The Non-Domestic RHI

What is the Non-Domestic RHI?

The Non-Domestic Renewable Heat Incentive (RHI) is a tax-free income for commercial or district heating schemes featuring MCS-accredited ground source heat pumps. Lasting up to 20 years, this quarterly income is funded by the UK government to encourage a net-zero future.

With an extensive range of MCS-accredited ground source heat pumps, Kensa has installed thousands of systems in retrofits and new-builds claiming the Non-Domestic RHI. The returns can be very rewarding, as a ground source heat pump produces up to four times the energy it consumes.

When does the Non-Domestic RHI end?

The Non-Domestic RHI closes for applications on 31st March 2021 (correct as of July 2020). For projects completing after this date, there is the option to apply for a Tariff Guarantee. Applications must be submitted by 31st March 2021 but ideally, well in advance of this.

Our partner, Kensa Contracting, explains the Non-Domestic RHI deadline and what it could mean for your project in this useful timeline fact sheet.

Who is the Non-Domestic RHI for?

The Non-Domestic RHI is ideal for commercial buildings, businesses or multiple domestic dwellings that install ground source heat pumps. Uniquely, in domestic scenarios, the RHI applies to projects where as few as two dwellings are each fitted with a ground source heat pump and connected to a Shared Ground Loop Array.

Whether in new-builds or retrofits, the Non-Domestic RHI covers such projects in England, Wales and Scotland. Its payments can benefit business owners, housebuilders, developers, social housing providers, local authorities, self-builders and owners of clusters of properties.

Who is the Non-Domestic RHI paid to?

The RHI recipient may either be the owner of the ground source heat pump(s) and the associated ground array(s), or an external investor involved in split ownership – funding the ground array(s) only.

How does the Non-Domestic RHI work?

The Non-Domestic RHI provides a 20-year quarterly tax-free income for the renewable heat produced by the system(s).

The quarterly payments for Non-Domestic RHI are subject to tiered tariffs. Once in the scheme, this tariff is fixed for 20 years and adjusted annually with inflation.

Funded by the UK government, the RHI provides a significant financial reward for carbon compliance, as it helps the UK meet its zero carbon commitments.

How much could I earn from the Non-Domestic RH?

Single commercial building

  • Pay from £83,000 for appliance & infrastructure.
  • Earn up to £500,000 from the Non-Domestic RHI.
See more example costs & returns

85 new-build homes

  • Pay from £606,960 for appliance & infrastructure.
  • Earn up to £962,582  from the Non-Domestic RHI.

What are the current Non-Domestic RHI tariffs for ground source heat pumps?

Ground source heat pumps have the highest Non-Domestic RHI tariff compared to any other heating system. Over 20 years, payments are made at a set rate per unit of renewable heat produced (kilowatt hour or kWh).

Current annual tariff levels (systems less than 100Kwth)¹

  • 9.68p/kWh (Tier 1) on the first 1314 hours of eligible energy produced, followed by:
  • 2.89p/kWh (Tier 2) on any additional heat produced.

Once in the scheme, the tariff level an installation will receive is fixed and adjusted annually with inflation.

Will the Non-Domestic RHI tariffs change in the future?

Ofgem is responsible for publishing quarterly tariff tables. These will show the tariffs that will be applicable for each period following the Department for Business, Energy & Industrial Strategy’s (BEIS) quarterly degression announcement.

We expect the tariff levels of Non-Domestic RHI to decrease over time to new entrants, as the costs of equipment and installation reduce through economies of scale. Early movers will secure the best Non-Domestic RHI tariff for twenty years.

SEE EXAMPLE COSTS & RETURNS

What are the Non-Domestic RHI payments based on?

The majority of domestic projects with ground source heat pumps and Shared Ground Loop Arrays receive the RHI based on deemed heat consumption – while all other eligible applications, such as commercial installations, are metered.

In scenarios where payment is based on deemed heat consumption, it is calculated by Ofgem using the combined EPCs of all the domestic dwellings.

Circumstances vary from project to project

Although these are the most common scenarios, each installation has to be evaluated at the design stage to confirm the correct configuration. For instance, it might be that a project includes a combination of a commercial and domestic installation.

