Finance - Heat Pumps Scotland

11 April 2022

Goodbye Renewable Heat Incentive, Hello Home Energy Scotland Loan (With Cash Back)!

Governments across the world are putting in place measures to help them and their citizens achieve net zero carbon emissions as quickly as possible.

Everyone is agreed that this is a huge undertaking and requires government financial support if the ambitious targets that have been set are to be achieved.

Financial incentive schemes have been in operation in the UK for well over a decade at this point and it’s looking like that will continue for some time to come. The different schemes come and go, but the aim remains the same – get the UK to net zero emissions.

Renewable Heat Incentive (RHI)

The Renewable Heat Incentive was introduced in November 2011 and picked up where the Low Carbon Building Programme left off, which closed in 2010.

The RHI scheme was popular and was used by households in England Scotland and Wales to install heat pumps and other renewable heating technologies.

Critics might quibble with the efficacy of the RHI in terms of heat pump installation. According to figures published for the period from November 2011 to January 2021, only 728 air source heat pumps were installed under RHI. Much, much more needs to be done to get to the level of heat pump uptake required for the UK to achieve net zero.

Renewable heat incentive end date

The Renewable Heat Incentive came to an end on 31 March 2022, but there is still cash available if you want to install a heat pump in your home.

All good things must come to an end, and the RHI is no exception. It was responsible for the uptake of renewable heating by many households and has paved the way for improvements in technology, reductions in cost and the upskilling of an entire workforce of heat pump engineers.

Heat pump costs

Heat pumps are expensive to install at the moment, with the average cost coming in at around £10,500 for an air source heat pump. This is prohibitively expensive for many households in the UK, which has prompted the government to put its hand in his pocket once again and make money available to help homeowners pay for the installation of new heat pumps to replace their gas boilers.

Once installed in a suitably insulated house, heat pumps offer excellent efficiency and can bring down the cost of heating a home significantly. In fact, a recent study by the Regulatory Assistance Project (RAP) suggests that the high gas prices resulting from the energy crisis and the war in Ukraine mean that it’s now cheaper to heat your home using a heat pump than a gas boiler.

The study shows that a new gas boiler typically costs around £2,700 for installation and £984 per year to operate. Contrast this to the money required to heat an average home using a heat pump (around £723 per year) and a saving is there to be made of £261 each and every year.

Factoring in the cost of installation of both types of unit, the heat pump comes out as £412 cheaper over 10 years, partly because heat pumps last much longer than gas boilers. Your average gas boiler normally won’t last much more than 10 years, whereas a heat pump can still be running well after 20 or 25 years.

Government grants and loans for heat pumps

Boiler upgrade scheme (BUS)

To fill the gap left by the Renewable Heat Incentive, government has rolled out the Boiler Upgrade Scheme (BUS), which is making £450 million available to around 90,000 households in England & Wales who are in a position to take advantage of the offer.

Critics say that £450 million falls far short of the money required to replace fossil fuel boilers with heat pump systems at the scale required to bring the UK to net zero. The Taxpayers Alliance has recently suggested that £115 billion will be needed for that.

This sounds like Monopoly money to most of us and it’s hard to see where such a large sum will come from.

Home Energy Scotland Loan

The boiler upgrade scheme does not apply in Scotland, but we have a similar scheme instead.

With a quote from your installer to support your application, you can apply for a Home Energy Scotland Loan. The loan allows for up to 40% cashback for certain eligible energy efficiency measures and 75% for renewable heating systems. These figures are based on the overall cost and have an upper limit, but applications can be made now.

The scheme has come in for criticism for being rather complicated and for placing too much financial risk on the shoulders of installers.

Nevertheless, you can apply for up to 2 home renewable systems for your house, provided you don’t go over the £17,500 limit. Heat pumps are included in the eligibility criteria, whether air source, ground source, water source or hybrid.

To cover the cost of installation of your heat pump system, you can apply for a loan of up to £2,500 with cashback of up to £7,500. Adding Rishi Sunak’s zero-rated VAT announcement that he made recently, and you could save yourself some serious cash.

That’s assuming of course that you are well off enough to be able to afford a heat pump system even with these financial incentives. For most households in the UK, a heat pump is still financially out of reach and the likelihood is that the money available from these incentive schemes will find its way into already wealthy households.

What’s next?

Looking at the numbers set out above, the incentive schemes available today look rather like a sticking plaster over the gaping wound of climate change.

We need to do much more to avoid a climate catastrophe and financial incentives can only take so far.

Until heat pumps can stand on their own without government support, we’ll struggle to get sufficient uptake in the UK. This means bringing the cost of installation down further by finding efficiencies in the installation process and innovating in the product supply chain to bring down the cost of component parts and the unit cost of heat pumps themselves.

Heat from renewable sources needs to be genuinely cheaper than heat from fossil fuels. This can be facilitated by appropriate fiscal measures in relation to electricity and fossil fuels, to make heat pumps the obvious choice for all.

It’s important also to recognise that building efficiency is a key part of this picture. Adequate insulation is a prerequisite for heat pump installation and this also costs money, so funding for these measures must continue.

Finally, we need to set a date for banning fossil fuels altogether and this must be set out in legislation. With legally binding deadlines, financial incentives and appropriate tweaks to the taxation system, we can get to net zero before it’s too late.

7 April 2022

Alternative To Gas Boilers? Complete Comparison of Heat Pump vs Gas Boiler for UK

There has been a lot of hype in the news recently about whether heat pumps can be a good alternative to gas boilers.

