The aim of the RHI is to increase the amount of renewable energy production in the UK by encouraging initially non-domestic users to install renewable energy technologies for heating buildings or for processing activities. The scheme is managed by OFGEM, the energy regulator.  Here’s our 10 point summary to get you geared up and ready to go.

1) Where to start?

It’s important to get to grips with the intricacies of the scheme. We strongly recommend that anyone intending to apply to the RHI should read the detailed guidance on the OFGEM website: www.ofgem.gov.uk/rhi. This blog should not be seen as a replacement for reading the guidance in full.

You can also phone the enquiry Line on 0845 200 2122 or email RHI.Enquiry@Ofgem.gov.uk

2) What technologies are covered?

The RHI covers biomass heating, solar water heating, heat pumps, anaerobic digestion and the heat element of Combined Heat and Power (CHP) projects. In this blog we deal with biomass heating.

3) Which types of projects are covered?

Phase 1 of the scheme deals with non-domestic users such as offices, hotels and schools.  Crops for Energy have so far been involved in the following projects:

• A farm enterprise using miscanthus to provide district heating to eight holiday lets, a farmhouse and a swimming pool
• A farmer using miscanthus to provide heating to two chicken barns and two farmhouses
• A farmer using miscanthus to heat a suite of offices and a farmhouse
• A district heating scheme involving a manor house and six housing lets

The heat use is deemed eligible if it used to provide heating to an enclosed space or “building” through radiators or underfloor heating. A building is “any permanent or long lasting building or structure which except for doors and windows is wholly enclosed on all sides with a roof or ceiling and walls“. Moveable buildings such as porta-cabins, static caravans, greenhouses and shipping containers could be eligible as long as they remain in the same place.

Eligible uses include:

• Single non-domestic buildings (e.g. hotel or office)
• Multiple domestic dwellings (e.g. a district heating scheme that supplies a number of houses or a blocks of flats)
• Multiple non-domestic buildings such as a shopping centre
• Mix of domestic and non-domestic (flats and shops)
• Heating hot water
• Heating a process enclosed within a building such as pasteurisation in a dairy.

It is possible to use heat produced from an eligible system to dry woodfuel.  This would work nicely for a farm producing short rotation coppice (SRC).  SRC is harvested wet and could be dried to produce a premium grade wood chip.  The technology used to dry woodchip could also be used to dry cereal grains.

In order to be eligible the installation must also:

• Be new at the time of installation
• Be used in one location during its lifetime
• Use liquid or steam as heat delivery medium (hot air is not permitted)
• Have been installed and commissioned after 15th July 2009
• For boilers up to 45 kilowatts (kW), the boiler and installer must be Micro Generation Certification Scheme (MCS) certified
• Be financed without grants or public money (any grant received prior to the end of September 2011 must be repaid)

Larger projects (greater than 1 megawatt (MW) in size will need to provide a quarterly report on the fuel used in order to comply with sustainability criteria.

4) Which types of projects are not covered?

The following are classified as ineligible uses:

• A biomass boiler providing heat to an individual domestic dwelling (see point 10)
• Heating of external surfaces to prevent frost or cold temperatures
• Underground heating of open spaces such as football fields
• Heating of outdoor swimming pools
• Tents or polytunnels which are erected on a temporary basis
• Heat used to generate electricity or process internal heat

5) What is the rebate worth?

Quarterly rebates are paid to the project owner based on the capacity of the boiler and its quarterly meter readings.  The scheme provides the best return for small boilers under 200 kW.  In this case the first 1,314 hours that the boiler works each year (15% capacity factor) will provide a rebate of 8.3p/kWh.  Above this number of hours the rebate is 2.1p/kWh. (Please note these tariff levels were increased by 4.8% in line with the Retail Price Index on the 1^st April 2012). Bear in mind that history suggests that later phases of similar schemes (i.e. Feed in Tariffs) tend to be less lucrative. Phase 2 of the scheme will be rolled out in the summer of 2013 so project developers who want the best returns should act now.

Tariff name	Eligible technology	Installed capacity (kW)	Tariff rate (pence/kWh)	Duration (yrs)	Support calculation
Small biomass	Solid biomass (includes: wood chip, wood pellet, wood logs)	Up to 199 kW	Tier 1: 8.3 Tier 2: 2.1	20	Metered: Tier 1 applies annually up to tier break, tier 2 above the tier break. The tier break is 1,314hr x installed capacity (kW)
Medium biomass		200 kW to 999 kW	Tier 1: 5.1 Tier 2: 2.1
Large biomass		1000 kW and above	1.0		Metered

RHI phase 1 tariff levels from 1^st April 2012

6) How will the heat used be measured?

Approved heat meters will be required to measure the eligible heat produced. The requirements for metering will depend on whether a plant is simple or complex. An installation is “complex” if:

• the heat generated by the plant is used in more than one building
• the heat is supplied to a mix of eligible and non-eligible uses (i.e. a hotel with an outdoor swimming pool)
• if heat is distributed using steam or comes from a CHP plant

OFGEM requires that a heat meter is installed in each eligible building. This ensures that no rebate is paid for any ineligible use or for any losses from the heat mains. As part of the accreditation process (See point 9) OFGEM require that all complex projects have an Independent Metering Report produced by a competent person. You should be able to get this done by your installer but first read “Independent Report on Metering Arrangements” on the OFGEM website. You cannot submit your application unless you have this report.

