Government Backed Financial Incentives to Install Renewable Energy Heating Systems

Domestic Renewable Heat Incentive provides Financial Rewards for Home Owners Switching to Renewable Energy Heating Systems

Domestic Renewable Heat Incentive and Air Source Heat Pumps
Domestic Renewable Heat Incentive - Air Source Heat Pumps
Air Source Heat Pump
Domestic Renewable Heat Incentive - Biomass Boiler
Biomass Boiler
Domestic Renewable Heat Incentive - Ground Source Heat Pumps
Ground Source Heat Pump
Domestic Renewable Heat Incentive - Solar Thermal Water Heating Systems
Solar Thermal Water Heating

What is the Domestic Renewable Heat Incentive?

Domestic Renewable Heat Incentive scheme is a UK Government initiative offering financial incentives to encourage home owners to use renewable energy systems instead of fossil fuel.

If you participate in the Domestic Renewable Heat Incentive scheme and install a renewable heating system such as an air source heat pump or biomass boiler, the Domestic Renewable Heat Incentive tariff payments will be paid to you quarterly for 7 years.

Most Renewable Heat Incentive payments are based on the heat required to heat your home and provide hot water. This information can be found on your Energy Performance Certificate (EPC).

The Domestic Renewable Heat Incentive is available in England, Scotland and Wales.

Why was the Domestic Renewable Heat Incentive introduced?

The basis of the Domestic Renewable Heat Incentive scheme is that the UK Government has set out its intention of achieving a target of 12% of heating being sourced from renewables such as biomass energy by 2020.

This is part of its overall plan to reduce carbon emissions from homes and businesses and to minimise the effects of climate change.

The Domestic Renewable Heat Incentive scheme is considered so important by the Government that the Department of Energy and Climate Change described it as ‘the first step in transforming the way we heat our homes’.

In May 2019 the Committee on Climate Change released a report entitled ‘Net Zero The UK’s contribution to stopping global warming’. This set a target of net zero carbon emissions from the UK by 2050. You can download a full copy of the report HERE.

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Learn more about the Domestic Renewable Heat Incentive from the Government HERE

Which heating systems are included in the Domestic Renewable Heat Incentive?

Domestic Renewable Heat Incentive started on 9th April 2014.  It applies to:

Domestic Renewable Heat Incentive tariffs are paid to eligible applicants every three months for seven years. The Domestic Renewable Heat Incentive scheme is available to homeowners and those who self-build new homes in England, Wales and Scotland.

Whilst the Domestic Renewable Heat Incentive scheme is available to all households, those off mains gas will have more to gain by reducing both their fuel bills and carbon emissions. This is because of the relative inefficiencies (compared to mains gas) of LPG, heating oil, coal or electricity in providing cost-effective heat and hot water for your home.

All of these renewable energy heating systems provide space heating or space heating and hot water, except solar thermal which must provide hot water only, to be eligible.  Where a renewable energy technology system provides space heating, it must do so through a ‘wet’ central heating system such as radiators to be eligible for the Domestic Renewable Heat Incentive scheme.

Current estimates are that there are approximately four million households in the UK which don’t have access to mains gas and the Domestic Renewable Heat Incentive scheme is available to:

  • owner-occupiers
  • private landlords
  • social housing
  • third-party owners of a domestic heating system and
  • new self-build properties
Domestic Renewable Heat Incentive – Financial Incentives

Domestic Renewable Heat Incentive financial incentives are paid quarterly for seven years, to the owner of the renewable heating system.

Tariffs are at a set rate of ‘pence per kilowatt hour’ of renewable heat energy generated.

To be eligible for the Domestic Renewable Heat Incentive, solar thermal panels must ONLY supply hot water for your home, whereas all of the other eligible renewable heating systems can provide space heating, with or without hot water.

Domestic RHI scheme rules only apply to these renewable energy technologies if they use a ‘wet’ central heating system such as central heating radiators. Domestic RHI tariffs will not be paid for hot water intended for use in a swimming pool or hot tub.

Domestic Renewable Heat Incentive - RHI Tariffs

Example of RHI Tariffs by Switching to an Air Source Heat Pump

Based on a typical three bedroom house using 15,000 kilowatt hours of heat energy per year, installing an Air Source Heat Pump, the total annual Domestic Renewable Heat Incentive tariff will be:

kWh of renewable heat x tariff = Total annual Domestic Renewable Heat Incentive payment

15,000 kWh x 10.71 pence per kWh = £1,606.50 per year

This equates to tariff receipts of £11,245 over seven years however, this is adjusted by the Seasonal Performance Factor of the particular air source heat pump you install. Please see the relevant FAQ below.