The climate emergency now faced by humankind means we must dramatically reduce the amount of carbon that we are putting into the atmosphere. Governments all over the world are working towards achieving net zero carbon emissions, with the UK Government setting targets to deliver this by 2050 and the Scottish Government going even further to achieve net zero emissions of all greenhouse gases by 2045.

Heat pumps are very efficient at providing heat for our homes whilst at the same time reducing carbon emissions and we must roll out this technology widely across the country if we are to stand a chance of achieving our net zero goals.

The question on everyone’s lips is, “How do heat pumps compare to gas boilers, and can heat pumps be a viable alternative to gas boilers?”

The short answer is that heat pumps are indeed a viable alternative to gas boilers, but let’s look at this in a bit more detail.

First, a reminder of what a heat pump is.

What is a heat pump?

The simplest analogy for a heat pump is the fridge in your kitchen. The fridge removes heat from inside the cooling compartment and dumps that heat into the kitchen via the coils on the back of the appliance.

A heat pump works in the same way, but instead of removing heat from inside of the fridge, it takes the heat from the outside environment (either from the air or, in the case of a ground source heat pump, from the ground). It then concentrates the heat it has collected using a compressor before releasing it inside the house.

It’s a simple technology that people have been using for years, but in Scotland we have been slow to apply it to heating our homes.

Practical considerations

We all have a lot on our plate, with family, work and other commitments vying for our time. We want our heating systems to “just work”, providing warmth without any fuss, so we can get on with our busy lives.

There has been good reason in the past for people to heat their homes using fossil fuels, not least the low running costs of a gas boiler using mains gas. The economics and convenience of such systems have resulted in 80% of domestic properties in the UK being heated with mains gas.

If you are considering a move towards more environmentally friendly alternatives, you are probably wondering whether a heat pump can deliver the same convenience, warmth and affordability as a gas boiler.

Let’s look at some of the most common questions people have about heat pumps.

Can a heat pump heat a whole house?

The short answer is yes, a heat pump can heat a whole house.

Heat pump systems must be carefully designed and consider the specifics of the house they will be heating. For example:

Is the house well insulated?
What is the preferred temperature of the rooms being heated?
What is the outside temperature?
How much outdoor space is available?

All these things will influence the size of the heat pump required, and whether an air source, ground source or water source system would best suit.

If there is plenty of space available to bury the collector pipe, perhaps ground source heating is worth looking into, or if there is a suitable body of water close by, a water source might offer the best efficiency.

In any case, a properly designed heat pump system will have no trouble heating a whole house.

Is it cheaper to run a heat pump all the time?

Some people like to be able to turn their heating on and off quickly, for example so they can open the windows and let in all that lovely fresh air without wasting money heating the outside of their property.

A common question about heat pumps is whether they need to run continuously to be effective. If that was the case, it would put off the fresh air fiends out there because they would have visions of living in a hermetically sealed box with no access to fresh air.

In general, it is not cheaper to run your heat pump all the time. Most people find that setting their heat pump to a lower temperature overnight saves them money on running costs. Likewise, not running your heat pump while you are out at work, or away for the weekend will reduce running costs, too.

Something to consider, particularly if your property is relatively modern and airtight, is a heat recovery and ventilation system. The system will allow your home to receive fresh air without having to open your windows. Instead, fresh air is blown into your house to provide ventilation and the incoming air is warmed using exhaust air, which saves on heating bills without compromising air quality. Perfect for the fresh air fiends out there.

At what temperature do heat pumps become ineffective?

The short answer to this question is typically at temperatures below those experienced in Scotland (heat pumps can operate at temperatures as low as -25°C).

This is perhaps the wrong question to be asking though. If you have a heat pump that can operate in outdoor temperatures as low as -25°C, you’ll be fine pretty much anywhere in the UK on any day of the year.

Perhaps what you should be asking though is whether the particular model of heat pump that you will be using is effective at those very low temperatures.

Not all heat pumps can operate in such cold environments, so it’s important to check that yours will if you need it to.

Something else to think about is the efficiency of the heat pump system, which isn’t only related to the outside temperature, but the difference between the indoor and outdoor temperatures. If you are used to keeping your home at 35°C to be comfortable, you might find your heat pump never quite gets you there.

The wider the gap between the outside temperature and the desired indoor temperature, the harder your heat pump will have to work to maintain that indoor temperature. The harder your heat pump has to work, the less efficient it will be.

This is why low temperature underfloor heating is a good match for a heat pump – the large surface area allows for sufficient heat transfer without the need for high temperature radiators. This in turn allows the difference between the inside and outside temperatures to be kept small, resulting in a more efficient heat pump system.

Heat pump efficiency

I just touched on the issue of efficiency, and it is worth sticking with this topic for a moment.

How is heat pump efficiency measured?

The main statistic that is used to measure the efficiency of a heat pump is the Coefficient of Performance (COP).

What is COP?

COP, simply put, is the ratio of the amount of electrical energy required to operate a heat pump to the amount of heat energy it produces.

So, for a heat pump that produces 4 units of heat energy for each unit of electrical energy consumed, the COP would be 4.

What is a good COP for a heat pump?

A COP of 4 is excellent and an expected range for heat pumps in the UK would be between 2.5 and 3.5.

Heat pump carbon savings

The top end of the COP range equates to an efficiency of 350% for a heat pump, which is a lot better than even the most efficient, modern condensing boiler, which can only manage 90% or so efficiency.

There is really no comparison. Plus, when you take into account the fact that the electricity grid is becoming greener all the time, with renewable energy becoming an ever larger proportion of the electricity generation mix, the carbon savings of using a heat pump compared to a gas boiler are huge.

