Renewable Heat Incentive Consultation for domestic scheme
Earthtest Energy is a sister company of Ashton Bennett Limited, which for the last 25 years have provided geological, geotechnical and environmental consultancy services to the construction industry, home owners and businesses. Earthtest Energy have been supplying ground source heat pumps together with the associated heating delivery systems since 2008. Earthtest Energy secured the first ever Non Domestic Renewable accreditation for our customer – Booth Brothers (Printers) Ltd.
We offer our responses to the consultation questions set out in the consultation document. Our response is limited to the ground source heatpump industry since we have no direct experience of biomass or solar thermal.
We have submitted this response through your website ref. ANON-4X4M-GNER-S, but we are sending this letter so that you can contact us with any queries you might have. My telephone number is 07703 259637.
1 What are your views about the proposed approach of a universally available tariff scheme? Is a tariff scheme the most efficient way to drive down technology costs, increase innovation and value for money, together with developing a homegrown supply chain? Please include reasoning for your response.
The tariff is essential to stimulate the market. Over the last 3 years we have quoted for 200 installations, both domestic and commercial. Of these less than 20 installations have been undertaken using any form of renewable heat. Most have proceeded using conventional heating, although some are on hold until some form of incentive makes the project viable. Bad publicity resulting from badly implemented installation has tarnished the image of renewable heat technologies.
Incentive tariffs will encourage customers to purchase the technologies and enable a renewable energy to prove itself as a realistic alternative fuels. Successful installations will result in subsequent customers needing less incentive to proceed with renewable projects, and in time no incentive will be needed as increasing energy costs and reducing renewable equipment costs make the justification of the increased capital costs a justifiable expenditure.
2 Do you think that there would be advantages in phasing or piloting roll out of the scheme? On what basis do you think it might make sense to phase or pilot the scheme?
The scheme needs to be detailed as soon as possible and to be rolled out in line with the programme detailed in the consultation proposals. Any delay, phasing or piloting will further destroy the credibility of the scheme, which has been “promised” since 2009.
3 Do you think that there may be alternative or additional approaches to incentivising renewable heat deployment that we should pursue? What approaches do you think might add most value?
We think that there has already been too many delays and the scheme should be launched in line with the proposed timetable, and with only minor adjustments as detailed in the rest of our response.
4 Do you have any comments on the proposed exclusion of second homes from the RHI?
The objective is to encourage the installation of renewable heat systems and its subsequent use. Whilst it might be seemed fair to exclude tariff payments for the retrofitting of renewable systems in second homes, it would be madness not to incentivise the fitting of renewable heating system in new builds and major renovation. It is likely these houses will continue being used for decades and subsequent owners may purchase them as their sole residences.
5 Do you have any comments on the proposed approach to private landlords and their tenants under the RHI? Have you any suggestions about how to ensure that the RHI incentivises the installation of renewable heat in the private rented sector and does not disadvantage tenants?
We see no reason to exclude rental properties from being fitted with heatpumps and incentives paid to the owners, since such installations will reduce the burning of fossil fuels. Tenants will get the advantage of reduced energy bills. Biomass may be different.
6 What are your views on our proposals for the treatment of legacy applications for installations between July 2009 and the opening of the scheme?
We can see no reason why recipients of Premium payments would object to a repayment if the scheme proceeds as proposed.
7 Are there any other legacy applicants (aside from those that have received RHPP or installed renewable heating systems since 15 July 2009) that you think we need to consider?
If a system installed before 15th July 2009 can be demonstrated to perform in line with the standards required of new systems, we see no reason why it should not be eligible. This may lead to the improvement of some of the badly designed schemes detailed in recent surveys, which must be good for everyone.
8 What are your views on phasing legacy applications over the first year and the option of setting a cut off date for legacy applications?
If the Premium Payment assessment has been carried out properly, the RHI accreditation should be virtually automatic. There are records of the Premium Payments made so the work load will be known and the resources made available to ensure an efficient response to applications. We see no reason to have a cut off date; those who delay risk being eligible for a lower tariff, and may have to achieve higher technical standards.
