What is it?
The Non-domestic RHI launched in November 2011 as part of the UK’s commitment to dramatically reduce Carbon Emissions by at least 35% by 2020 and 80% by 2050 (subsequently increased to net zero by 2050). The scheme was the world’s first financial incentive which pays people for generating renewable heat and aimed to revolutionise the way that heat is generated and used in UK buildings.
The Non-domestic RHI pays participants (per kWh) who install and use a renewable energy system to heat the building. It’s expected that heat pump technology, in particular, will play a significant role in the UK hitting their renewable energy targets.
Who is it for?
The Non-domestic RHI is suitable for buildings on and off the gas grid in England, Wales and Scotland. Eligibility spans from commercial businesses, social housing, property development, public sector and not-for-profit.
Rendesco’s training and expertise can help advise if you’re unsure whether your project could quality for the Non-domestic RHI, or if you could benefit from another scheme such as the Domestic RHI or Rendesco Funding.
How does it work?
If a Non-domestic RHI application is successful and follows regulations, the applicant will receive a payment every quarter for 20 years. The payments are administered by Ofgem and are based on:
- The type of renewable heating system – each renewable heating technology has its own tariff, in pence per kWh of heat generated. This tariff is based on its efficiency and expected reduction in CO2 emissions.
- The income calculation is different for each technology depending on the tariff structure but for ground source heat pumps it is as follows:
- The non domestic RHI ground source heat pump tariff for 2019/20 is 9.56p per kWh for tier 1 and 2.85p per kWh for tier 2.
- The tier 1 rate is paid on the first 1,314 hours of heat generation by the heat pump system and the lower tier 2 rate is paid on every generated after 1,314 for the rest of the financial year.
- The tier 1 and tier 2 eligible energy is calculated by multiplying the peak capacity of the ground source heat pump(s) by 1,314 and the result is then subtracted from the total annual energy produced. For example, if you have a peak system capacity of 100kW and total annual energy of 200,000kWh then you would first do 100kW x 1,314 = 131,400kWh to get your eligible tier 1 heat.
- You would then do 131,400kWh – 200,000kWh = 68,600kWh to get your eligible tier 2 heat.
- Finally, multiply the tier 1 energy by the tier 1 tariff and the tier 2 energy by the tier 2 tariff to get the total income from the non domestic RHI scheme. So carrying on the example above, the tier 1 income would be 131,400kWh x £0.0956 = £12,561.84 and the tier 2 income would be £1,955.10 giving a total annual income of £14,516.94.
- Latest tariffs – tariffs per kWh are established by the Department for Business, Energy and Industrial Strategy (BEIS), formerly known as the Department of Energy and Climate Change (DECC) and you can find more information about the non domestic RHI scheme here
What are the benefit of joining the Non-domestic RHI scheme?
- Highest tariff – heat pumps have the ability to generate the most energy due to the size and capacity of the systems compared to biomass and solar PV. The UK government expects heat pumps to significantly contribute to the renewable energy targets and have given the highest tariffs to the technology, as shown in the table above.
- Income generation – On average, the system is expected to have paid for itself within the first five years, providing pure income generation from the remainder of the seven year RHI payment period. Please note, the timeframe depends on the unique system specifications and will be clearer during the consultation and design phases.
- Reduction of CO2 and encouragement of further incentives – Joining a governmental scheme will not only reduce your (and therefore the UK’s) carbon footprint, but it will also show support of renewables, encouraging further budget investment.
- Ongoing benefits of a heat pump – heat pump systems provide reduced energy bills, reduction of a CO2 emissions and a safe, reliable heating system. Learn more about ground source, air source and water source heat pumps.