The Non-Domestic RHI criteria also states:

  • Systems less than or equal to 45kWth must be MCS accredited.
  • The heat pump must extract naturally occurring energy.
  • The heat pump must have a Coefficient of Performance (CoP) of at least 2.9.
  • The heat pump must have a design Seasonal Performance Factor (SPF) of at least 2.5
  • Reversible ground source heat pumps are only eligible for measured heat, not cooling.
  • Heat metering is essential if there is more than one heat pump installed into a commercial building, or inside a single dwelling
  • The capacity of the ground source heat pump specified is based on design conditions.
  • The heat pump must not use energy located and extracted from 500m or more beneath the surface of solid earth.
SEE EXAMPLE COSTS & RETURNS

Being able to access the Non Domestic RHI was a bonus as it has helped us cover the costs of the ground source heat pump installations.

Elaine Robinson, Business Owner

Examples of heat pump projects eligible for the Non-Domestic RHI

Multiple domestic properties on a Shared Ground Loop Array

  • One heat pump located within each dwelling.
  • If below 45kW, installation needs to be MCS compliant. If not, MCS compliance will need to be evidenced.
  • Individual heat pumps need to be electrically metered.
  • Heat meters will not be required for installed heat pumps of less than 45kW.
  • Payments to be calculated on EPC and deemed output.
  • Eligible for both retrofit and new build properties.
  • 30,000kWh limit applies to each property.
  • Payment will be made to the owner or an authorised signatory.

 

Multiple domestic properties on shared ground arra

Single commercial property on a single ground array

  • Individual heat pumps will need to be metered (electrical and heat).
  • Payments calculated on heat meter readings.
  • Commercial premises need to be business rateable.
  • Payment will be made to the owner or an authorised signatory.
Commercial property single system LK_250

Single domestic & single commercial properties with a centralised plant

  • Installation needs to be MCS compliant (below 45kW).
  • This scenario will only be allowed under Non-Domestic RHI if the domestic property comprises no more than 30-50% of the total heat load.
  • Mandatory heating and electrical metering required on centralised plant.
  • Commercial payments calculated on heat meter readings.
  • Any buried pipe on the heating distribution side joining buildings together must be RHI compliant (otherwise additional meters are required).
  • Commercial premises need to be business rateable.
  • Commercial premises need their own entrance.
  • Payment will be made to the owner or an authorised signatory.
Ground source heat pump costs and design - Single domestic and commercial property district heating RHI scheme example

Multiple domestic & commercial properties on a Shared Ground Loop Array

  • Heat pumps located within each building.
  • For the domestic properties, payments are calculated on EPC and deemed output.
  • The commercial premises must be heat metered with payments based on this for the commercial property.
  • Commercial premises need to be business rateable.
  • Commercial premises need their own entrance.
  • Installation needs to be MCS compliant (below 45kW).
  • 30,000kWh limit applies to the domestic property.
  • Individual heat pumps need to be electrically metered.
  • Payment will be made to the owner or an authorised signatory.
Multiple domestic and commercial properties on shared ground array

Individual flats in a tower block on a Shared Ground Loop Array

  • Individual heat pumps in each flat.
  • Electrical meters are required on each heat pump.
  • Heat meters are not required.
  • Payments calculated on EPC and deemed output.
  • 30,000kWh limit applies to each flat.
  • Payment will be made to the owner or an authorised signatory.

Individual flats in a tower block_cropped

Domestic property with integrated swimming pool & a commercial property with centralised plant

  • This scenario will only be allowed under Non-Domestic RHI if the domestic property is no more than 30-50% of the total heat load.
  • Installation needs to be MCS compliant (below 45kW).
  • Mandatory heating and electrical metering required on centralised plant.
  • Payments calculated on meter readings.
  • Any buried pipe on the heating distribution side joining buildings together must be RHI compliant (otherwise additional meters are required).
  • Commercial premises need to be business rateable.
  • Commercial premises need their own entrance.