If you can generate your own electricity using renewable solar PV, wind turbines or something else, then that brings even greater carbon savings – possibly even going beyond net zero.

Financial considerations

In the previous section, I explained how a heat pump can provide the same convenience and comfort as a gas boiler. The all-important issue of cost is next under the microscope, and this can be broken down into installation and running costs.

Zero VAT for heat pumps

The Chancellor’s announcement that rate of VAT payable for heat pumps would be zero for the next five years is surely a welcome fillip to the sector, but heat pumps are still a relatively expensive option in terms of up-front installation costs compared to more traditional options such as the gas boiler.

Boiler Upgrade Scheme (BUS scheme)

The Boiler Upgrade Scheme only applies to England and Wales. It aims to encourage the use of heat pumps and biomass boilers for space and water heating in certain properties.

Hopefully a similar scheme will be announced for Scotland and Northern Ireland that can replace the Renewable Heat Incentive (RHI), which ended on 31 March 2022 after a one year extension to its original lifetime.

Heat pump installation costs

Installation costs of a heat pump will vary according to the type and size of heat pump required. For a 2-3 bedroom house, they typically range from £8,000 for a medium-sized air source heat pump, to £20,000-£30,000 for a ground source heat pump.

The reason for the large difference in price is largely due to the substantial groundworks required for a ground source heat pump. The ground collector either has to be buried in trenches, or installed in a borehole, which requires specialist borehole drilling machinery, which is also expensive.

Octopus Energy are spearheading a move to bring down the costs of installation of heat pumps by optimising the installation process. They are also working with heat pump manufacturers to bring down the cost of the units themselves. Fingers crossed they mange to do this and, in the process, make heat pumps available to a wider market.

Heat pump running costs

The running costs of heat pumps depend mainly on the cost of electricity because they only need a service once a year and this is not particularly expensive (approximately £200 plus parts).

With the energy crisis grabbing headlines recently, you can’t fail to have noticed that the cost of electricity has gone up, a lot.

But so has the cost of gas, which means the scales haven’t necessarily been tipped in favour of fossil fuels.

Let’s take a look at the cost of running a heat pump for the 2-3 bedroom property we used as an example above. Before the price rises, the cost of heating a home like this would come in at just under £1,000 per year, which is around £200 cheaper than an equivalent gas boiler driven system.

As a result of the price cap rises, electricity has gone up around 72% on average, but gas has risen even more (by around 84% on average), which means that the savings likely to result from using a heat pump compared with a gas boiler are even greater.

But I’ve heard that heat pumps are worse than gas boilers

Let’s bust some heat pump myths!

If you’ve spent time researching heat pumps on the internet, you will have come across stories of people paying extortionate amounts for their electricity since installing a heat pump. Or perhaps even worse stories of cold homes and unreliable equipment.

What many of these stories have in common is that the heat pumps in question have been incorrectly designed and/or installed.

Normally, those complaining online of an unsatisfactory experience with their heat pump are met with responses from lots of satisfied heat pump customers offering advice and sharing their more positive experiences.

One such positive experience was shared online at the Home Farm website, as follows.

“We have a 4 bedroom house and had an ASHP installed in September 2021. Our heat pump is a 12kW Vaillant. The cost of heating and hot water from 7 November – 7 December 2021 was £144. The heating is on from 06:00 hours to 20:30 with a 2 hour break in the middle. The hot water is set on for a 12 hour period. We live in a frost hollow in eastern Scotland and have gone through two storms in the last two weeks and overnight temperatures hovering at around zero for the last fortnight. Our home is timber-framed and reasonably well insulated but the bedrooms upstairs have 30 years old velux windows which are not particularly well insulated. We only upsized the downstairs radiators. Despite all of this we find we are warm and cosy.”

This was in response to someone posting a comment about their air source heating costing £6,000 per year to run. Such high running costs are not the typical experience but give credence to the critics and naysayers who wrongly spread rumours about heat pumps not being capable of heating houses efficiently in the UK.

The unfortunate truth is that there are companies out there installing heat pumps who shouldn’t be. Buyer beware is good advice and if you can, it’s a good idea to educate yourself on system design basics so you know what questions to ask.

Failing that, make sure you get good recommendations and always follow up on references before going with an installer.

Summary

Heat pumps are a good alternative to gas boilers for your domestic hot water and space heating needs.

Heat pumps are a very effective way to reduce your carbon footprint and save money on your heating bills in the long run, provided they are correctly designed and installed.

Are heat pumps worth the money?

Yes. They cost more up front than gas boilers, but the installation costs are mitigated by their zero VAT rating and the availability (in England and Wales) of financial assistance in the guise of the Boiler Upgrade Scheme (BUS).

Heat pumps are cheaper to run across time thanks to their superior efficiency.

Are heat pumps a good alternative to gas boilers? The Key points

Heat pumps are a good alternative to gas boilers.
A heat pump can heat a whole house.
It is not cheaper to run a heat pump all the time.
Heat pumps are effective down to temperatures as low as -25°C.
Heat pumps save carbon emissions vs gas boilers.
Installation costs of heat pumps are larger than for gas boilers but financial incentives are available to help with the costs.
Heat pump running costs are normally lower than gas boilers, provided they are properly designed and installed.

23 March 2022

Heat Pump Loans 2022 – Chancellor Announces Green Finance Measures to Parliament

The government might not have offered heat pump loans before, but it has long been incentivising the uptake of renewable energy, with schemes such as the Renewable Heat Incentive (RHI). Despite this, many are saying that not enough is being done quickly enough for the UK to meet its ambitious climate targets and do its bit to pull humanity back from the brink of a climate disaster.

