Finding the best funding stream
Retrofit social housing properties are eligible for RHI payments from the Non Domestic RHI which supports residential heat network (or district) systems.
The Non Domestic stream of the RHI is far more favorable and rewarding for retrofit social housing compared to the Domestic stream; the Domestic Renewable Heat Incentive (RHI) is structured in such a way that it fails to adequately support social housing. In part, this is because the running cost savings do not accrue to the landlord (who makes the capital investment) and, in part, because the relatively high (compared with larger properties) cost/kW of installation in smaller social housing dwellings means the tariffs themselves are not generous enough on their own to provide a return for the landlord.
A significant and unique opportunity therefore exists for retrofit social housing schemes with the Non Domestic RHI; Kensa’s micro district ground source heat network solution offers the answer.
Non-Domestic RHI & ECO
The Department for Business, Energy and Industrial Strategy (BEIS) has confirmed that Kensa’s micro district ground source heat network design – where an individual ground source heat pump is installed inside each property and linked to a communal ground array – qualifies as a heat network system (also known as district heating system); as few as two dwellings with their own ground source heat pump linked to a communal ground array qualify.
This means the system qualifies for the Non-Domestic Renewable Heat Incentive (RHI).
All Non-Domestic RHI payments are paid to the landlord or the entity deemed as the system owner; they are index-linked for twenty years. These payments are currently based upon meter readings although a recent RHI consultation proposes this changes to a deemed consumption figure; this refinement eliminates the cost of metering/communications equipment and also provides certainty about the payment levels.
The solution also complies with the definitions of a heat network system under the Energy Company Obligation (ECO), which provides a capital subsidy towards the system investment costs, based upon the amount of CO2 savings made.
Kensa has arrangements in place with several of the largest energy suppliers to provide ECO funding to social housing micro heat network housing schemes.
ECO: The Basics
- Supports ground source heat pump heat network schemes (also known as district heating)
- Paid as a capital subsidy in full, once installation is complete
- Heat network schemes treated as a primary measure across all CERO and CSCO categories
- Enhanced support for properties in rural areas (ie off gas grid)
- Grant level dependent on CO2 savings
- Displacement of electric and oil heating are most attractive
Non-Domestic RHI: The Basics
- Includes support for residential heat network systems
- Recently uplifted tariffs for ground source heat pumps
- Increased from 8.7p/kWh to 8.8p/kWh
- Payments made over 20 years
- Includes support for retrofit and new build
- More attractive long term rate of return than Domestic RHI scheme
Micro Heat Network Ground Source Heat Pump System
Based on 2 bedroom end of terrace house
|Ground Source Heat Pump||Air Source Heat Pump|
|Lifetime CO2 savings:||85 tonnes||65 tonnes|
|Typical annual running cost saving vs. night storage heaters:||£485||£350|
|Total capital cost*||£13,600||£7,850|
|Existing system replacement costs:||£3,100||£3,100|
|ECO funding contribution:||£2,500||£0|
|Total net cost:||£8,000||£5,350|
|Total RHI contribution:||£14,400||£2,900|
|Overall rate of return (IRR):||6%||0%|
* Includes: Heat pump, ancillaries and installation, boreholes and ground collector system, new radiator system and domestic hot water cylinder, design (EPC, borehole design)
Trent & Dove has achieved an outcome that many housing associations dream of; halved tenant energy bills, halved CO2 emissions in our stock, improved tenant health and well-being, and £2.3m of income through the RHI to off-set our £1.8m investment.
Steve Grocock, Trent & Dove Housing