Renewable Heat Incentive (RHI)
RHI costs and earnings
Article 2 of 3
RHI costs and earnings
Find out how much you could earn with the Renewable Heat Incentive (RHI) and if it's worth installing a renewable heating system in your home.
Want to know whether the Renewable Heat Incentive (RHI) will pay out enough money to make it worth your while to switch from a fossil fuel heating system to renewable heating? To make it easy for you, we've collated all the information you need about RHI to provide you with a rough idea of how much it will cost. We'll also show you how much money you could receive from RHI payments.
The upfront costs to install renewable heating technology can range from £3,000 for solar thermal panels, up to around £21,000 for a state-of-the art biomass boiler. But, after a few years, most people should see a substantial decrease in their heating bills.
Combine this decrease with the RHI payments that you will receive each quarter for seven years, and you shouldn't be left out of pocket.
Looking to install solar PV instead? Find out which solar panels you should buy in our solar panel reviews.
How much could I earn with RHI?
How much you could earn depends on your personal circumstances - such as the size of your home, how much heating you need and which renewable heat technology you choose to install. On top of RHI payments, you can also make a saving on your heating bills. This will vary depending on which fuel you are replacing and what you are replacing it with.
The table below outlines the estimated annual RHI payments for different property types and renewable heat technologies. It also shows you the average costs of running a fossil fuel heating system for the different properties.
Simply choose the property that most closely represents your home to get an idea of how much you're currently spending versus how much you're likely to earn.
RHI payments for heat pumps and biomass boilers will increase from September 2017, the government has announced, so the estimated annual RHI payments in the table below will be larger. You are eligible for the higher payment rate if you applied to join the RHI scheme since 14 December 2016; the higher payment rate will apply on or after 20 September 2017.
However, payments for biomass boilers were cut from 1 July 2017, the government announced, after the cap for installations was reached in spring 2017. Read on to find out more about degression.
|RHI earnings and comparison|
|1-bed semi-detached||2-bed semi-detached||3+ bed detached|
|Example annual heat demand (kWh)(a)||8,000||12,500||18,000|
|Estimated annual cost of current heating system(b)|
|Estimated annual RHI payment(c)|
|Air source heat pump||£610||£954||£1,373|
|Ground source heat pump||£1,571||£2,445||£3,535|
|Solar thermal panels(d)||£174||£277||£400|
(a) Example heat demands taken from an Ofgem letter to all retail energy-market participants, price-comparison websites, consumer groups and other interested parties in May 2015.
(b) The estimated cost of your current heating system is calculated using the average annual heat demand for the property size and the price per kWh for the relevant fossil fuel (price for gas and electricity calculated by Which?, prices for oil, LPG and coal from Sutherland Tables for Jan 2017. Electricity prices are assumed for standard rate tariffs - those on Time Of Use tariffs will pay less. Last updated: 3 July 2017.
(c) The estimated annual RHI payment is calculated by multiplying the average annual heat demand by the relative RHI rate for the different technologies.
(d) The heat energy output for solar thermal panels is deemed. The estimated annual RHI payments for solar thermal panels are therefore based on the estimated annual deemed renewable heat for different property sizes (details from YouGen and the Solar Trade Association).
Installation costs vs RHI payments
The cost of installing a renewable heating system in your home will depend on which technology you choose, and which size you opt for. The actual savings you will make depend entirely on your own specific property and heat usage, plus the efficiency of your renewable heating system.
The table below shows the typical cost of installing the various renewable heating systems, as well as the total RHI payments you would receive over the seven-year period they are paid, at current levels. You can use this in combination with the table above, which shows how much you'll save by not having to pay for fossil fuel heating. This should help you decide whether it's worth changing your current heating system for renewable heat.
If you apply from the scheme from 14 December 2016, with a heat pump or biomass boiler, you will be eligible for a higher tariff rate from September 2017. These are listed below.
|Estimated RHI payments over seven years|
|3+ bed detached|
|Air source heat pump||£7,000-£11,000||£4,273||£6,676||£9,614|
|Ground source heat pump||£13,000-£20,000||£10,998||£17,185||£24,746|
|Solar thermal panels||£3,000-£5,000||£1,217||£1,942||£2,800|
Table Notes: Calculations for estimated RHI payments over the seven-year period are based on the annual estimated payments in the potential earnings table above. Installation costs (including technology costs) from the Energy Saving Trust.
The Department for Business, Energy and Industrial Strategy (BEIS) also has its own domestic RHI calculator. You can enter specific details about your property to find out a rough idea of what you could earn by installing one of the four types of eligible RHI technologies.
The rates for domestic RHI tariffs for applications submitted between 1 July to 30 September 2017 are:
- 7.63p/kWh for air-source heat pumps (air to water)
- 19.64p/kWh for ground-source heat pumps
- 3.85p/kWh for biomass boilers and biomass 'cooker stoves'
- 20.06p/kWh for solar thermal panels
The rates for RHI payments on heat pumps and biomass boilers will increase from September 2017. If you applied to join the RHI scheme from 14 December 2016, your tariff will automatically increase once available. The higher rates will be:
- 10.18p/kWh for air source heat pumps
- 19.86p/kWh for ground-source heat pumps
- 6.54p/kWh for biomass boilers
These rates may go down as the government keeps the RHI payments within budget. If spending on one of the RHI technologies reaches a cap, then that particular technology's tariff decreases by 10% from the start of the next quarter, or 20% if spending far exceeds the budget. This is called degression.
If you already receive RHI payments, and applied before April 2016, your tariff will be adjusted in line with the Retail Price Index (RPI) on 1 April each year. If you applied after April 2016, your tariff will be adjusted in line with the Consumer Prices Index (CPI). All domestic RHI payments are tax-free.
Most homes receive estimated RHI payments, but you may be required to install a meter and submit meter readings so Ofgem knows how much to pay you. Ofgem decides whether or not your system should be metered.
From September 2017, all new heat pumps applying to receive RHI payments must have an electricity meter installed with them. This is to help consumers make most efficient use of their heat pumps by making them monitor the performance of their system and understanding its electricity usage.
Ofgem offers an extra annual payment if you register for a Metering and Monitoring Service Package.
For biomass boilers that burn wood pellets, air-source heat pumps and ground-source heat pumps, Ofgem offers an extra annual payment if you register for a Metering and Monitoring Service Package (MMSP) that monitors the performance of your system. The payments are: £200 per year for a biomass pellet boiler; and £230 per year for an air/ground-source heat pump for the first 10,000 applicants each year.
It's paid quarterly into the same bank account where you'll receive your RHI payments. You are eligible regardless of whether your system needs to be metered for RHI payments.
Heat demand limits will also be introduced for heat pumps and biomass boilers from September 2017. These limit the financial support that owners get for their renewable heat use. If your home’s heat demand (on your EPC) is above the limits (below), your payments will be capped.
|Technology||Annual heat demand limit (kWh)|
|Air source heat pumps||20,000|
|Ground source heat pumps||30,000|