Heat Pump Loans 2022 - Chancellor announcement.

The climate emergency has been focusing minds in Holyrood and Whitehall for years now, and Scotland’s impressive roll-out of wind turbine technology and seen it lead the way in renewables for the UK, if not the world.

But the cost of living crisis, driven in no small part by ever rising global energy prices, and now the war in Ukraine creating a perfect storm of supply issues, rising demand and the impact of sanctions against Russia, is now forcing politicians to think outside the box. And about time, too.

Government energy loans

Before Rishi Sunak’s Spring Statement earlier today, where he announced a series of measures aimed at helping households through the current cost of living crisis, he reportedly gave a green light to cheap taxpayer-backed heat pump loans to help homeowners cover the costs of installing heat pumps.

The loans also apply to other energy efficiency materials such as insulation and solar panels, but the cheap heat pump loans got our attention, for obvious reasons.

Following on from the heat pump loan reports, Sunak’s Spring Statement to the Commons brought more good news for those looking to take advantage of green energy, with the announcement of a cut to VAT on those same energy saving materials, including heat pumps, insulation and solar panels.

He acknowledged that some items already qualify for 5% VAT relief, albeit with complicated rules around who is eligible, so the new announcement is not quite as generous as it first appears. Nevertheless, this is new money being identified for the funding of renewable, energy saving measures for the UK’s homes.

Sunak blamed the European Court of Justice for previously restricting the eligibility of energy saving relief in 2019 and credited Brexit with removing this constraint.

For the next five years, homeowners will pay zero VAT on work to install solar panels, heat pumps or insulation. He also said that the government would reverse the EU’s decision to take wind and water turbines out of scope and zero-rate them as well.

To illustrate what these changes could mean, the Chancellor provided an example of a family having solar panels installed potentially saving £1,000 in tax, not to mention savings of £300 per year on their energy bill.

Northern Ireland won’t benefit from these changes due to the Northern Ireland Protocol, but Rishi Sunak said that a Barnett contribution would be made that would be equivalent to the tax savings that the rest of the UK will benefit from.

Wider government financial assistance

In addition to the help for those installing green energy materials, the Chancellor announced an increase in the National Insurance threshold of £3,000 to £12,570 per year and a cut in fuel duty of 5 pence per litre (for one year), which will help to bring down the pressure on household budgets a little.

Critics say these measures don’t go nearly far enough. Indeed, one Member of Parliament present in the chamber for the announcement could be heard saying, “Is that it?” in response to the Chancellor’s speech.

How much can I borrow with a green energy loan?

The UK infrastructure bank, the new government-owned policy bank, which is providing £22 billion of finance for infrastructure, aims to form partnerships with the private sector and local government bodies to give birth to a new industrial revolution.

The revolution this time will be green rather than the grey of the smokestacks that powered the first industrial revolution. The new banks stated aim is to drive growth across the UK by financing green infrastructure.

Heat pump loans

There is no information yet on exactly how much money could be borrowed by homeowners for installing heat pump systems. Harriet Lamb, CEO of Ashden – the climate charity – has said that she is encouraged to see Rishi Sunak prioritising the energy efficiency of our homes and renewable heat in the guidance that he gave to the UK infrastructure bank, but she also pointed to the need for more skilled trades people and heat pump technicians to deliver the work.

Heat pump installers

This is a point of view that Greg Jackson the Chief Executive of Octopus Energy has been saying for a while. His vision is for innovation in the heat pump sector that will drive down the cost of heat pump units through collaboration with manufacturers.

He has gone further than this with the creation of a huge heat pump innovation and training centre near Slough, where he has built replica houses that will be used to practice the installation and removal of heat pumps so the process can be optimised and made as efficient as possible. Making the installation process more efficient will in turn drive down the cost to the consumer and make heat pumps available to the masses.

Heat pumps saving the planet and the pocket

If Jackson is successful in bringing the cost of heat pump installation down, and if the expectation that, following Rishi Sunak’s announcement, high street banks will offer loans for energy efficiency projects at very low interest rates, we could see thousands of new green energy projects coming forward very soon.

Not only could these loans unlock green energy investments for households up and down the country, they might also help to ease the pressure on household finances by enabling families to take advantage of more efficient forms of heating that will save them money going forward.

1 March 2022

Heat Pump Grants 2022 – Frantic Dash for Money from RHI Replacement Scheme

We’ve written before about the coming ban on gas boilers in 2025, which was announced by Chancellor Philip Hammond in 2019. On the back of this, heat pump grants have been made available through the Renewable Heat Incentive and other schemes.

A new announcement by Rishi Sunak has put pressure on Nicola Sturgeon’s administration to up their game in terms of green heating. Scotland has so far been leading the way in spearheading the development of renewable energy, but the recent announcement from Sunak could see the SNP on the back foot and having to play catch up.

UPDATE April 2022: The Home Energy Scotland Loan has been introduced, so you can apply for that now if you want.

The new government scheme, which only applies to England and Wales, is intended to encourage the 25 million households currently using gas boilers to switch to a low carbon heat pump or similar type of renewable energy to heat their homes.

Can I Get a Heat Pump for Free?

Sadly no, even if you do live in England or Wales. The schemes available to help with the purchase of heat pumps and other alternative heating systems a quite generous, but they don’t go so far as to give away free heat pumps.

Are Heat Pump Grants Available for Heat Pumps in England?

The scheme announced by Rishi Sunak is available from April 2022 and eligible households in England and Wales could get a £5,000 grant from the government to help with the costs of heat pump installation. However, if you live in social housing, or are buying a new build property, you won’t be eligible.

