Biomass heating – the UK’s hottest opportunity!
By Neil Turner RES Group
On 10 March 2011 the UK Government announced the biggest shake up of the heating industry in decades. The Renewable Heat Incentive (RHI) has been designed by the Department of Energy & Climate Change (DECC) to revolutionise the way buildings are heated and will mean biomass heating is financially the preferred choice in all commercial and public buildings. It is the first financial support scheme for renewable heat in the world!
The Triple Benefit As well as the income from the RHI, heat users benefit from the carbon savings achieved as they offset the Carbon Reduction Commitment (CRC) levy and from reduced use of counterfactual fuel (this is usually the incumbent fossil fuel such as gas, oil or LPG). This triple benefit (RHI, CRC and bill savings from displaced fossil fuel) makes biomass the UK’s most financially attractive fuel.
The tariffs have been set to achieve a 12% return on the additional cost of using biomass heating as an alternative to gas, therefore projects displacing oil or LPG can achieve even greater returns. It is estimated within DECC’s RHI Impact Assessment that nearly 50% of the £860million of Treasury funding for the RHI will be spent on biomass heating, which is over double the share of any other renewable energy technology. The funding is expected to stimulate £4.5 billion of capital investment up to 2020, which equates to an estimated 13,000 installations of renewable heating systems in the industrial sector as well as 110,000 installations in the commercial and public sector.
It is estimated within a DECC press release (March 2011) that 25% of the heat demand in the public and commercial sector will come from renewable sources by 2020 and biomass heating is vital for the UK to stay on track to meet its EU obligations of 20% of total energy from renewable energy by 2020. This means that biomass heat technologies and the RHI are set to transform the monitoring and delivery of heating, hot water and in some cases cooling within buildings.
Intelligently designed government scheme Set to begin on 30th September 2011, the details of the RHI released so far indicate an intelligently designed tiered tariff mechanism. The idea is that an income is guaranteed over a 20 year period as long as the equipment continues to work and deliver usable heat, but the tariff reduces significantly each and every year after 1314 hours of operation (this equates to a 15% load
factor, but in a conventional UK space heating demand profile this typically equates to over 50% of the annual load). This means there is a big incentive to deliver heat, but no incentive to over-consume fuel and waste heat. Various further safe guards such as heat meters and spot checks are all going to be used to ensure the RHI is not abused and that the technology delivers on its promises. This ‘policing’ of renewable heat is a massive wake up call for the heating industry and means there will be a new breed of renewable heat user focusing on whole life costs - selecting quality equipment that is well designed and capable of delivering heat for at least 20 years.
Over the last decade building-integrated renewable energy has mainly been installed in new developments to meet planning requirements such as the ‘Merton Rule’ (a percentage renewable energy requirement for new developments. For many Councils this has been a 10% target based on carbon or total onsite energy consumption. A number of Council’s have increased this requirement to 20%, which is highly challenging to achieve without the use of biomass heating).
This
policy and various grant programmes have enabled the biomass heating industry to flourish and quality fuel supply networks have developed. Procurement decisions are often based on biomass heating being the most cost effective onsite renewable energy to deliver carbon savings (project analysis nearly always shows biomass heating saves the most carbon at the lowest cost – ‘the £ spent to carbon saved ratio’). The ‘Merton Rule’ and grant programmes, although commendable for enabling the renewable energy market to develop, did not include any retribution if theoretical carbon savings were not achieved. This meant the construction industry could continue to drive down capital costs and some never delivered the carbon savings promised. The RHI completely changes this with payments made on a quarterly metered heat basis – the whole life cost is now critical to a projects success!
ENVIRONMENT INDUSTRY MAGAZINE |85|
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