UK: More Good than Bad News from the British Islands

In March 2013, the UK Government came under criticism for their updated heat strategy when they announced further delays to the Renewable Heat Incentive (RHI) being made applicable to householders. As a stop-gap, it was announced in parallel to extend the householder’s Renewable Heat Premium Payment (RHPP) scheme for another year. In summary, much of the uncertainty about these schemes has been blamed for a 35% drop in UK solar thermal sales. Since then, better news has been offered by the UK Department of Energy & Climate Change (DECC).

Firstly, DECC have released their Early Tariff Review of the non-domestic RHI at the end of May (see attached document). The Review is proposing an increase in commercial tariffs via an industry consultation that has run until 28 June. The following table shows the proposed rates:

Technology

Current rate [pence GBP/kWh]

Proposed
[pence GBP/kWh]

Percentage
increase

Solar
thermal

up to 200 kW

9.2

10.0 - 11.3

9% - 23%

Biomass

Small
(up to 200 kW)

Tier 1: 8.6
Tier 2: 2.2

No change

n/a

Medium
(200 kW - 1MW)

Tier 1: 5.3
Tier 2: 2.2

No change

n/a

Large
(1 MW and above)

1.0

2.0

100%

Ground Source
Heat Pumps

Small
(up to 100 kW)

4.8

7.2 - 8.2

50% - 134%

Large
(100 kW and above)

3.5

Source: Renewable Heat Incentive: Non-Domestic Scheme Early Tariff Review Data from DECC. The last tariff change for solar thermal was last year from 0.085 to 0.089 GBP/kWh and is proposed to 0.092 GBP/kWh on 1 July 2013 due to inflation.

The question is, will such proposed increases help the solar thermal industry recover from current low sales? For many, it is the PV Feed-in Tariff (FiT) that has had the most significant negative impact on the solar thermal industry. David Raven, Renewables Workshop, argues that “solar thermal manufacturers and installers have simply come up against a better proposition, which is Solar PV. Given the rate for the RHI at the start of the scheme there was little competition between the two, and I personally know of situations where the homeowner removed solar thermal to get more PV on to their roof”. This brings home the point that unless the government co-ordinates its support, the result can be worse for CO2 reduction than if they had done nothing. It is ironic to consider that the current imbalance of support is causing the more efficient solar thermal technology to be removed from roofs. This would be doubly worse if removed solar thermal installations had previously received any of the earlier subsidies such as Clear Skies or the Low Carbon Building Programme.

The proposed increase in the RHI solar thermal tariff is not as large as that being suggested for large-scale biomass and ground-source heat pumps. Nevertheless, there are hopes that the higher rewards for solar thermal will help narrow the gap between the two competing solar technologies by encouraging more commercial customers to go ahead with solar thermal installations. This is the opinion of Geoff Miller, Tisun Sales Director Great Britain, who says: “Now that the feeding frenzy in the PV industry has calmed down and the RHI for commercial projects will be increased again, everyone within the solar thermal industry – manufacturers, wholesalers and installers – needs to spread the message that solar thermal makes sense for the UK.” For Miller, a solar thermal boom may come about through council-owned buildings such as swimming pools, hotels, hospitals, universities and schools, which “all have a high domestic hot water demand and can justify the investment in solar thermal installations”. Tisun has performed simulations that “suggest that the possible increase in RHI payments to 0.11 GBP/kWh could reduce payback periods by a year. 2013/14 should be when solar thermal at last sees an increase in profile”.

The Solar Trade Association (STA) was submitting their response about the proposed tariff rates by 28 June. Discussions have included that the rate should be raised to over 0.14 GBP/kWh for 20 years. Now, in the domestic sector alone, PV installations are 75 times higher than they were before the FiT for domestic and commercial combined. It is therefore argued that a higher tariff increase is needed to ‘kickstart’ the solar thermal industry into the mass market to the same extent as for electricity-generating technologies.

Secondly, DECC announced another piece of good news on the 21 May that the Renewable Heat Premium Payment Scheme (RHPP) will increase. The subsidy scheme offers homeowners a one-off payment for installing renewable technologies, with the payback amount for solar thermal now doubled from GDP 300 to GDP 600:

Technology

Original rate

New rate

Percentage increase

Solar thermal

GDP 300

GDP 600

100%

Air Source Heat Pumps

GDP 850

GDP 1,300

53%

Ground Source Heat Pumps

GDP 1,250

GDP 2,300

84%

Biomass

GDP 950

GDP 2,000

111%

Source DECC: http://www.energysavingtrust.org.uk/Generating-energy/Getting-money-back/Renewable-Heat-Premium-Payment-Phase-2

David Raven regards this as a positive development, suggesting that “for the well-off homeowner who has everything, it is likely that the increased tariff for thermal will help make a buying decision”.

Tisun further suggest that a higher RHPP will make solar thermal more attractive to customers even if the value of the RHPP is deducted from domestic RHI payments in the future, with Geoff Miller saying: “If the RHPP is deducted at the end of the proposed 7-year RHI period, the value of the RHPP is effectively an 8-year tax-free loan, and certainly worth having! The RHPP is an indication that the government will be honouring its commitment to bring in the RHI for domestic in 2014”.

However, Miller adds that the onus is on installers to make homeowners aware of the RHPP, “as the majority of the UK population is unaware of the incentive”. He also considers the news that in order to be eligible for the RHPP payments customers will also have to undergo a Green Deal assessment “unfortunate as, no matter how badly-insulated a property is, a solar thermal system would make a massive contribution to increasing its energy-efficiency”. Raven agrees, suggesting that adding an energy survey requirement made sense for heat pumps but is perhaps less justified in the case of solar thermal.

The third promising announcement from DECC was published on 2 May 2013, providing a new GBP 6 million phase of the Social Landlord competition that aims to help registered social housing providers to install solar thermal, heat pumps and biomass. Two bidding dates are provided for this competition: the first closed on 28 June 2013 for projects that will be completed by March 2014, and the second will close on 27 September 2013 with a June 2014 deadline. At GBP 2,000, solar thermal is offered the smallest grant maximum, compared to a range of GBP 4,400 to GBP 7,900 for heat pumps and GBP 6,100 for biomass.

More information:
DECC: www.gov.uk/government/organisations/department-of-energy-climate-change

This news is written by Chris Laughton, founder and Managing Director of The Solar Design Company in Great Britain.

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