9 Do you agree with the proposed approach to the selection of eligible technologies for the domestic RHI scheme? Please include reasoning for your response.
Open loop ground source heatpumps draw water either from surface sources i.e. rivers lakes or the sea, or from boreholes. To avoid administration delays once the scheme is underway, the drafting of the legislation should make it clear that surface water ground source heatpumps will be treated as horizontal loop heatpumps and below ground water source heatpumps will be treated as vertical loop heatpumps.
10 Do you agree with the proposed eligible technologies set out above? Are there others that should be considered for inclusion?
In the non domestic RHI scheme waste heat cannot be the source or partial source for an eligible heatpump system. So for instance a supermarket which dumps heat from refrigeration into the ground cannot use this ground as a source for a heatpump to heat the building without an adjustment to its payments. Or a farm cannot route collector pipes through a dung heap to increase the source temperature without a similar adjustment. Or an air extract from the building cannot be ducted to flow into an air source heatpump. We are told by Ofgem that this is because of the way the legislation was drafted. The drafting of the Domestic RHI rules should allow the reuse of waste heat since it only makes the heatpump more efficient, thus benefitting the environment.
11 Do you agree that an approved suppliers scheme is the best option for domestic biomass heat installations to demonstrate their use of sustainable fuel? Please provide reasoning with your response.
We are not qualified to respond to this question.
12 Do you agree that as part of the approved biomass supplier list we should assume a level of boiler efficiency? Please provide evidence to back up your response.
We are not qualified to respond to this question.
13 Do you agree that April 2014 is an appropriate date from which to start requiring users of domestic biomass heat installations to provide proof of meeting the sustainability criteria? Please provide reasoning with your response.
We are not qualified to respond to this question.
14 Is the air quality approach set out appropriate for the domestic RHI sector? Please provide your reasoning with your response
We are not qualified to respond to this question.
15 Do you have any views on our proposals for excluding certain technologies? If you would like to suggest changes, please provide evidence to support your view
As stated above use of waste heat should be permitted because everyone wins and no one loses.
Some domestic schemes exceed 45kw. If they comprise multiple MCS certified heatpumps there is no reason to exclude them from the scheme. Owners of such installations may accept that the maximum claimable tariff be capped at 45kw, but to exclude them would ensure that such large houses continue to burn fossil fuels. The Domestic RHI legislation should preferably include larger schemes provided the equipment is MCS approved and pay tariffs in line with the installed capacity, or should include larger schemes provided the equipment is MCS approved and pay tariffs up to 45kw installed capacity, or (non preferred option) should classify such installations as non domestic. These properties must not fall in the gap and be ineligible for either RHI tariff.
16 Do you agree with our proposed approach to efficiency requirements for heat pumps?
COP is certified and tested in laboratory conditions and is generic for any heatpump design. SPF is a more important to the end customer, but is specific to every installation and can only be measured using expensive equipment installed in the house and monitored over a period of years. As an eligibility criteria SPF is too subjective and can only be estimated by considering the detailed design of the system. SPF will vary according to the way the house owner operates the system, which may have to change according to the weather. We believe that COP should be the overriding criteria backed by a calculation which estimates the likely SPF of the system.
17 Do you agree with our assumption that heat pump systems, using technology that meets MCS efficiency specifications, should meet an SPF requirement of 2.5 providing they are designed, installed and used appropriately?
An SPF of 2.5 is reasonable target for an installation using a MCS approved heatpump, and should be demonstrable if the system is correctly designed.
18 Do you think that the ‘Green Ticks approach’ to an energy efficiency requirement is appropriate to the RHI? Please provide reasoning for your response and further information on any exceptional cases you think might arise
The Green Tick approach is a good way to link the two initiatives.
19 What are your views on our proposal to require consumers to have installed energy efficiency measures and provided proof to Ofgem before they become eligible for the RHI? Can you suggest an alternative approach that guarantees the installation of the green tick measures, but provides RHI subsidy at an earlier point?
It is reasonable that the energy efficiency improvements should be implemented prior to the commissioning of the RHI supported installation.
20 Do you think that solid wall insulation should be excluded from the energy efficiency requirements or be introduced in a phased way? Please provide evidence for your response.