When assessing the financial impact of switching to renewable energy you should take into account:

  • The installation cost of the renewable energy heating system
  • The RHI tariff receipts, which increase by inflation each year
  • The savings in switching from an expensive fuel such as oil, LPG or coal
Domestic Renewable Heat Incentive FAQs

Will Domestic Renewable Heat Incentive tariffs change?

Renewable Heat Incentive tariffs will change annually in line with the Retail Price Index (RPI).

Also, the Department of Energy and Climate Change (DECC) has announced that in order to control costs and encourage early take up, Domestic Renewable Heat Incentive tariffs may be reduced over time for new applicants to the scheme, this is referred to as degression.  However, once an applicant has secured their tariff it will not be reduced due to cost control or degression; it will only be affected by changes in the RPI each year.

Any changes to tariff rates in the Renewable Heat Incentive scheme will be notified by the Department of Energy and Climate Change but we cannot guarantee that any published tariff rates on this web site represent the very latest situation.

If you are considering installing a renewable energy heating system such as a air source heat pump you should check with Ofgem first for current Domestic Renewable Heat Incentive tariffs, before making a decision.

Will I have to pay tax on the Domestic Renewable Heat Incentives tariffs I receive?

When the Renewable Heat Incentive scheme was first launched, the then Chancellor of the Exchequer, Alistair Darling, announced that Domestic Renewable Heat Incentive tariffs would not be taxable.

As far as we are aware, that remains the case as long as the renewable energy produced by your eligible heating system is for your own private use in the property within which it is installed.

Will I have to install a meter?

You will need metering if:

  • you have a back-up heating system, for example if you install a biomass boiler but you also have an oil fired boiler
  • you have a heat pump capable of using a non-renewable fuel such as fossil fuels
  • you have more than one renewable heating system, such as a number of biomass pellet stoves fitted with back boilers, in different rooms
  • your biomass boiler or stove does not heat all of the property
  • your home is occupied for less than half of the year.  This includes second homes and tenanted properties which are expected to be empty for more than six months in a year.

Where can I find an approved domestic renewable energy installer?

Simply complete the form on this page and we will introduce you to up to three renewable energy technology installation companies for you to request quotations from.

We do not charge you anything for this service and you are under no obligation to place an order with any of the installers that we introduce you to.

Will I need an Energy Performance Certificate (EPC) before I apply for the Domestic Renewable Heat Incentive?

Your proposed renewable heating system must be installed in a property capable of having a domestic Energy Performance Certificate (EPC).  Without an EPC you will not be able to apply for the scheme.

Additionally, for biomass boilers , ground source heat pumps and air source heat pumps, the Domestic Renewable Heat Incentive tariff payable to householders is calculated with reference to the estimated heat demand for the property as shown in the EPC.

In other words, without an EPC the tariff payments due cannot be calculated, so it is very much in the applicant’s interest to ensure that an EPC is prepared.

If I join the Domestic Renewable Heat Incentive scheme, what are my responsibilities?

The Domestic Renewable Heat Incentive scheme rules include:

  • Keeping the renewable heating system and any metering system in good working order.
  • Informing Ofgem if the heating system breaks down or isn’t working.
  • Informing Ofgem if you sell your house whilst still receiving Domestic Renewable Heat Incentive scheme tariff payments.
  • Advising Ofgem of any major changes to your renewable heating system. This includes any changes which result in you having to install a meter when one wasn’t previously required.
  • Informing Ofgem of any changes in your circumstances which may affect your eligibility to receive Domestic Renewable Heat Incentive scheme tariff payments.
  • Completing an annual declaration confirming that you have kept to the rules of the Domestic Renewable Heat Incentive scheme. Please note that domestic installations of renewable energy heating systems which are part of the Domestic RHI scheme will be randomly checked to ensure compliance with the scheme’s rules.
  • Domestic users of biomass boilers will have to demonstrate that they have bought their biomass wood pellets from an authorised supplier who is on the Renewable Heat Incentive Biomass Suppliers List in order to ensure that the wood pellets being used satisfy the required sustainability criteria of the Renewable Heat Incentive scheme.

What documentation do I need to apply for Domestic Renewable Heat Incentive scheme?

