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Social Landlords - The Business case is Compelling
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Social Landlords - The Business case is Compelling

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The case for Social Landlords to use Ground Source Heat Pump solutions coupled with RHI (funding). Compelling case

The case for Social Landlords to use Ground Source Heat Pump solutions coupled with RHI (funding). Compelling case

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  • 1. Calorex and GI Energy © Issued in commercial confidence Social Landlords & The Renewable Heat Incentive
  • 2. Contents 1. Introduction 2. Calorex & GI Energy Background 3. Renewable Heat Incentive (RHI) 4. Why Ground Source Heat Pumps? 5. Business Model 6. Feedback onApproach & Questions? CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 3. Introduction  An opportunity exists to take advantage of feed in tariff for domestic heating aimed at the role out of carbon efficient technologies to the domestic sector  This tariff is called the Renewable Heat Incentive  RHI is operational from Spring 2014  Calorex a leading British manufacturer of heat pumps have developed the product for the target market  GI Energy a leading installer of GSHP and renewable energy products have the resources to execute project roll out and delivery CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 4. • UK manufacturer and market leader of heat pump technology • Established 1977 • Made and Installed more heat pumps in UK than any other manufacturer • Manufactured in excess of 250,000 heat pumps so far • 1,000,000 hours of measured performance data from UK domestic heating installations! • The FIRST manufacturer accredited under MCS (Microgeneration Certification Scheme) Calorex Profile CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 5. • Based at 80,000 sq ft (7400 sq m) facility in Maldon, Essex • Export circa 70% of finished goods • £2m invested in R&D since 2005; ongoing £0.75m p.a. • Comprehensive GSHP andASHP domestic ranges designed for UK market conditions and practices • New re-built building includes flow line production facility for heat pump manufacture promoting higher quality with increased output • Bespoke training facility for ASHP, GSHP, Dehumidifiers & Pool units CONFIDENTIAL – © Calorex Heat Pumps Ltd Calorex Profile
  • 6. Calorex Heat Pumps Indoor Swimming Pools Environmental Climate Control Systems. Heat Recovery & Dehumidification Outdoor Swimming Pools Air source heat pumps Portable Equipment Building Dryers Air Conditioners Air Movement Domestic Heating Ground & Air source Heat pumps Dehumidification Dehumidifiers Humidifiers Heat Recovery Calorex Product Applications CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 7. Calorex Heat Pumps CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 8. Calorex – MCS Ground source heat pumps Air source heat pumps Output COP brine on 0oC; output to water 35oC Output COP air on 7oC; output to water 35oC 3.5kW 4.53 4.50kW 3.43 5.0kW 4.53 9.0kW 3.54 8.0kW 4.14 12.0kW 3.65 12.0kW 4.31 Above COP’s include full defrost cycles EN14511* standard 3.50 EN14511* standard 3.20 * UK Microgeneration certification scheme standard Source:- BSRIACONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 9. Calorex - experience  Calorex have the largest installed population of GSHP in UK  Over 2,700 GSHP installed and working in UK  Products hold market leader status  Product range 3.5 – 6.5kW designed specifically for RSL market  Full range MCS approved products  Calorex technology is 100% Made in Britain  Mainly retro-fitted into social housing  Designed for the UK market and climatic conditions  Extended warranty to ensure RHI funding period is covered CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 10. GI Energy experience GI Energy • Leading renewable energy solutions partner in the UK • 13 year experience in market place • Have installed more heat pump capacity in the UK than any other company • Own their own drilling equipment and drilling team • National service and complete maintenance capability • Experience with remote monitoring options CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 11. Full Service Offering CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 12. The Renewable Heat Incentive (RHI)  A financial support scheme for renewable domestic heat  Aimed to assist home owners to change their heating systems to more energy efficient systems and reduce carbon  Comes from DECC “Future of Heating” published in March 2012  Targets 15% renewable energy by 2020 to deliver affordable, efficient, low carbon heat in the future CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 13. RHI (Domestic)  The tariffs are listed below  Confirmed payment process over 20 years  Paid over 7 years quarterly in arrears  Dwelling must have a Green DealAssessment Source Pence per kWh Air Source Heat Pump 7.3 Biomass 12.2 Ground Source Heat Pump 18.8 Solar Thermal 19.2 CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 14. RHI (Domestic)  The scheme was operational from 9April 2014  The system output is “deemed” i.e. predetermined in advance of operation; using rdSAP calculation  The product must be Micro Generation Certification Scheme (MCS) approved  This is a customer orientation quality assurance scheme  Requires third party accreditation  See http://www.microgenerationcertification.org/  The installer must be MCS approved  Therefore utilising Calorex products with GI Energy installation both product and installation are completely certified  The system is subject to annual confirmation of operation CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 15. RHI (Commercial Non-Domestic)  The tariffs are listed below  Payment over 20 years  Paid on metered heat output Source Pence per kWh GSHP 7.2 (8.7 tier 1; 2.6 tier 2) Biomass <200 kWth 4.1(8.7 tier 1; 2.6 tier 2) Solar Thermal 10.0 ASHP 2.5 CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 16. 