Certain houses such as listed buildings cannot install double glazing or wall insulation. Other houses with exceptional internal architecture, would be irretrievably damaged if say antique oak floor boarding or elaborate tiled floors had to be lifted to install underfloor insulation. The practicality and the cost of reinstating the architectural features should be considered when assessing whether a Green Tick measure needs to be implemented prior to RHI accreditation of a system.
21 Do you think that 7 years is a suitable time period for tariff payments under the RHI to be made? Would a different time period for tariff payments suit different technologies? Please provide evidence to support your view.
A seven year tariff period is appropriate for heatpump installations, making the installations viable and yet leaving many years of cost savings to follow before the equipment has to be replaced. We recognise the issues addressed in the consultation document, when biomass tariff payments cease.
22 Please provide evidence on the potential lifetimes for the different renewable heating technologies, particularly where they are expected to last less than the 20 year period that we are assuming.
We expect heatpump installations to last for 20 or more years.
23 . What is the risk of switchback after the period over which tariff payments are made? Do you think this applies solely to biomass?
We think that switch back only applies to biomass.
24 Do you think that either of the proposed solutions would mitigate the risk of switchback? Which approach would be better? Is there any other action we could take to ensure the continued use of biomass in this way?
We have no specialised knowledge of this subject.
25 What do you think are the other risks associated with paying a tariff over a shorter period, say 7 years, but assuming heat delivered for 20 years? How do you think we should mitigate these risks?
We think there may be a risk that Solar thermal panels may fall into disuse. Since they are not the prime source of heat, the house owner may not notice their degradation, or may choose not to spend money repairing them. We see no such problem for heatpumps, since they are the prime source of heating and domestic water.
26 Do the tariff ranges above accurately reflect the costs faced by consumers installing renewable technologies? Where possible we would welcome cost-based evidence that supports your views.
The top of tariff range suggested for ground source heatpumps, even though artificially capped, would seem to be adequate to incentivise the first and very important customers to avail themselves of renewable technology. The lower figure may be appropriate once the technology becomes widespread and the earlier, sometimes less efficient systems, are swamped by the greater number of efficient systems complying to RHI requirements.
27 What are your views on the support for solar thermal as set out? What evidence is there to support a tariff higher than the renewable energy cap? Do you have any suggestions / views on other ways in which a subsidy for solar thermal could be paid, for example, through a capital grant or through increasing the tariff beyond the cap?
Solar thermal is a supplement to other forms of heat. Its installation will always reduce the energy consumption of the house, but will not reduce the size of the prime heating system. Where solar thermal is fitted together with another eligible system the prime system tariff payments should not be reduced either in quantum or in rate. If it has been decided to cap the tariff rate at 17.3 pence, that cap should apply to all technologies.
28 What are your views on the support for ground source heat pumps as set out? What evidence is there to support a tariff higher than the renewable energy cap?
A 20p tariff would obviously offer a greater incentive, but we accept that there is a logic in applying a cap.
29 What are your views on differentiated tariffs for ground source heat pumps?
A differentiated tariff would encourage the use of boreholes which are more efficient than horizontal systems. This would not need to be great, one or two pence would swing a proportion of customers, and this would reduce energy consumption by about 8 to10%.
30 Do you have any data that you can share on the current market split between borehole and ground array GSHPs, associated costs and the likely future demand of these?
Because of the problems we have seen with horizontal collectors, we only offer vertical systems. We would guess that more than half of the installed systems have horizontal collectors. Many people are put off installing a heatpump by space constraints, and the cost of vertical systems. If professionally installed, boreholes probably cost twice as much as horizontal systems, but many horizontal systems are installed by home owners themselves, thus increasing the differential.
31 Are there other factors which should be taken into account when calibrating the tariff levels for either air source heat pumps or biomass boilers if the value for money cap were to become applicable to those technologies?
We have no specialised knowledge of this subject.
32 Do you believe that the introduction of a domestic RHI tariff for new build is appropriate? If so, what additional costs and/or savings should DECC take into account if setting a new build tariff?