Once a project has been accredited the owner will report all meter readings to OFGEM on a quarterly basis or monthly for larger projects (>1MW). Meters need to be calibrated according to manufacturer’s instruction. The owner of a project needs to be able to confirm meters are in full working order and perform annual checks and servicing.

7) What is the likely return from a project?

Examples of potential returns for different sized projects under the 200 kW threshold are summarised below.

Boiler rating	70 kW	150 kW	199 kW
Total annual heat demand to be met from biomass boiler	100,000 kWh	200,000 kWh	320,000 kWh
Number of operating hours	1,429	1,333	1,608
Tier break	70kW x 1,314hrs = 91,980 kWh	150kW x 1,314hrs = 197,100 kWh	199kW x 1,314hrs = 261,486 kWh
Tier 1 tariff revenue	91,980 kWh x 8.3p = £7,634.34	197,100kWh x 8.3p = £16,359.30	261,486 kWh x 8.3p = £21,703.34
Tier 2 tariff revenue	(100,000 – 91,980) x 2.1p = £168.42	(200,000 – 197,100) x 2.1p = £60.90	(320,000 – 261,486) x 2.1p =£1,228.79
Total annual RHI revenue (Tier 1 + Tier 2)	£7,802.76	£16,420.20	£22,932.13

Potential returns from Phase 1 of the RHI

8) Emissions limits

All biomass heating systems which are designed to burn clean woodfuel are eligible for the RHI. Other biomass fuels such as biomass waste, straw, grain, contaminated wood etc will also be eligible subject to certain additional criteria.

Under Phase 2 of the RHI all accredited installations must meet emission limits of 30 grams per Gigajoule (g/GJ) for particulates and 150 g/GJ NOx.  It should be possible to achieve this with good quality woodchip in more efficient boilers.  By contrast, miscanthus is particularly dusty and produces a high level of particulates (around 100 g/GJ) so is likely to miss this target.  However, it might be possible to achieve these stringent requirements by using ceramic filters in the flue. It is suggested that ceramic filters can significantly reduce PM10 (particles measuring 10 micrometers or less) and PM2.5 from boiler emissions.  However, this would add around 10-15% to the installed costs of the boiler.

Both SRC and miscanthus have higher nitrogen contents than typical woodchip and they might fail to meet the grade on this front as well.  Currently there is no emissions control technology that is capable of cost effectively reducing NOx emissions from smaller biomass boilers.  However, until now there has been no incentive for manufacturers to address NOx emissions so once addressed it should be possible to achieve these limits.

Using SRC and miscanthus is not a problem under phase 1 of the RHI. For simplicity and to save on the capital costs associated with the emission control technology, growers and end users wishing to use these fuels should consider installing a boiler as soon as possible.

9) Getting a project accredited

In order to be eligible for RHI rebate payments a project developer has to go through an accreditation process with OFGEM. For installations less than 1MW, the owner of the plant will be able to make an application on the OFGEM website as soon as the installation is commissioned. The accreditation date will start from when the application is submitted or from the date on which all necessary information is received.

It is possible to submit a project (>200kW) for preliminary accreditation once planning permission has been gained or appropriate evidence provided to illustrate that it is not required. The aim of this is to provide reassurance that a scheme meets all current eligibility criteria prior to the installation of the project. This does not however guarantee that RHI rates will be fixed or that OFGEM will change the rules of the scheme between preliminary and actual accreditation.

10) What about RHI rebates for domestic tariffs?

Phase 2 of the scheme which will also be open for domestic properties is scheduled for launch in the summer of 2013. In the meantime domestic projects can get a voucher towards the cost of installations through the Government’s Renewable Heat Premium Payment (RHPP) scheme. Voucher values depend on the technology and the current fuel used to heat a property. Any householder can get a £300 voucher for solar water heating but only householders off the gas grid can get vouchers of £850 for air source heat pumps, £950 for biomass boilers and £1250 for ground source or water source heat pumps.

A consultation will take place from September 2012 on how to include domestic properties in Phase 2 of the RHI. Currently, there are no details on the proposals surrounding eligibility: i.e. minimum energy efficiency standards. Although there have been no decisions taken on the tariff levels and their duration, industry insiders suggest that it is unlikely that 20 year tariffs will be offered. Tariff levels are also likely to decrease as the scheme matures.

If you like the sound of all this but still feel daunted and would like help at every step of the way Crops for Energy can help! Our turn key management services include:

• Initial feasibility study looking at boiler size, woodfuel requirement, RHI rebate etc
• Production of a project brief and requesting quotes from installers
• Help in understanding the returned quotes
• Negotiating a timetable with the chosen installer
• Production of a woodfuel tender and negotiation of an interim contract
• Applying for an Energy Crops Scheme establishment grant
• Project management of the land preparation, planting and aftercare
• Applying for RHI accreditation through OFGEM

If you would like to get paid to keep warm give Crops for Energy a call on 0844 248 2901 or email us.

Crops for Energy does not make any representation or warranty, expressed or implied as to the accurateness or completeness of the information contained in this blog. All parties must rely on their own skill and judgement in making use of the information provided. Crops for Energy will not assume any liability to anyone for any loss or damage arising out of the provision of this blog.