop, some targeted action from Government and innovative approaches from industry is clearly necessary to deliver the 2030 and 2050 carbon targets:
Most commentators believe that action needs to be a blend of ‘carrot’ and ‘stick’ measures and Government has finally conceded that the ‘carrots’ delivered via the RHI have to be awarded to the most deserving cases. For this reason, the revised RHI will introduce a heat demand limit which will decrease returns for installations at large country homes and focus more spend on smaller dwellings.
The Government is keen to boost housebuilding and improve affordability, thus introducing the Right to Build Act in October 2016. Local Authorities now have a legal duty to make sufficient plots available to meet demand on their Right to Build register. The custom and self build sector is forecast for huge growth – research commissioned by the National Custom and Self Build Association shows that 53% of people would like to build their own home at some stage, with 1 million wanting to get started in the next 12 months. With the domestic RHI available to 2021, ground source heat pump installers are set for a prosperous future with the custom and self build sector.
A big opportunity for GSHP sales will rest with installations that can qualify for the non-domestic RHI. Any installation featuring an individual heat pump at two or more residential properties served by a common ground array will qualify as district heating and be eligible for the 20-year non-domestic RHI income stream. By installing a heat pump in each dwelling, this removes the need for a plant room and provides each property with their own energy bill, allowing them to switch suppliers at their will.
This system architecture will appeal particularly to social landlords, and new funding and fulfilment models should create interest in both the new build sector and small retrofit community schemes.
BEIS expects significant uptake with the consultation response revealing ‘The Government is keen to support the deployment of GSHPs making use of shared ground loops’. There are compelling reasons; communal ground arrays are typically less expensive because it is usually possible to drill a smaller number of deeper boreholes, and they are more reliable as you eliminate the risk of an exceptionally high heat use property exhausting its individual borehole.
To support shared ground loop deployment, the revised RHI will feature a very important refinement; for residential district heating installations, RHI income will no longer be based upon metered heat consumption. Instead, the deemed heat consumption will be taken from the Energy Performance Certificate, which mirrors the established protocol for the domestic RHI.
This change is crucial. It will result in lower costs as there is no need to supply, install and maintain expensive metering/communications equipment. Further, it will be possible to establish the level of return at the outset of any project.
Most importantly, the returns will be appealing and far more generous than those under the 7-year domestic RHI scheme.
Given the continued absence of any mandatory measures to demand the specification of heat pumps, the most notable ‘stick’ remains compliance with building regulations (for new builds and major renovations) or the need to meet SAP rating targets for social housing stock. Here the news is helpful too. The Government is currently consulting on possible changes to SAP and has proposed some significant changes to the carbon emission factors linked to various fossil fuels.
The carbon intensity of electricity has been falling because of the increasing influence of renewable sources and the reduced reliance on coal in the generation mix. These lower factors will significantly improve the SAP rating whenever a heat pump is installed so the technology will be viewed more favourably by architects and energy consultants.
Whether it’s the concern of what Brexit may do to import costs for materials, or the influence of lifestyle or sustainability choices, buying British – and sourcing local products and labour – is an emerging important factor for all markets. Having British made products in your repertoire could bolster your opportunities, and be the deciding factor that sets you apart from your fellow competitors to secure new business.
All in all there has never been a better time to embrace ground source heat pumps, especially as the increasing heating oil price over the past few months has again focussed interest on the technology.
Simon Lomax is managing director for Kensa Heat Pumps