Introduction of domestic RHI for new build is essential, at least until planning rules change which force new build to incorporate renewable heating systems. The tariff payment must take into consideration the additional build costs over say a conventional boiler system for houses or electric panel radiators for apartments. It must also incentivise the architect, the builder and the home owner to move to the new technologies. Currently estate agents are still telling developers that renewable heating does not increase the value of a property and many builders and architects are scared of making mistakes if they install something new. Initially the tariff payments for new houses should be the same as for retrofits; this will incentivise the construction industry to change.
33 Do you have any evidence on the percentage cost reductions associated with fitting a renewable heating system into a new building, compared with retrofitting it?
For a new build the costs of the equipment is the same as for a retrofit, but there is no equipment to be prematurely scrapped and there is no collateral damage to be rectified.
34 If you do not agree with a domestic tariff for new build along the lines proposed, can you propose alternative ways to incentivise the uptake of renewable heating in the sector?
Any new build completed since July 2009 should be eligible. Tariffs for new builds should continue until planning rules force the inclusion of renewable heating systems.
35 In light of the above, do you think we should introduce a domestic RHI tariff for social landlords? Why/why not?
It will boost the take up of renewable heating if owners of large tranches of properties decide to invest in the technology and they should be encouraged to do so. If a social landlord uses a single heatpump to heat multiple apartments or houses, the scheme will be eligible for the non domestic RHI. For heatpumps serving single houses, the costs incurred by a social landlord will be similar to those incurred by other owners, save that the greater volumes purchased will enable the social landlord to negotiate increased discounts from suppliers. At the same time the extra volumes will enable supplies to cut their costs, and thus eventually the costs and the prices of heatpumps will reduce, the effects on the costs and prices of the groundworks will be less significant. The intent expressed in the consultation document is to reduce the tariff as costs reduce. To exclude social landlords would be to reduce the potential carbon emissions savings and to slow the process of driving down equipment costs, and this would be contrary to the objectives of the scheme.
36 Do you think that the proposed 7 year period for tariff payments would be appropriate for social landlords too or would another timeframe within the 20 year life of equipment be more appropriate?
It may be appropriate to make social landlords with more than say 50 installations, eligible for the non domestic scheme rather than for the domestic scheme.
37 Do you have any evidence on the percentage differences to costs/benefits of fitting individual renewable heating systems into social housing?
We have no evidence.
38 . Is there an alternative way in which you think we should incentivise renewable heat in the sector?
We see no necessity to introduce a third tier of payments over and beyond the Non Domestic and the Domestic RHI schemes.
39 Do you agree that deeming, as opposed to metering, is the most appropriate approach on which to base the calculation of RHI payments? If not, why not?
We believe that deeming is an appropriate way to calculate the tariff payments, but believe that the calculation should be based upon the insulation levels required by building regulations at the date of the house build, enhanced by the addition measures needed to achieve The Green Deal compliance. If a house owner chooses to increase insulation levels further or to introduce other heat saving measures, such as mechanical ventilation with heat recovery, he should not be penalised with a lower deemed consumption level. By taking this approach the assessment of the deemed consumption will be simpler and less open to abuse, since the calculation can more easily be checked retrospectively.
40 Do you agree that a calculation by the MCS installer, or equivalent, is the best approach and that the above criteria are adequate for developing an effective calculation?
The MCS installer is the best person to calculate the deemed consumption. See also our comments above.
41 Do you have any views on which calculation would be most appropriate for deeming heat? Please provide evidence to support your claim.
See our comments under question 39
42 Do you agree with the approach outlined here for the treatment of bivalent systems?
The proposed approach to bivalent system seems reasonable. If however solar thermal and a heatpump are the bivalent system, the deemed consumption for the heatpump should not be reduced since the introduction of the solar thermal system does not reduce the size of the heatpump installation which must be sized to cope on a cold winter night. The capital cost of the heatpump is the main driver in calculating the tariff payment, so a reduction in the deemed consumption could make the addition of solar thermal not viable.
43 Do you anticipate that financing offers will come forward from the market to provide support for renewable heat in conjunction with the RHI? If not, is there anything DECC could do to support this?