The reason the government is throwing money at this is to help achieve the ambitious climate change targets the UK signed up to in international agreements, under which all heating systems in the UK will need to be low carbon by 2035. Gas boilers are less efficient than heat pumps and contribute a significant load to the UK’s greenhouse gas emissions, so there is a lot riding on the switchover.

Boiler Upgrade Scheme (BUS)

The new scheme, known as the Boiler Upgrade Scheme (BUS) is replacing the Renewable Heat Incentive in England and Wales. It remains to be seen what the Scottish Government will bring forward after RHI is withdrawn at the end of March.

English and Welsh householders who want to take advantage of this offer will have to move quickly, because the scheme will be operated on a first-come first-served basis. They will also need to take care that they don’t go over budget, or at least plan for this eventuality, because costs above the £5,000 grant will need to be met out of their own pocket.

Notwithstanding the limitations of the grant, it is still a great deal, but is it better than anything available in Scotland?

Is There a Grant Available for Installing a Heat Pump in Scotland?

There are similar schemes available in Scotland but they are only available in specific circumstances. As mentioned above, the Boiler Upgrade Scheme is only available in England and Wales and is not available in Scotland.

Social Housing Net Zero Heat Fund

The social housing net zero heat fund targets social housing landlords throughout Scotland and aims to upgrade the most inefficient and expensive to heat homes in the social housing sector. The expectation is that these homes will be upgraded to the best possible standards, saving money for the occupants at the same time as contributing towards Scotland’s efforts to address climate change.

The social housing zero heat fund was launched in August 2021 and the latest call for this fund makes available £30 million to help deliver these upgrades. It is planned to run until 2026 and will make available a total of £200 million.

Publicly Owned Buildings

The Scottish government wants the public sector to lead from the front and show that it can transform the nation’s buildings, making them more efficient and decarbonising the entire estate. During the course of this Parliament, the government is intending to invest more than £200 million in Scotland’s public sector buildings, minimising the use of energy and putting in place heating systems which do not contribute greenhouse gases to the atmosphere.

Home Energy Loan and Cash Back

Although this is a loan, it is offered interest-free and includes up to 75% in cashback. It can be put towards the installation of any renewable heating system, which will certainly soften the financial impact. The loan can also be applied to energy efficiency measures and will be replaced in 2022/2023 with a grant scheme that will provide financial assistance to those looking to install zero carbon emission heat systems and energy efficiency measures.

Grants for Renewables are the Right Approach

Although the assistance being offered by the Scottish government is different to that being offered by the government in England and Wales, the incentives are all moving is in the same direction i.e. towards net zero and away from fossil fuels.

This can only be a good thing, and will also help to mitigate the impacts of fluctuations on the international oil and gas markets, the effects of which are hitting householders hard at the moment, with the ongoing conflict in the Ukraine causing supply shocks. Renewable energy should be cheaper in the longer term and if it can reduce our reliance on foreign fossil fuel imports then will be better off financially as well.

It shouldn’t be a surprise that the UK is offering this sort of assistance because it was the first G7 country to enshrine its net zero target by 2050 into law. Financial incentives and the boiler ban are just two approaches being used to achieve this target. Wider education and training of technicians with skills applicable to alternative heating systems will be another essential component of the UK’s response to climate change.

It remains to be seen whether Scotland will follow England’s lead and bring forward proposals to continue to support the installation of heat pumps and other renewable heating after the RHI comes to an end at the end of March 2022. I for one will be keeping my fingers crossed.

5 September 2020

RHI Payments Table

UPDATE April 2022: The Renewable Heat Incentive (RHI) has now ended. If you are in England or Wales and live in an eligible property, you might be able to take advantage of the Boiler Upgrade Scheme (BUS), but for those of us not living in those areas, we hope there will be a replacement scheme announced by Government at some point. We’ll provide an update on this website whenever an update is available.

The Home Energy Scotland Loan has been introduced, so you can apply for that now if you want.

The Renewable Heat Incentive (RHI) will pay owners of heat pumps installed since July 15th 2009 significant amounts for the renewable heat generated by their renewable energy heating systems, subject to meeting the relevant eligibility criteria. For a full list of eligibilty criteria you can contact the Energy Saving Trust.

Payments are index-linked, tax-free and guaranteed for 7 years.

The level of payments you can receive will depend on the amount of heat deemed to be required for your property and which is generated by your heat pump. This is an important factor in considering your overall costs, so you need to understand exactly how much you will be entitled to under the scheme.

An indication of the payments you could potentially receive from the scheme are shown in the tables below. Please do your own research and get professional advice before taking a decision on installing any heat pump system because the figures on this website are for illustrative purposes only and might not reflect the most up to date position.

To find out more or to request a free estimate, please complete the form on this website.

Domestic RHI tariffs tables (Q2 – 2020/21)

Tariff announcement: BEIS announced on 1 June 2020 that there will be no degression on 1 July 2020.

