The Renewable Heat Incentive (RHI)

In 2011, the Government introduced its RHI scheme for non-domestic business users (including commercial, industrial, local and national government, not-for-profit and community organisations, holiday home complexes, bed/breakfast and District heating schemes).

Under the scheme, investors in biomass and solar hot water heating systems obtain a return of up to 12% on their capital overall, when compared to a gas heating system – and even more compared to oil or LPG systems. The ‘cash-back’ payments will be made on a kilowatt/hour heat meter reading, similar to electricity and gas billing. As a rule-of-thumb, most installations will pay for themselves in 4-8 years.

Payback example 1

A 300 kW installation costing £220,000 producing an annual heat output of 450,000 kW hrs will attract an RHI payment of £22,119 per year for 20 years, increased annually by RPI. The annual saving on fuel costs by using woodchip instead of oil will be about £10,688, giving a total annual ‘income’ of £32,807. On this basis, the original £220,000 investment will be paid back in 6.7 years. The remaining 13.3 years’ RHI payments + fuel savings will more than cover maintenance costs and fuel price increases.

Payback example 2

A 130 kW installation costing £100,000 producing an annual heat output of 200,000 kW hrs will attract an RHI payment of £15,332 per year for 20 years, increased annually by RPI. The annual saving on fuel costs by using woodchip instead of oil will be about £5000, giving a total annual ‘income’ of £20,332. On this basis, the original £100,000 investment will be paid back in 4.9 years. The remaining 15.1 years’ RHI payments + fuel savings will more than cover maintenance costs and fuel price increases.

You can work out your own savings and pay-back period using the online calculator on the Biomass Energy Centre’s website.  More information can be found on the Government RHI page.

Forest Heat Energy are pleased to offer an RHI application processing service.

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