It is to be hoped that with government encouragement, Mortgage Companies and High Street Banks will provide loans to householders. We are concerned however if this does not happen, that specialised finance companies may introduce arrangements, perhaps with major equipment suppliers, which could encourage the retention of or even the increase in capital costs. Smaller equipment suppliers and smaller installer may thus be railroaded into joining and thus competition could be depressed, and prices may not fall as would otherwise be the case.
44 To what extent do you believe the ability for some consumers to fund their renewable heat installations through Green Deal and the RHI will improve deployment of renewable heat?
Since The Green Deal merely provides finance and does not subsidise the house owner, there is no double subsidy. However since the house holder will be in receipt of guaranteed tariff payments for a 7 year period, this could also be financed through The Green Deal. This approach would address our concerns in our answer to question 43, and would by increasing the sizes of The Green Deal loans, make participation in The Green Deal financing more attractive for financial institutions.
45 Do you agree that a metering and monitoring service package like the one we have outlined would be effective at driving long-term system performance improvements?
A package such as that outlined would certainly ensure that the system to be monitored is correctly installed to maximise its efficiency. It would also encourage the house owner to manage his system to maximise the efficiency. In the longer term the publication of data collection would motivate equipment manufacturers to improve their equipment, and installers to adopt best practise even if it increases initial costs.
46 Do you think that the additional financial support in option 1 should be distributed as a flat-rate increase to the RHI tariff, a one-off upfront payment or in some other way?
Unless the additional capital cost is paid upfront, many customers will decline to take this option.
47 Do you offer a system that already provides some of the requirements outlined in option 1? If so, please can you provide details of how your system works and whether you would be interested in helping us develop this proposal further.
We would be interested to work to develop such a system.
48 Should consumers’ RHI tariffs for heat pumps vary according to the measured or estimated performance of the system? Do you think installers would offer performance guarantees if this was offered in the RHI? Please comment on the method we have described in option 2.
We believe that there are a small but significant number of customers who would like to participate in such a system. We would be happy to guarantee the performance of our installations. Currently we believe that a monitoring system to measure SPF as accurately as required would be prohibitively expensive, and SPF would be affected adversely or positively dependent upon the varying weather year by year in any older house. A lot of work would be needed to make a fair system, but the potential benefits of the information gained could justify the effort.
49 Do you think that setting a minimum SPF higher than the EU minimum for air source and ground source heat pumps could be an effective driver of performance? What figure do you think might be suitable?
Setting a minimum SPF at a higher level than 2.5 would drive equipment suppliers and installer towards best practise, but as detailed above would be very difficult and expensive to police. Introducing a higher SPF requirement initially may stall the market if customers fear that they may be disqualified and installers have no means to offer their customers the certainty that the installed system will comply, regardless of the severity or duration of the winter. However if the measures outlined in paragraphs 197 to 217 are implemented first, then raising the threshold for the SPF would be practical and advantageous.
50 If we took this approach, should the minimum SPF required increase over time? Please comment on how quickly you think the required SPF should rise and to what level it should rise
We do not believe it is possible to answer this question, and have no detailed knowledge of the accuracy of the information gathered in data gathered in Germany. It would however be logical to suppose that what is being achieved (but not necessarily what is been reported) in Germany can be achieved in the UK.
51 What are your views on the use of the RHI budget to pay for metering equipment to be installed for the purpose of policy evaluation?
We would be happy to comply with these proposals, and provided the test equipment is properly designed and the test procedures well thought out there would be no reason why the sets of equipment could not be moved from installation to installation once the tests are completed.
52 What are your views on the proposal that we should share data with MCS Certification Bodies so that it can be used to improve MCS installer surveillance?
There would seem to be little point in these tests unless they are used to provide feedback, but it is important that the causes of any inefficiencies are detected and the installer given the opportunity to explain any discrepancy before the data is passed to other parties.
53 What are your views on the requirement to make all installations meter ready and the use of an Installer Checklist?
Making every installation meter ready will increase costs, but not by very much.
54 Do you agree that there should be a financial penalty for consumers who do not ensure their installation is ‘meter ready’?