RHI Payments Table for Ground Source Heat Pumps

Date of accreditation	Tariff Rate 2020/21 (p/kWh)	Adjusted by
between 01/04/2020 and now	21.16	CPI
between 01/04/2019 and 30/03/2020	21.16	CPI
between 01/04/2018 and 31/03/2019	21.16	CPI
between 01/04/2017 and 31/03/2018	21.16	CPI
between 15/12/2016 and 31/03/2017	21.16	CPI
between 01/04/2016 and 15/12/2016	20.92	CPI
between 01/04/2015 and 31/03/2016	21.65	RPI
between 09/04/2014 and 31/03/2015	21.65	RPI

Ground Source Heat Pumps – Domestic RHI tariffs tables (Q2 – 2020/21)

RHI Payments Table for Air Source Heat Pumps

Date of accreditation	Tariff Rate 2020/21 (p/kWh)	Adjusted by
between 01/04/2020 and now	10.85	CPI
between 01/04/2019 and 31/03/2020	10.85	CPI
between 01/04/2018 and 31/03/2019	10.85	CPI
between 01/04/2017 and 31/03/2018	10.85	CPI
between 15/12/2016 and 31/03/2017	10.85	CPI
between 01/04/2016 and 15/12/2016	8.13	CPI
between 01/04/2015 and 31/03/2016	8.27	RPI
between 09/04/2014 and 31/03/2015	8.42	RPI

Air Source Heat Pumps – Domestic RHI tariffs tables (Q2 – 2020/21)

These figures are indicative only and a full quotation will be required to provide an accurate estimate for your property.

5 September 2020

Renewable Heat Incentive (RHI)

The Home Energy Scotland Loan has been introduced, so you can apply for that now if you want.

Industry has been lobbying Government for a number of years to get more support for renewable energy products such as ground source heat pumps and air source heat pumps because of the value we believe these products offer consumers and the overall positive impact they can have on the environment.

We were therefore delighted that on April 9th 2014, government confirmed the launch of the domestic Renewable Heat Incentive which provided exactly the support for heat pumps and renewable energy we had fought so hard for.

If you have an RHI query, please request a callback using the form on this website.

If you’re not quite ready to make that call, read on for more information or watch this helpful video from the helpful folks at The Green Age.

What is the Renewable Heat Incentive (RHI)?

The Renewable Heat Incentive (RHI) is a financial support scheme for renewable heat. The scheme remains open for applications and is administered by the energy regulator Ofgem with the purpose of supporting and rewarding households who move away from fossil fuels for heating their homes.

Working in a similar way to the Feed-in-Tariff for solar photovoltaic (solar PV) systems, owners of heat pumps can be paid according to the total heat load of the property in kilowatt hours, for seven years tax-free.

It should be noted however that air to air heat pumps do not qualify for RHI payments.

What are the payment levels under the Renewable Heat Incentive (RHI)?

The amount of money you can receive under the Renewable Heat Incentive will be dependent on a number of factors including:

Renewable technology installed (ground source heat pumps, air source heat pumps, solar thermal)
Deemed heat load (the amount of heat likely to be generated by the renewable energy heating system)

The government assumes a 20 year lifetime for renewable heat technologies and has factored in the lifetime (i.e. 20 year) costs of operating the renewable heat system into the tariff values which are paid over 7 years. So, in effect, you are paid for 20 years of operation within a 7 year period.

An indication of the payments you could potentially receive can be viewed on our RHI Payments Table.

Participants will receive RHI payments quarterly in arrears for seven years. Tariffs will change annually in line with the Retail Price Index (RPI).

At the time of writing, the most recently updated tariffs published by Ofgem are for June 2020. Tariffs for air source heat pumps (10.85 p/kWh renewable heat) are significantly higher than the tariff available for biomass (6.97 p/kWh renewable heat. Tariffs for ground source heat pumps are much higher (21.16 p/kWh renewable heat), which is almost double the tariff for air source and is on a par with the solar thermal tariff.

The table below summarises these figures, which are also available on the Ofgem website where you can find out more about the scheme and how to apply.

	Air source heat pump	Biomass	Ground source heat pump	Solar thermal
Tariff (p/kWh renewable heat)(Applications submitted between 01 July 2020 and 30 September 2020 incl.)	10.85	6.97	21.16	21.36

Table 1: RHI tariffs as of June 2020

If you have previously received public funding for your heat pump system, such as the Renewable Heat Premium Payment, this must be declared as part of the application process. This will then be deducted from RHI payments under the scheme. Initially, a deduction equal to one twenty-eighth of the value of the prior public funding received will be made from each quarterly payment.

Who is eligible to receive the Renewable Heat Incentive (RHI)?

The domestic RHI scheme will give financial support for an eligible renewable heating system that heats a single domestic property in Great Britain. The property can be on or off the gas grid. Payments will go to the owner of the system.

To help with the costs of installing a heat pump, the following groups will be eligible to apply for the domestic RHI (and all receive the same tariff):

Owner occupiers
Private landlords
Registered social landlords
Self-builders
Third party owners of a heating system

Self-builders are defined as those who have built or commissioned a home for their own use, either by buildingthe home on their own or working with builders. Second homes are also eligible for the RHI. These are homes that are not a person’s main residence. Applicants for second homes will have to install metering equipment which will measure the amount of heat used.

New Build Properties – 183 Day Occupancy

The domestic RHI requires that if a property is occupied for less than 183 days, in a 12 month period, a heat meter must be installed to measure renewable heat use and determine payments, instead of payments being based on the annual heat demand specified on the property’s EPC.

This occupancy requirement ensures that the Domestic RHI delivers value for money for the taxpayer by not overpaying for renewable heat systems installed in properties that are not continuously occupied (for example, second homes).

This had resulted in the unintended consequence of eligible new self-builder properties having to wait 183 days prior to scheme application or installing heat meters as they are unable to provide evidence that they have lived in their homes for at least 183 days in the previous 12 months.

To overcome this, it was proposed that the regulations were amended to make eligible new build properties exempt from the 183 day occupancy requirement in the 12 months prior to application to the scheme. Thereafter, these participants would be subject to the standard ongoing obligations which included the annual declaration that the property had been occupied for 183 days or more in the last 12 months.

