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If the idea FiTS

FEED IN TARIFFS (FITs) AND THE RENEWABLE HEAT INCENTIVE (RHI)

Introduction

The last Government brought in FITs and proposed the RHI as ways of stimulating the renewable energy market and helping to achieve carbon reduction goals. Together they will radically alter the economics of renewable energy and lead to a double win situation, carbon savings and economic returns on capital invested.

FITs, The feed in tariffs apply to the output from any renewable device producing electricity, eg wind, photovoltaic (PV) or hydro. They are available now.

RHI, will apply to renewable technologies producing heat, including solar hot water, biomass boilers and  heat pumps. Assuming the new Government implements the proposals they should start from April 2011 and installations carried out from 15th July 2009 will be eligible (but see note on deeming on pg 3). Confirmation is still awaited as the RHI wasn’t mentioned in the Conservative/Lib Dem coalition agreement but as it’s not paid for by Government we expect it to go ahead.

Grants,

The grants for renewable electricity generating installations have now been withdrawn. Grants are still available for domestic RHI installations (Until April 2011, see www.lowcarbonbuildings.org.uk) and taking a grant will not affect a householder’s eligibility for RHI payments.

Installers and equipment

All installers and equipment will need to be certified by the Microgeneration Certificate Scheme (MCS). Only new equipment will be eligible, unfortunately this rules out community schemes using second hand wind turbines.

Detail of FITs. (see appendix 1 pg 4 for detailed figures)

FITs are paid for all the electricity generated regardless of whether it is used directly on site or exported to the grid, this is measured by a generation meter, plus small additional payments (3p/kWh1) are available for any electricity exported, this is normally estimated at 50% of the output unless an export meter is fitted.

Savings are also available if the electricity is used on site.

FITs are still payable even if an installation isn’t grid connected but it is more common to connect to the grid via an inverter which matches the output to the mains enabling exporting and importing. Unfortunately with a grid connected system if the grid goes down then the house system will also need to shut down for health and safety reasons.

The payments vary for the different technologies, they are set to give a fairly standard rate of return irrespective of which technology is chosen.  They are fixed for 20 to 25 years from the date of commissioning, will rise with inflation and are tax free for householders.

Notes

1, 1kWh =one kilowatt hour, a bar of an electric fire on for one hour, or one unit of electricity on your bill.

2, KW peak is the rated maximum output of the system.

The rates paid per kWh generated drop for larger schemes but this reflects savings in installation costs per kW peak2 for larger schemes.

The rates paid will start to drop for new PV and wind installations from April 1st 2012 and will then drop annually but this doesn’t affect householders already signed up. It is anticipated that this degression will be balanced by lower installation costs as the market expands.

DECC have calculated on a return on investment of between 7 and 10%. However there are many factors to take into account, including costs of installation, how much electricity is used directly, the future price of electricity and inflation. We think a 6% return is a reasonable figure to work on but as this is tax free it’s equivalent to 7.5% for standard rate income tax payers or 10% for those on the higher rate. If electricity prices rise substantially in the future then higher returns will accrue. This is a good deal if you have the capital available. However if money has to be borrowed then this would need to be over the long term. Figures suggest a profit could be made (in addition to paying the capital and interest) at current interest rates but there is obviously a risk as to future interest rates.

FIT technologies,

Photovoltaics (PV) are reliable and predictable. Shading should be avoided and a south west to south east orientation is best, ideally on a 300 .  They are normally mounted on a pitched roof but could be on a frame. Costs are between £4,000 to £5,000 per kW peak. 1 kW peak would cover about 8m2 and would produce about 800 kWh/year. The current FIT rate is 41.3p/kWh for systems up to 4kW peak. However with a domestic system a large proportion (up to 80%) of this will be exported to the grid unless there’s something like a home office use during the day. There shouldn’t be much maintenance over 25 years apart from probably replacing the inverter once.  
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Wind, is much more unpredictable. Estimates of wind speed for each km square in the UK are available from DECC see www.decc.gov.uk/en/content/cms/what_we_do/uk_supply/energy_mix/renewable/explained/wind/windsp_databas/windsp_databas.aspx,

but actual wind speeds for a proposed site will need to be measured. (see www.powerpredictor.com or www.windandsun.co.uk ) .

