Providing an incentive

In November 2011 the Department of Energy & Climate Change launched its non-domestic Renewable Heat Incentive (RHI) scheme - a fund that financially rewards businesses for any heat produced via green technology.

To incentivise commercial sustainable heating system installations and contribute to UK carbon emission reduction targets, a total of £860m has been earmarked to provide RHI income over the next 20 years.

The UK has committed to decreasing its carbon emissions by 80% by 2050 and currently the production of heat and hot water using fossil fuels, such as oil and gas, accounts for about half of the current emissions.

As the first financial initiative of its kind to subsidise low-carbon heating, the RHI could reduce carbon dioxide by 44 million tonnes over the next decade - equivalent to taking 20 gas-fired power stations off the grid.

There are three steps to the RHI:
? (for businesses without existing renewable heating systems): source advice and assistance to design and install renewable heat systems, such as solar thermal panels, ground source heat pumps, air to water heat pumps or a biomass boiler;
? ensure metering and certification are in place to measure how much heat the renewable energy system produces and apply to the RHI for accreditation;
? get paid a fixed amount based on that output, the type of technology and the size of the system.

Many companies are now turning to 'client engineers' and biomass specialists for assistance in tapping into the benefits of the RHI. For example, in the first year of the scheme alone, Sustainable Energy Ltd has helped more than 22MW of installed heating applications gain accreditation and created £12m-worth of income over the next 20 years.

Timber processing companies that use heat for processes and heating can particularly benefit from the RHI as the combination of an onsite low-cost heating fuel, plus the financial incentive can make a strong commercial case, despite the higher costs for biomass boiler plants.

With the support of Sustainable Energy the BSW Group is just one timber business to take the renewable plunge and has installed two 3MW biomass boilers at its Newbridge sawmill, a 5MW boiler in Dalbeattie and two 5MW boilers at its Fort William site.

With more than 15,000 tonnes of carbon savings each year and an annual RHI income of around £500,000 at current volumes, plus the estimated cost of oil offset by the boilers, it is set to create substantial cost savings and return on investment for BSW within two to three years. It also demonstrates both the environmental and business case for biomass.

"The biomass projects at our three sites have been a huge success," said BSW Timber chief executive Tony Hackney. "Not only does biomass significantly reduce BSW's carbon emissions, it also makes overall site operations more sustainable."

Exceeding expectations
"We're already exceeding our performance expectations and meeting key environmental and financial objectives," he continued. "The Renewable Heat Incentive accreditation is an additional business benefit of these projects and we are proud to have set the benchmark for the industry when it comes to investing in means of sustainable heat production."

Hardwood supplier Sewstern Timber Services produces approximately 5,000m3 of timber product per year, which was previously dried in oil-fired kilns. These kilns are now powered by a newly-installed 750kW biomass boiler designed and project-managed by Sustainable Energy.

By transferring heat production to a woodchip boiler and using 930 tonnes of co-products as fuel, Sewstern will offset the annual consumption of up to 350,000 litres of oil per year and create a saving of 900 tonnes of CO2, as well as the RHI providing an annual income of £94,000. Its increased kilning capacity will mean a 30% increase in job throughput.

The RHI will enable businesses that had previously discounted sustainable energy options on the grounds of slow financial returns to consider renewable heating as a way to gain security from future rising gas and oil prices. Combined RHI income and offset fossil fuel costs can provide rates of return of 15-25% and payback periods of three to five years. Owners of all eligible renewable heating systems installed since July 15, 2009 will also now be able to apply for the RHI retrospectively. However, for those businesses considering a new biomass boiler or plant, it is vital to plan ahead and consider the RHI when installing as retrospective changes are costly and can delay the securing of funding.

Although there have been many successful applications, some RHI applications have been denied or delayed. Common problems when applying include:
? insufficient heat meter installed;
? heat loss on external pipework not accounted for;
? meters installed incorrectly;
? meters do not meet 2004 MID Class 2 Accuracy Standard;
? insufficient evidence to support the application;
? errors in independent metering report;
? and insufficient proof of eligible heat use.

Ofgem, which administers the RHI scheme, is due to roll out phase two of the non-domestic RHI this summer as currently incomplete or incorrect applications have created a 10-week backlog for accreditations.

It is vital to ensure your application is thoroughly checked and complete before submitting for accreditation. It is also advised to:
? obtain a schematic diagram that accurately reflects the installation, including location, fossil fuel equipment and heat meters;
? obtain necessary supporting information from the equipment provider at the offset - particularly commissioning certificates and equipment warranty information;
? ensure that your heat meter supplier can provide evidence of compliance with 2004 MID Class 2 Accuracy Standard;
? and read the 'Summary of supporting information for RHI applicants' on www.ofgem.gov.uk.

Sustainable Energy Ltd is an independent consultancy. For further information please visit www.sustainable-energy.co.uk.