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Renewable Heat Incentive Explained

Renewable Heat Incentive : Everything Explained
(Image credit: Getty Images)

The Renewable Heat Incentive (RHI) is a government incentive scheme that was launched in April 2014 and provides payments for the generation of renewable heat from eligible renewable heat technologies. 

In short, it rewards homeowners who use renewable energy to heat their homes.

How it works: 

The Renewable Heat Incentive (RHI) has two schemes, the domestic RHI and the non-domestic RHI. You can only apply for incentive payments from one or the other so it is important to research the rules before applying. 

The Domestic RHI scheme

The domestic RHI is designed to pay back the difference in capital cost of a renewable heat technology installation (against a conventional heating technology) with quarterly payments over a seven year period.

The amount of payment is calculated according to the heat requirements of the property and the efficiency of the heating system.

The Non Domestic RHI Scheme

This is the same as above but it’s for the public sector and non-profit organisations. You will need to apply online to get accepted. 

(MORE: The Green Homes Grant)

How Do I Apply for the RHI?

Before Applying for RHI

Remember the domestic RHI payments are not available to all properties. An energy performance certificate needs to be completed and any recommendations, such as additional insulation, installed before payments can be received.

Applications for the domestic RHI are done through the Ofgem website and you will need your Energy Performance Certificate and Microgeneration Certification Scheme (MCS) documentation from the installer. The applications are done by the home owner.

What is a MCS certification and how do I get one?

Microgeneration Certification Scheme (MCS) is the certification body for renewables technologies and renewables installers.

To be eligible for RHI payments, all the technologies must be MCS certified and installers must be MCS-approved for the relevant technology. The homeowner does not need MCS certification themselves.

Renewable Heat Incentive: Everything Explained

(Image credit: Getty Images)

What Renewable Technologies are Eligible?

The eligible technologies included in the domestic RHI scheme include:

All the technologies must also specifically be registered on the MCS to be eligible for payments. 

Approved Metering and Monitoring Service Package (MMSP) equipment can also be installed and will receive additional payments.

Choosing the Right Renewable Technology for You

Choosing the right technology for your home can be difficult. If you speak with an installer they will inevitably have their favourites and will try and steer you towards them. 

Get independent advice by speaking to people who have the technologies fitted, read case studies, attend exhibitions or engage with experts in the industry.

It is important to work out what you want from the system otherwise, if you don’t know, then there is very little chance that you will get it. 

Renewable Heat Incentive: Everything Explained

(Image credit: Getty Images)

Do I Need a Meter?

There must be an electricity meter installed on all installations but there only needs to be a designated space for a heat meter installation.

To get domestic Renewable Heat Incentive you do not need to fit a heat meter unless there is an alternative heat source such as a boiler. 

If you choose to fit an approved Metering and Monitoring Service Package, which includes approved electric and heat meters, then you will be eligible for additional payments under the RHI scheme.

(MORE: Choosing a new boiler)

What are the Current RHI Tariffs?

The RHI provides a great incentive for homeowners to invest in ground source heat pumps and solar thermal renewable heat technologies.

Having said that, there are more technologies available.

The domestic RHI tariffs are currently:

  • Biomass - 6.97p/kWh
  • Air source heat pump -  10.85p/kWh  (capped at 20000kWh per year)
  • Ground source heat pump - 21.16p/kWh (capped at 30000kWh per year)
  • Heat pump MMSP - £57 per quarter
  • Solar thermal -  21.36p/kWh

If you are wondering how long the RHI payments last it's important to know domestic RHI payments are paid quarterly for seven years. 

Unmetered payments are fixed for the duration of the term and adjusted according to the Consumer Price Index (CPI).

How are RHI Payments Calculated?

Domestic RHI payments are calculated on the energy performance rating of the property and the efficiency of the appliance. 

Heat pumps use electricity so the output energy figure is adjusted to allow for the electricity used.

If there is a second heat source, such as a boiler and a heat pump, then meters will be installed and the payments will be based on meter readings.

(MORE: How to choose a heat pump)

Renewable Heat Incentive: Everything Explained

(Image credit: Getty Images)

How Much Can I Receive From the RHI?

The whole idea of the RHI is to offset the capital cost of the installation of renewable technologies to bring them in line with conventional heating appliances. This is not intended to be an income stream. 

Air source heat pumps are capped at 20,000kWh per year. Ground source heat pumps are capped at 30,000kWh per year. Both of these figures are also subject to the efficiency of the system. 

So as an example if your ground source heat pump is 400% efficient then it uses one unit of electricity to deliver four units of heat.

Therefore if you generate 30,000kWh of heat then you will only be paid for three quarters or 22,500kWh  x 21.16p = £4761 per year

or

£33,327 over seven years. 

Do RHI Payments Cover the Installation?

The RHI payment rates are specifically designed to pay back the capital cost difference between the renewable technology and a conventional heating technology.

The payments differ between properties in accordance with the efficiency of the property, but in most cases the RHI does cover a large percentage of the capital costs over seven years. 

Renewable Heat Incentive: Everything Explained

(Image credit: Getty Images)

What Brings the Best Payment?

A large home ground source heat pump installation may cost around £25000 fully installed and you could expect RHI payment over seven years in excess of £20000 on that system.

The domestic RHI eligible technologies attract different tariffs and heat pump tariffs are also capped. The payback is very similar for the different technologies but as installation costs can vary the payback can vary too.

(MOREGet a quote for your heat pump)

How to Make your RHI Work Best

RHI payments are based on the efficiency of the heating system and the heat demand of the home.  

A well-insulated home will result in a smaller heat load and therefore a smaller plant. To maximise your RHI incentives the heat demand must not exceed any caps and also fit the metering and monitoring service package if available. 

A 4kW Earth Save air-source heat pump was installed in this energy-efficient self build home on the Isle of Man

A 4kW Earth Save air-source heat pump  (Image credit: Jeremy Phillips)

How Long Will the RHI Be Available?

Applications for the domestic RHI are still open for applications until 31 March 2022 for all eligible technologies and installations.

What will replace RHI?

There is currently no definite replacement for the domestic Renewable Heat Incentive (RHI) but there are proposals for a single grant system with suggested payments of around £4,000. 

Given the extension to the Green Homes Grant which now also ends in March 2022 and the proposals to try and reduce the use of the gas grid on new properties as well as the governments aim of installing 600,000 heat pumps a year by 2028, we will need to wait for further details.