It may be simpler to place the onus on the installer, who would have the resources to return to site to rectify the situation.
55 Should the penalty for consumers who do not make their installation ‘meter ready’ be the loss of the first year of their RHI payments or a reduction of all of their payments? What other penalty might be appropriate?
Only if the installer does not comply, should the consumer be penalised – the objective of the scheme is to incentivise the consumer not to alienate him.
56 What are your views on providing a tariff uplift for systems where solar thermal is installed alongside other renewable technologies?
Solar thermal is a supplement to other forms of heat. Its installation will always reduce the energy consumption of the house, but will not reduce the size of the prime heating system. Where solar thermal is fitted together with another eligible system the prime heatpump system tariff payments should not be reduced either in quantum or in rate.
57 Do you have any evidence on the size of tariff that should be provided in order to encourage the deployment of these systems?
If the householder receives full tariff at the heatpump rate for the total deemed consumption of the house plus a tariff for the solar thermal based upon that deemed generation, then the customer will be incentivised to fit the secondary system and to ensure that its use takes preference over the primary system. For biomass, where running costs are substantial part of the tariff, there may need to be an alternative solution.
58 Are there any other approaches that you think could drive continued improved performance of renewable heating systems?
Systems which use waste heat should be made eligible for tariff payments whether they are in the domestic or non domestic sectors. It is madness to exclude the use of heat which will otherwise go to waste. Deemed consumption should be based upon a building constructed to the building regulations applicable at the time of construction plus The Green Deal improvements. Customers who further increase insulation or take other energy saving measures should be encouraged not penalised.
59 What are you views on the options for the proposed pattern of payments?
If the house holder increases his mortgage to pay for the works, he will be repaying on a monthly basis, so quarterly payments would be preferable, as would payment in advance rather than in arrears.
60 Do you think that MCS (or equivalent schemes) will provide sufficient consumer protection for the RHI or should additional consumer protection be built into the scheme? If you think more is necessary, please explain what you think is required.
We think that the MCS as structured will provide the customer and their lender adequate protection.
61 Do you agree that our proposed approach of an annual consumer self-declaration, supported by supplementary spot checks is the best way to ensure that equipment installed under the RHI continues to be operational and generate heat optimally over time? What should the penalties for non compliance be? If you think that the proposed approach is not the best or could be improved, please set out your reasoning and any evidence to support that.
For heatpumps we agree with the proposed approach, but generally there is not a maintenance regime, the customer would only self- declaring that they are continuing to use the system.
62 Are there other risks of fraud or gaming that we have not identified in the table above?
We cannot think of any other risks of fraud, but for the sake of clarity it should be stated that if the customer improves his property to reduce energy consumption by increasing insulation, installing mechanical ventilation with heat recovery or any similar measure, he would remain entitled to the full agreed deemed payment.
63 In terms of communicating the RHI scheme to consumers and other interested parties, what do you consider that the role of government should be?
The government’s role in communicating the scheme should be to point out the possible benefits, and point the potential customers towards the MCS accredited suppliers and installers, whilst emphasising the government’s confidence in the expertise and the integrity of certified installers.
There is still a widespread misapprehension that the government reduced PV tariff payments to those already in the scheme, rather than to new entrants. Correcting these erroneous rumours is important to ensure that there is faith that RHI will deliver what is promised. There have been too many officials making statement such as “we must avoid repeating the mistakes that occurred with PV panels”.
64 Do you have any comments on how RHI information to support and guide consumers along the journey should be provided? If so, please set them out.
We think that general advertising in newspapers, hoardings, on television etc should direct interested parties to a web site, to trade associations and to MCS, where more detailed information would be available and lists of certified installer can be found. At the end of the day the installer is the one who has to deliver the solution to the customer.
65 Do you have any comments on or additions to the identified events and issues affecting the consumer along the Customer Journey? If so, please set them out.
A key issue for the consumer is how he is going to finance the installation. We do not think it will help the credibility of the scheme if loan companies are set up specifically to finance a scheme to earn tariff payment. We are thinking specifically of the free PV panel fitted to householders’ roofs in return for the electricity they produce, with the tariff payments and the deemed feed in payments going to the installer or his financier. We would not like see something similar happening with renewable heat.