New build systems would not be eligible for the scheme. This meant properties in which the renewable heating system was installed before it was inhabited for the first time. This included applications from house builders and housing developers, as well as anyone who owned a new build property, including legacy applicants. The only exception was self-build homes (see above definition).

The renewable heat installation must be certified under the Microgeneration Certification Scheme (MCS). The installation will need to meet the MCS standards that applied at the time of installation, rather than the current standards.

All systems installed between 15th July 2009 and the launch of the RHI were eligible provided they met all the other criteria (referred to as “legacy applications”).

Other eligibility requirements of the Renewable Heat Incentive (RHI)

Before applying for RHI support, all applicants including legacy applicants needed to ensure that:

A Green Deal Assessment (GDA) had been carried out to find out which energy efficiency measures were cost-effective for the property;
Loft insulation (to 250mm) and cavity wall insulation had been installed where the measures were recommended by the GDA; and
Where the GDA shows the required loft and cavity wall insulation was yet to be installed, an updated Energy Performance Certificate (EPC) was obtained following installation, as proof of installation (or valid evidence provided proving why installation was not feasible)

The only exception was for self-builders who built their property to current building regulations who simply needed to submit an EPC.

All applicants must agree that they are willing to take part in a metering scheme if their property is chosen by DECC as a property to be metered. There will be an extra incentive for applicants who install metering and monitoring service packages of £230 per year for heat pumps.

Legacy applications and the Renewable Heat Incentive (RHI)

Installations of heat pumps since 15th July 2009 were eligible for the RHI, subject to meeting all of the other RHI criteria. To manage the potentially large volume of legacy applications and avoid a backlog administrators were working with Ofgem to develop an approach to phasing legacy applications over a period of time after the launch of the scheme: that is, staggering the dates when legacy applicants could first apply for the scheme. The last date for submitting a legacy application was Wednesday 8th April 2015.

To find out what this could mean for you and your home contact us using one of the forms on this website.

21 April 2017

Government Funding Boost for District Heating Gets Mixed Reception

On the 7^th April 2017, the UK Government announced the provision of £24 million for district heating schemes across England and Wales. The measure is part of the “central heating for cities” initiative and is designed to boost confidence in the sector and help to achieve ambitious targets for renewable heat generation, but concerns have been raised about the lack of protection for consumers, with some calling for better regulation of the sector instead of government subsidies.

Subsidies can help to offset some of the cost of ground source heat pumps and boost uptake of of these systems, which is beneficial for the homeowner and helps the UK work towards its renewables targets.

Although none of the money is coming to schemes in Scotland, many will be watching closely to see how much it will help to boost investor confidence in this somewhat overlooked sector. With £320 million of funding coming down the pike for heat networks between now and 2021, the scheme is hoping to facilitate the construction of as many as 200 heat networks.

Such ambitious plans will surely result in benefits for district heating schemes here in Scotland over the next four years and beyond. Not only will the proposals in England and Wales help to better establish the technologies involved and demonstrate the benefits of district heating, but Scottish businesses operating in the industry will be in a strong position to win some of the contracts to deliver these systems given their excellent track record in renewable energy.

There are a number of similar schemes at various stages of planning and development in Scotland, such as the River Tay Heat Pump and District Heating Scheme, a similar one in the River Clyde and the possibility of former mining areas across the central belt providing ground source heat for district schemes.

With all the advantages that heat networks offer, on the face of it, it seems like a smart choice for most consumers. Announcing the funding, Energy Minister Baroness Lucy Neville-Rolfe said, “Heat networks can significantly improve the efficiency with which heat is provided to our towns and cities, as well as helping to develop local infrastructure and reduce carbon. The new scheme will help us to develop viable reforms to make the most of the heat we produce and use it effectively to bring bills down for people across the country.”

According to the Committee on Climate Change, low-carbon heat networks could provide 20% of the United Kingdom’s heat generation needs by 2050, taking us towards an overall reduction of 450% in associated emissions during that same time frame.

Listen carefully though, and you will hear a few dissenting voices. Not big businesses arguing for continued heat and energy production from fossil fuels – that argument was lost a long time ago. The voices of dissent belong to that most important of groups – the customers. The people whose homes are being heated by district schemes are not all finding their bills to be cheaper.

Indeed, they are sometimes paying a handsome premium for the privilege of being supplied by a shared scheme. A customer of one such scheme, Charles Montlake has gone on record stating, “Those of us who have District Heat know that the current suppliers overcharge, far from 30% cheaper we believe it is 300% more expensive (my bill is about 1,500 a year for a 3 bedroom flat, if I had gas it would be about 500 a year).”

Mr Montlake goes on to complain of the lack of an appeals process for the prices he and others are paying for heat. He says, “There is no appeal to this over charging. We have tried OFGEM, Ombudsman, ASA, MPs etc. Some of us are taking the suppliers to court but they settle before we can be heard.” Mr Montlake is calling for regulation, not funding, and is asking for people to lobby against funding subsidies until there is proper regulation in place for the sector.

Some have also questioned the efficiency of district heat. Anecdotal evidence has suggested that some schemes have installed equipment with low efficiency ratings, which is bad both for the environment and for customers’ bank balances alike. In some cases, this could mean customers would be better off not participating in the district heating scheme at all.

It would be good for these issues to be resolved quickly. Nobody wants to pay over the odds for their heating, and it is in everyone’s interests for heat generation to be done in as environmentally friendly way as possible.