To apply for Domestic Renewable Heat Incentive scheme you will need:

  • An Energy Performance Certificate (EPC) for your home.
  • A report to confirm that your home meets current loft and cavity wall insulation specifications.
  • An MCS (Microgeneration Certification Scheme) certificate to confirm that the renewable energy heating system you are installing complies with the requirements of the MCS scheme and the Domestic Renewable Heat Incentive scheme.
  • An Emissions Certificate for the renewable energy heating system you intend to install.

All of these can be provided by or organised by your installer.

Will I have to repay any previous grants I have received before I apply for the Domestic Renewable Heat Incentive?

Any public grants previously received which have subsidised the cost of installing renewable heating systems such as biomass boilers, including the Renewable Heat Premium Payment (RHPP), may be deducted from the Domestic Renewable Heat Incentive tariff, to avoid a double subsidy.

Who administers the Domestic Renewable Energy Incentive scheme?

The Renewable Heat Incentive is administered by Ofgem.

What happens if I sell my property before the seven year Domestic Renewable Heat Incentive tariff period ends?

If you sell your property whilst you are still receiving tariffs under the Renewable Heat Incentive scheme, you must inform Ofgem so that future payments can be made to the new owner.

How are the RHI tariffs for Heat Pumps adjusted for the Seasonal Performance Factor?

Electricity is required to run heat pumps and to avoid being rewarded for using this electricity, the RHI tariff payable is adjusted for the Seasonal Performance Factor (SPF) of the particular heat pump you have installed.

The SPF is calculated the following way:

This is to say, a heat pump with an SPF of 3 will on average deliver 3.0kWh of heat for every 1kWh of electricity it uses.

The adjusted annual RHI tariff payable is calculated as follows:

Domestic Renewable Heat Incentive ASHP tariff calculation adjusted for SPF

If the annual heat demand from your EPC is 15,000 kWh as in the example above this equates to an annual tariff of £1,071.00 not £1,606.50 as shown above, before the adjustment for your air source heat pump’s SPF.

Changes to the Domestic Renewable Heat Incentive

The main changes to the Domestic Renewable Heat Incentive since it was introduced are:

  • Metering – The introduction of mandatory metering for all new air source heat pumps and ground source heat pumps installed.  Payments of Domestic Renewable Heat Incentive tariffs will still be based on deemed heat demand from the EPC for domestic properties. Metering will be used for second properties and situations where the renewable heating system is installed alongside another heating system.
  • Assignment of Rights – The introduction of an ‘assignment of rights’ option to provide householders and landlords access to finance to cover the upfront cost of a renewable heating system. Assignment of rights allows an installer or investor to help fund the purchase, installation and maintenance of a renewable heating system. In effect, the installer or investor pays for the renewable heating system and receives the Domestic Renewable Heat Incentive tariff payments. The benefit to the householder is that they receive a new renewable heating system and benefit from the associated reduction in heating costs and carbon emissions.
  • Heat Demand Limits – Heat demand limits were introduced to cap the annual Domestic Renewable Heat Incentive tariff payments which an householder can receive. The heat demand limits are set at 20,000kWh for air source heat pumps, 25,000kWh for biomass boilers & stoves and 30,000kWh for ground source heat pumps. There are no heat demand limits for solar thermal water heating systems. The result is that if the deemed heat demand from your EPC is over 20,000kWh and you install an air source heat pumps, the DRHI tariff payments will be based on a maximum of 20,000kWh per year.

Other minor changes have been introduced and a ‘Factsheet – Important Changes to the Domestic Renewable Heat Incentive Scheme’ produced by OFGEM can be seen HERE.

Typical costs per unit of fuel energy for a Biomass wood pellet boiler compared to other domestic fuels:

Domestic Renewable Heat Incentive - comparison of costs of biomass with oil, LPG, Gas and Electricity

Typical Carbon Dioxide emissions for a Biomass wood pellet boiler compared to other domestic fuels:

Domestic Renewable Heat Incentive - comparison of carbon emissions from biomass with gas, oil, LPG and electricity

Speech by Greg Barker MP, Minister of State for Energy and Climate Change when the Domestic Renewable Heat Incentive Scheme was introduced

Affordable Warmth Scheme

Another Government scheme to help with heating systems in domestic households is the Affordable Warmth Scheme. This provides grants to help to install central heating systems, replace broken heating systems and to install insulation in homes where one of the occupants receives a qualifying State Benefit, Tax Credits or other allowance.

More information about the Affordable Warmth Scheme can be found HERE.

You can apply for ‘First Time Central Heating’ to be installed HERE or if you live in Liverpool, apply HERE.