Domestic property with integrated swimming pool building and commercial property on shared ground array

Commercial & domestic premises within the same building on a single ground array

  • This scenario is only eligible for the Non-Domestic RHI if the client owns both the domestic dwelling and commercial aspect of the building.
  • Only allowed under Non-Domestic RHI if the domestic property is no more than 30-50% of the total heat load.
  • If below 45kW, installation needs to be MCS compliant. If the heat pump is higher than 45kW, which cannot be MCS certificated, MCS-approved calculations need to be provided to show the SCoP and CoP of the heat pump is up to standard.
  • Mandatory heating and electrical metering required on centralised plant.
  • Payments calculated on meter readings.
  • Commercial premises need their own entrance.
  • Payment will be made to the owner or an authorised signatory.
SEE HOW MUCH YOU COULD EARN

Commercial and domestic premises in the same building

How do I apply for the Non-Domestic RHI?

Following installation, the system owner must make the application for the Non-Domestic RHI. If you need support, we offer assistance with RHI applications as part of our services, such as Kensa heat pump technical support.

When you are ready to apply, you must create an online account with the RHI’s provider, Ofgem. It’s important that you read Ofgem’s official guidance on how to apply for the Non-Domestic RHI to make sure you understand the process.

The documents you need before you apply

Before you apply, you will need documentation to qualify for the 20-year payments. This documentation includes:

•  Proof of consent

Evidence of consent from the owner of the system, a board member or an authorised signatory to apply for the RHI.

•  Bank account details

For example, both physical and online evidence of a bank statement which includes the account name, address, sort code and account number.

•  Evidence of installation details

This includes the installer, date of installation, and the heat pump’s serial number. You must also provide receipts, invoices or the commissioning certificate and report, plus photographs of the installation clearly showing the serial number of the equipment.

If the heat pump is higher than 45kW and thus cannot be MCS approved, the installer must provide MCS-approved calculations of the heat pump’s SCoP and CoP.

•  Evidence of non-domestic status

For instance, a commercial premise must provide council tax bills, business rates bills, or a letter of exemption from local council.

For projects featuring multiple domestic dwellings, photographic evidence can be taken of the dwelling from the outside to prove that it is a dwelling, and that it exists.

•  Offer letters relating to grants paid for installation

And also any evidence of grants surrendered or repaid in full.

This is because Ofgem will not accept any application that has been doubly government funded. For instance, if biomass has been installed and claimed for at the same address under a previous government funding initiative, the ground source heat pump will not be eligible for the Non-Domestic RHI.

•  Copy of meter manufacturer’s certification (if applicable)

For each model of meter, provide the manufacturer’s certification that the meter meets the class 2 standard and requirements. This must be supplied together with photographic evidence of the meters running, as well as photographic evidence of the meter reading supplied for the application.

These readings must be taken within 3 days of the application submission.

•  Schematic diagram from the installer

This must include the following:

    • All plants providing heat to the heating system, whether eligible or ineligible.
    • All uses supplied with heat from the heating system, both eligible and ineligible.
    • The pipework connections between all plants and heat uses.
    • An indication of building boundaries and names/types, which must be shown and labelled as wholly enclosed and permanent.
    • The positions of any external electric meters, relevant hot water and/or steam meters and their associated components.
    • A code key so that the schematic can be easily understood.

•  Copy of manufacturer’s technical specifications

Evidence of the heat pump unit’s technical data to support declaration of its Coefficient of Performance (CoP). Kensa Heat Pumps will provide product technical information required to support the application.

•  Proof for installations below 45kWth (solar thermal, heat pumps, solid biomass)

These installations must have proof of MCS or equivalent certificate.

•  Proof for installations between 46 – 999KWth with ‘simple metering’

Provide suitable evidence to confirm the installation exists. For example, submission of scanned purchase invoices or orders, commissioning reports or similar evidence which contains relevant details regarding the application.

Remember that a heat pump higher than 45kW cannot be MCS certificated. For that reason, MCS- approved calculations must be provided to show that the SCoP and CoP of the heat pump are up to standard. Kensa can supply these.

Get support from Kensa

Kensa Contracting, our delivery and district heating arm, specialises in the project management of large-scale installations. Submit your project plans to Kensa Contracting for more advice.

GET ADVICE FROM KENSA CONTRACTING

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