There is a balance that needs to be struck. District heating needs to be viable as a business proposition in order to be adopted widely. This means companies have to be able to turn a profit, but it also means that the price consumers pay has to be affordable. Many will say, “let the market decide”, but those waters have already been muddied by government subsidies.

It seems the only sensible way forward is for a system of proportionate regulation that will create a level playing field for businesses operating in the sector and guard against consumers being overcharged to maximise returns for investors.

Regulation will pave the way for a sustainable, subsidy-free industry that can stand on its own two feet, providing clean and affordable energy for the country well into the future.

Let’s hope that Holyrood can learn the lessons from Westminster’s experience and come up with a system of incentives and regulation that helps Scotland expand its green energy interests in a way that protects the environment, supports business and safeguards the interests of consumers.

13 July 2016

How Much Does a Ground Source Heat Pump Cost?

Ground loop diagram — Representation of a ground source heat pump system.

Ground source heat pumps are growing in popularity as more people want to do the right thing for the environment. They are not necessarily the cheapest option, but look beyond the initial price tag and consider the longer-term savings before making your decision.

So, what do you need to consider?

Remember to include all the costs and savings

Cost is clearly an important question when you are looking at the different options for heating your home or commercial premises. Ground source heat pump costs can be deceptive because they require a larger upfront investment than some other forms of heating.

But don’t be too short-sighted in your calculations, because although the upfront costs can be considerable, ground source heat pumps often operate more efficiently than some of the other options available, which translates into savings down the road. Payback periods for ground source heat pumps can be as quick as 4 or 5 years.

How price sensitive are you?

Be clear from the beginning about how much contingency you have allowed in your heating budget. If you are very sensitive to increases in your budget, you could be exposing yourself to risk if there are complications with the ground works. Ground source heat pumps require pipework to be installed underground, and until the hole has been dug, there is no cheap and reliable way to establish exactly what is down there.

For example, bedrock could be very shallow, making it harder to excavate the trench for the pipes comprising the heat collection system (called the ground loop). Or in the case of a borehole, you might find yourself dealing with unstable ground conditions requiring more support for the borehole than was anticipated. Then there’s always the risk of encountering unexpected services such as sewer pipes or electricity cables, which can get in the way and, if you are unlucky it’s possible that these could be damaged, resulting in expensive remedial work. However, if you use a trustworthy contractor this shouldn’t be an issue.

At least with an air source heat pump, or even a conventional fossil fuel fired boiler, you will have a good idea how much it will cost to install. There are fewer variables that could cause difficulties and higher costs, which make them a safer option if your budget is constrained.

How “green” are you?

An important consideration that doesn’t get talked about very much is how committed you are to a heat pump system. If you are passionate about the technology itself or the benefits that it offers in terms of reduced environment impact, then you will probably be prepared to pay more compared to someone who is just interested in the savings that a heat pump system can offer.

Remember the grants that are available

The Renewable Heat Incentive (RHI) scheme is a government scheme that pays people for generating heat from renewable means. The scheme is run by Ofgem (the Office of Gas and Electricity Markets), which is a non-ministerial government department and an independent National Regulatory Authority. Ofgem protects the interests of gas and electricity consumers and pays those who generate heat under the RHI scheme using the Treasury’s funds.

The payment per kWhr for the generation of hot water and heat under the RHI depends on the size and specifics of the system being used. It will normally be a few pence per kWhr, which doesn’t sound like much, but you might be surprised to know that, over the course of the 20-year life of the payment, a typical system makes a profit, which brings me to my next point.

Don’t forget to factor in the savings over the lifetime of the system

A typical ground source heat pump system will last more than 20 years, which is plenty of time for the savings made on the running of the system compared with a combustion-based system to offset the installation costs. Look at the entire life cycle of the system to understand the overall savings or indeed profits that will be made by the system.

So how much will a ground source heat pump typically cost?

The answer is obviously, “it depends”, but as a general indication, the estimates given below should give you a rough idea. They are broken down into upfront and running costs.

Upfront Costs

Upfront prices for a 10kW system can range between £6,000 and £15,000. This price bracket doesn’t include the connection to the distribution system, which is obviously different for each building and location.

Running costs

Again, running costs will vary according to a number of factors, the most obvious being the efficiency of the heat pump system. Efficiency is normally stated as the coefficient of performance (CoP). The CoP is simply the ratio of units of heat output to the units of electricity used to run the system.

Typically, most systems will have a CoP somewhere between 3 and 4. This is influenced by the difference in temperature between the heat source (the ground loop) and the heat sink (your heat emitters, such as radiators or underfloor heating).

The highest efficiencies will be achieved by low temperature applications such as underfloor heating, particularly if the climate is releatively mild, or if geothermal energy is producing high temperatures in the ground loop (e.g. a hot spring).

Conversely, heating hot water for use in showers, baths etc will result in lower efficiencies. Better efficiencies are always achieved by low temperature applications.

To give a rough guide, a system running at a CoP of 4 would result in 4kWh of heat being produced for each kWh of electricity used. So, assuming an electricity cost of 16p/kWh, such a system would cost 4p/kWh to run.

Add in the RHI savings that are available, and the savings increase even further.

In conclusion

The decision of whether a ground source heat pump is right for your budget or not is not straightforward, but it isn’t that complicated either. Just bear in mind the points above, be clear about your budget, the lifetime cost of the system (including both installation and running costs) and research the grant funding that is available through the RHI incentive scheme, which sadly is coming to an end at the end of March 2022.

With those facts in mind, a calculator and a cup of coffee, you’ll be able to reach the right decision for your particular circumstances.