66 Are there any specific customer journeys that you feel would be helpful to analyse? If so, please set them out.
All of our existing customers had a knowledge of what they wanted and financed the system installation from existing funds. Their journeys are not really relevant to your question.
67. Do you have any comments on or additions to the actions identified here? If so, please set them out.
The customer will often need to borrow money to finance the project. If the loan is to be provided by High Street Banks or existing mortgage holders, they will need to be certain that the payments will be made, that the deemed consumption will be what is expected and the tariff rate is what is expected. They will need this certainty when they lend the money, and not when the system is commissioned. There needs to be a mechanism to pre-book the RHI tariff, even if this involves a forfeitable deposit if the scheme does not proceed.
68 In particular, do you have any comments on how to make the RHI and Green Deal relationship as seamless as possible in order to minimise disruption to the consumer? If so, please set them out.
Ideally The Green Deal loan would cover the installation cost based upon not only the heating cost saving, but also the tariff payments. This would additional make The Green Deal loan business more attractive to financiers, because the size of the loans will be much larger both in quantum, and even more so, in proportion to the administration costs of achieving that loan.
69 Do you agree that the system of degression described would provide us with a sufficient means of controlling the costs of supporting the domestic RHI scheme? If you would prefer a different approach to budget control then please set out what that might be and how it might operate.
No. The system proposed potentially could destroy the scheme. The incentive to invest disappears if there is no certainty that the return will come. Installation of a ground source heatpump system (bearing mind that in most cases the heat delivery system has to be changed) takes about 4 months and can take longer. If a customer has to borrow funds to install the system, his lender will need certainty of the tariff payments prior to releasing funds.
70 Do you agree that we should build in greater flexibility to the system such that degression might not occur if overall deployment levels are low? If yes, how do you think this could be achieved?
To try to envisage every possible eventuality and design a course of action without knowing how each eventuality will interact with other eventualities is probably striving to achieve the impossible. No company would even attempt it. An individual or a committee should be charged with reviewing the payments agreed and the applications received against the budget. Every couple of months he/she/they should issue a report, and if necessary amend the tariffs giving as much notice as is practical. The guidelines within which he/she/they operate should be laid out and would be broadly in line with this chapter.
71 How do you think we should set triggers which would result in tariff reductions to ensure fairness, value for money and certainty? Do you agree with the options presented, or would you prefer we took an alternate approach?
We do not believe it is possible. We believe the system should be managed on a day to day basis.
72 Would you prefer a system which announces any tariff rate reductions every two months (with up to a one or two week notice period before the reduced rate comes into effect), or on a quarterly basis (with up to a months’ notice period)? If you would prefer a different period please set this out and explain why.
Neither two weeks’ nor a month’s notice is any good if the customer is committed on a four month project. Unless six month’s notice can be given (and clearly with the budget constraints outlined it cannot be given) Enhanced Preliminary Accreditation must be available for domestic customers.
73 Do you agree that the system should specifically recognise legacy applicants when calculating whether trigger points have been met? Do you agree with the options presented, or would you prefer we took an alternate approach? If yes, then please provide details.
Legacy customers are or are potentially a known, if taken into consideration at the start it makes it less likely that the tariff payments will have to be reduced early in the life of the scheme. Such an early tariff reduction would disproportionately reduce the incentive for customers to invest in renewable heat.
74 Do you agree that we should base degression calculations and triggers on pounds spent, or do consider it would be more appropriate to use an alternative approach, such as installed capacity and renewable heat produced? Please provide reasons for your preferred approach?
As stated above this should be part of day to day management of the scheme and not preordained by rules set in advance.
75 Do you agree that we should not apply EPA or a similar option to the domestic scheme? If not, why not? How could this work?
We categorically disagree. EPA is essential. It would be acceptable for a customer have to pay a non returnable deposit and to have to complete the scheme within say one year, but he must be able to gain certainty of the amount of tariff he is going to receive. An alternative would be to offer a reduced tariff, if booked in advance, so as not to disadvantage others, but regardless EPA must be available to domestic customers.