We don’t recommend any turbine that attaches to a building and tower mounted turbines ideally should be 80 metres away from buildings and trees.  Installation costs vary more than for PV but are around £5,000 per kW peak with about 1,800 kW hours produced per kw peak (for a good site). The current FIT rate is 26.7p/kWh for systems between 1.5 and 15kW peak. More of this is likely to be used directly than for a PV system as there’s more generated in the evening and during the winter when domestic loads are higher. Maintenance costs will be higher than for PV.

Hydro is still fairly uncommon and it’s difficult to find suitable sites. Costs vary widely as they have more to do with the building works needed than the turbine itself, but will be at least £5,000/kW peak, producing around 4,000kWh/ kW peak.  The current FIT rate is 19.9p/kwh for systems up to 15kW peak. Regular maintenance costs will need to be allowed for.

Details of RHI

Please see the section on the current status of the RHI on pg 1.

The RHI draft tariffs show an estimated return for all technologies of 12% apart from solar hot water at 6%. As per the FITs actual returns could be slightly lower than this. The tax situation hasn’t been clarified but they’re likely to be tax free for householders. No arrangement has yet been made for degression, (see para at top of this page), this will be considered at the first RHI review in 2013.

Payment of RHI for domestic installations will be calculated on a deemed heat demand for the property using a SAP rating, as seen in an Energy Performance Certificate, or similar, but assuming at least 150mm of loft insulation and cavity wall fill where appropriate. Unfortunately this could dampen enthusiasm for higher energy efficiency measures as these could reduce the deemed load and the accruing RHI payments. The details of this deeming are still being developed.  Installations completed before the RHI starts (in April 2011?) will need to have figures from two installers showing an estimate of heat load (using SAP) and if the installation includes solar hot water how much of the hot water demand this should satisfy.  Larger schemes may be metered instead.

The proposed tariffs again vary for different technologies, for small installations they will be,

RHI Technologies (no attempt is made to give price estimates apart from solar hot water)

Biomass boilers could be pellet, wood chip or log. Wood stoves (even with a back boiler) are excluded. Wood chip and log are only normally used for larger properties or district heating but fairly small pellet boilers are available, either manually or automatically fed. There can be issues of maintenance and fuel handling. Bulk pellets are reckoned to be about 25% cheaper than oil before any RHI payment is taken into account, chip and logs are cheaper still. District heating schemes will probably get a higher tariff paid.

Ground source heat pumps (GSHP) work best with a well insulated building and underfloor heating. Best practice could give a coefficient of performance (COP) of 4 (ie 4 units of energy out for every one used) but this is unusual and shouldn’t be counted on. A COP of 2.5 to 3 is more likely. As 7 pence is paid for every kWh of heat load this would give 17.5 to 21p for every unit of electricity actually used.

We recommend a biomass solution is considered before going for a GSHP but it can be a viable option in some circumstances and where less maintenance and fuel handling is required.

Air source heat pumps (ASHP) are basically air conditioning units run to provide heat. They’re more commonly used for single room applications rather than whole buildings. They are les efficient the colder it gets outside so are more useful in temperate climates. They can be visually intrusive and noisy. If used as  air conditioning units then any savings from the heating season will be offset or even exceeded by the cooling load in summer.

Solar Hot Water (SHW)

These can be of a flat plate or vacuum tube construction. Vacuum tubes are more efficient but more expensive. SHW is usually roof mounted but can be on a frame, need to face South West to South East and be non shaded to get maximum output. They usually require a larger hot water tank fitting, with multiple connections. They can’t be installed with most combination boilers (those without a hot water tank) and  those that can have SHW added will need a tank fitting which raises the cost. Installation costs from £3,000.  Prior to RHI SHWwas only worthwhile if you use enough hot water which was unlikely for a one or two person household. The output for a standard domestic system will be around 1,500kWh/a which would earn RHI payments of £270 plus the fuel cost saved.

If you have any questions or want details of local accredited suppliers do get in touch with us.