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A Financial Incentive Scheme

The Renewable Heat Incentive (RHI) is a financial incentive scheme that pays you a tariff depending on how much heat is used. It started in 2011, and can apply to heat pumps and biomass. There are both domestic and commercial schemes, these have different time periods, typically 7 years for domestic and 20 years for commercial. Some schemes are ‘deemed’, where the expected heat use is calculated and a fixed payment is made. Otherwise, the heat is metered (measured) and the payment is based on the meter reading.

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What to Expect

To give an approximation of what you might expect, look at the chart below. You can do your own calculations in a similar manner.

In this example, we consider a typical house using 15,000 kWh (units) of heat. This would currently cost around £750 per year if heated by mains gas or oil.

The RHI payments are based on the quantity of heat being extracted from the environment. This is the ‘renewable’ part, and a bit less than the 15,000kWh consumed in our example house.

The current annual payments for Air source and Ground source could work out at around £1,000 and £2,100 respectively. This would be available for 7 years on the domestic tariff.

The price of heating oil has been low for many years now, and we can now assume gas and oil to be around the same. There seems no point in trying to be too accurate here estimating expected fuel costs since we don’t know what gas and oil prices will be 1 year, let alone 10 years hence.


Air Source Heat Pumps

Domestic Renewable Heat Incentive

Air Source Heat Pumps
Up To £12,000
of Government Funding

Please note, grants cannot be applied for retrospectively towards existing systems.

Air source heat pumps are a form of renewable energy technology which take the warmth from the air outside (even when it’s quite cold) and use it to heat the home. There are two types of air source heat pump.

Air-To-Water systems heat water which is then circulated around the home via radiators or an underfloor heating system. They can also be used to heat water in a storage tank for the bathroom or kitchen.
Air-to-air systems typically use fans to circulate warm air around the home and cannot be used to heat water.
With the government grants that are available through the Renewable Heat Incentive the install costs can partially or fully recouped subject to survey. Grants of up to £12,000 are available for new installations. Grants cannot be applied for retrospectively towards existing systems. Finance can also be provided for UK residents as well as interest free loans through the Energy Saving Trust (Scotland Only)

How do they work?

Using various pieces of technology – namely an evaporator coil full of refrigerant fluid, a type of pump called a compressor and a heat exchanger – heat pumps absorb the warmth in the air outside and release this heat into air or water, which is then distributed around the home. They can do this even when the temperature outside is very low. Fridges work in the same way, only in reverse. They use the same technology to draw heat out of the air in the fridge, which is why the space behind fridges feels warm.

Where Do Air Source Heat Pumps Work Best?

A well-insulated home with high standards of air-tightness is preferable to get the most of your air source heat pump. This is because heat pumps are most effective in homes which warm up quickly and are good at keeping heat in. Please be aware that air source heat pumps therefore aren’t for every home. A tech survey by a qualified assessor is essential before install as it could have a detrimental effect on your electric bills if your house isn’t correctly insulated.

Renewable Heat Incentive

The Renewable Heat Incentive (the RHI) is a payment system in England, Scotland and Wales, for the generation of heat from renewable energy sources.

The RHI operates in a similar manner to the Feed-in Tariff system, and was introduced through the same legislation – the Energy Act 2008. In the first phase of the RHI cash payments are paid to owners who install renewable heat generation on a quarterly basis over 7 years and in many instances can far outweigh the install costs. Combine this will the savings on heating bills and it gives an excellent return on investment which is usually re-paid in 4-5 years.

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