Renewable Heat Premium Payment launches on 1st August

If you want to 'green' your household heating and potentially reduce your energy bills over the long-term then now is the time to start thinking about doing it.  But it's a "first come first served" deal and it only lasts until end of March 2012! Discount vouchers are being made available from 1st August 2011 that will make your up-front payment a bit less painful.  The scheme is called the 'Renewable Heat Premium Payment' or RHPP and is a fore-runner to a bigger scheme called the Renewable Heat Incentive (RHI) that is planned for introduction to domestic households from October 2012.

The first tranche of funding for householders wanting to switch to renewable heating was announced yesterday (21st August 2011) by the UK government. £15m of Treasury cash has been allocated to help up to 25,000 homes in England, Scotland and Wales install heat pumps, biomass boilers and solar thermal panels. Applications for the 'Renewable Heat Premium Payment' scheme will open on the 1st August and an information website  has been set up to provide full information and help householders apply. 

But before you get too excited, look out for the small print!  The vouchers are only likely to give you a 10% discount on your solution - maybe significantly less.  So it's hardly that generous. The focus is also on supporting installations in 'off gas' properties which is important given the energy bills faced by those on oil, LPG and electric heating. Only solar thermal panels attract a grant in 'on-gas' areas. Technology receiving grant support must be registered and installed under the Microgeneration Certification Scheme or Solar Keymark and will be monitored to learn lessons ready for the roll out of a full RHI scheme next year.

The value of the vouchers are:

Ground source heat pump: £1250 (voucher valid for 6 months - only off-gas homes) - the voucher represents a 6%-13% discount off a project that typically costs £10,000 - £20,000

Air source heat pump: £850 (voucher valid for 5 months - only off-gas homes) - the voucher represents a 6%-9% discount off a project that typically costs £10,000 - £15,000.  We think RHPP (like the RHI) will only cover air-to-water rather than air-to-air heat pumps as the latter are more like £3,500 to install and the voucher would then be far more attractive!

Biomass boiler: £950 (voucher valid for 6 months - only off-gas homes) - there are lots of variables for such a project with labour costs of installation being a more significant contribution that will differ in each case.  Log and wood chip solutions are significantly cheaper than wood pellet based solutions.  Pellet-based boiler solutions are more common and can typically cost £6,000 to £25,000.  So this voucher represents a 4-16% discount off such a project.

Solar Thermal hot water panels: £300  (voucher valid for 3 months - available to all homes) - represents a 6-8% discount off a project that typically costs around £4,000 - £5,000

The value of the vouchers is apparently based on the principle of covering 10% of the total cost of a solution but it's clear from our figures above that it could be much less than that.

The scheme, even in this pre-RHI form, is certainly long overdue.  The key question - if you were contemplating doing such a project but sitting on the fence because of costs, would a 5-10% discount make you take the plunge?  Perhaps unlikely.  For someone contemplating a solar thermal project, you might even wonder whether a 300 quid voucher was worth the application and feedback hassle!  

It seems fairly unlikely the incentive will have any 'extra' impact other than speeding up the process for those who were already going to do it anyway.  For these fortunate people they can now do their projects for slightly less - provided they fill in their feedback questionnaires.  It does seem like the government have decided they need more detailed information to get the RHI scheme right - "so we'll offer those of you already keen to do this a token discount in return for you telling us how and whether it works".

Given the numbers of people on the verge of doing a project or, indeed, those in the middle of a project, there probably will be a bit of a scramble for grants in just over a week's time.  That said, a number of eligibility conditions may prevent getting first in line. For example, there is a requirement for energy efficiency work in the form of loft installation and cavity wall insulation 'where practical' to be completed BEFORE applying. There is also a need for planning permissions to be secured IN ADVANCE of applying. This could be more problematic as getting planning consent can take time and is dependent on having a fairly good idea of what you want to do.  So you'll need to be in later stage discussions with suppliers if not appointed one of them. Planning requirements also vary across the UK.  Some biomass heating and heat pumps installations and even some solar panels (for Conservation Areas in Scotland and Wales and on Listed Buildings) require planning consent.  You don't have much time to get your 3 quotes, appoint a supplier and submit a planning application!

John Bryce, one of the directors of Perthshire Biofuels, a company that installs domestic biomass heating solutions, gave a postive response to the RHPP scheme saying "we've waited a long-time for something like this.  Hopefully it will provide an incentive to those those living off the gas-grid."  But, he warned, "the value of the vouchers are not exactly significant in terms of overall cost and it's a pity there is such a short window to take advantage of them.  Obviously the full RHI scheme is coming but no-one knows what level of benefit this will offer nor do we know the eligibility criteria - so people can't base decisions on this.  People are left wondering whether their solution will qualify or not from October 2012 - and what qualification actually means in terms of financial returns.  About 50% of our projects are with older properties where measures like cavity wall insulation are unsuitable. Their current '..where practicable' clause in 'energy efficiency measures must have been implemented where practicable' is vital to retain if this scheme is going to address those living in older properties.  Otherwise the whole thing is only going to be relevant to people in more modern housing.  This is very limiting in the sort of off-grid rural areas we operate in."  

John also warns people about false expectations over the cost of running a biomass heating solution. "Right now these solutions are unlikely to cut your bills unless you have your own source of fuel - like a woodland - and the necessary facilities to turn this into fuel.  However, over time, with oil and electricity prices rising as we expect and the price of biomass fuel falling as supply increases, a biomass heating solution should become significantly more cost effective to run and, of course, offers a much greener solution in terms of carbon emissions."

Mikael Lideborg, director of Lowergy, air source heat pump specialists, agrees the RHPP is a token contribution that's unlikely to make much impact.  He says a key problem is likely to be the relatively small number of accredited installers of these technologies.  "They tend to be larger companies that are located in urban areas.  Yet the solutions are required in more remote off-grid areas.  These areas are largely supported by small service companies.  Potential customers will find it tough to track down a local installer that cares about their reputation in the local area.  Quotes may be higher than expected due to inclusion of transport costs to service customers."

For anyone that has installed such solutions since 15th July 2009, you will also qualify for RHI support from October 2012 - provided you meet the (currently unpublished) eligibility criteria.

Right now it's all about the timescales of these schemes - we would assume the Government will use the RHPP scheme to get good feedback from real projects.  Then, at some point in late Spring - Summer 2012 they will tell us all how the RHI is going to operate.  If you already have a relatively well-insulated, energy-efficient home but would like to install greener heating for environmental reasons then taking advantage of the RHPP makes a lot of sense and, chances are, you will qualify for the RHI when it arrives.  If you have an older and/or less efficient property but still want to take action now then there's a risk you may not qualify for RHI - if you are 'cost-sensitive' like many of us then it may be more sensible to wait until Summer 2012 when we should all know more.  The financial incentives of the RHI scheme should be a lot more appealing than those of its baby brother RHPP.