4 Why Ground Source Heat Pump?  RSL considerations  Eliminate fuel poverty  Provision of low cost heating systems to tenants  Reduce carbon foot print (CRC targets)  Deliver quality energy efficient homes  Decent home standard  Code for sustainable homes CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 17. 4 Why Ground Source Heat Pumps? Target fuels CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 18. 4 Why Ground Source Heat Pumps?  Comparison with Gas  Cost 1 kWh for a heat pump releases 3 more kWh at no cost  Therefore GSHP running cost is £0.15 total or £0.05 p kWh with 1.7t CO2 p a  Main gas costs £0.06 p kWh with 3.4t CO2 pa  The CO2 savings are significant but the running cost saving is approx £200 pa  Depends on tenant/owner motivation  Running costs?  Carbon reduction/clean energy?  No flues?  Full investment calculations shown later CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 19. 4 Why Ground Source Heat Pumps?  GSHP  More efficient to run  Zero noise pollution  Greater carbon savings  Minimal annual servicing  Smaller sized units (smaller footprint)  Consistent output (all year round)  No planning permission  Higher RHI contribution  ASHP  Lower capital cost  Ease of installation (assumed)  Noise levels excessive  Planning permission required  Vandalism &Theft issues  Reduced output is mid-winter CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 20. 4 Why Ground Source Heat Pumps?  GSHP works better in colder months  Less temperature variation  No defrost  Less risk of tenant complaint  Zero noise  Simple maintenance CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 21. 4 Why Ground Source Heat Pumps? CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 22. 4 Why Ground Source Heat Pumps?  Benefits toTenants  Massive reduction in heating bills  Can be installed externally  Minimal space requirement  Zero noise in operation, unlikeAir-source  No invasive flue work  Simple controls  Minimal maintenance CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 23. 5 Business Model - Approach to Market  Social Housing off main gas grid offers best returns  Equally effective on gas grid for reducing fuel poverty and carbon reduction installations  Installing GSHP will;  Combat fuel poverty up to 75% reduction in tenant bills  Contribute to carbon reduction commitments  Between 1.8 and 3.1 tonnes per unit per annum of CO2  Attract financial support from 60%-100% of installed cost  Established technology proven in the UK market  Be covered by an extended warranty to match RHI period CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 24. 5 Business model Notes 1 Property must first have a Green Deal Assessment performed 2 ECO will contribute towards any external/attic insulation required 3 Only then will renewable heat requirement be addressed Utility Tenant RSL/HA RHI Funder One Stop Installer GDA provider Rads Supplier GSHP Supplier Drilling Contract or Ext Insul Supplier CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 25. 5 Business model  RHI fixed guaranteed income payable every quarter for 7 years  Value must be taken for the energy saving by the tenant – fuel poverty gap narrows considerably.  Will attract renewable funders  RHI can go to RSL, Funders or Installers depending on RSL choice  Model assumes RHI income to funders so installed cost is reduced CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 26. 5 Business model - Partners  Calorex have assembled a consortia of professionals to exclusively provide the RSL  Execute full EPIM on a design, install and maintain basis  Comprehensive warranty with extended warranty offer to match RHI period  Maintenance & Service package CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 27. 5 Business model - Financials  Loan finance is covered by RHI income ESTIMATE OF CAPITAL THAT CAN BE MET BY RHI CONTRIBUTION INPUTS TABLE RHI Tariff 18.8 p/kWh Heat Saving 15.0 p/kWh Based on cost of electric/storage/oil/LPG cost Loan life 7 years Rate of Interest 4.8% Warranty Life 7 years Carbon saving 450 g/kWh saved Energy Use HA installation CH & DHW GSHP Rating Output WW 3500 DT 4500 7,000 kWh/annum WW 5000 DT 8000 9,000 kWh/annum WW 6500 DT 9000 11,000 kWh/annum Typical SPF 3.4 Radiator flow temp of 50◦ C Heat Energy Generated Renewable Heat RHI Contrib per annum Inst Cost Ex Rads Loan Finance Equity Required Heat Saving Total Heat Saving Equity Shortfall? CO2 Saving CO2 Saving kWh/annum kWh/annum Stg£ Stg£ Stg£ Stg£ Stg£ Stg£ mt/pa mt/life WW 3500 DT 5750 4,059 763 7,301 4,448 2,854 609 4,262 No 1.8 27.4 WW 5000 DT 8500 6,000 1,128 9,320 6,575 2,745 900 6,300 No 2.7 40.5 WW 6500 DT 10000 7,059 1,327 10,993 7,736 3,257 1,059 7,412 No 3.2 47.6 CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 28. 5 Business Model –financials (with rads) ESTIMATE OF CAPITAL THAT CAN BE MET BY RHI CONTRIBUTION (incl rads install) INPUTS TABLE RHI Tariff 18.8 p/kWh Heat Saving 15.0 p/kWh Based on cost of electric/storage/oil/LPG cost Loan life 7 years Rate of Interest 4.8% Warranty Life 7 years Carbon saving 450 g/kWh saved Energy Use HA installation CH & DHW GSHP Rating Output WW 3500 DT 4500 7,000 kWh/annum WW 5000 DT 8000 9,000 kWh/annum WW 6500 DT 9000 11,000 kWh/annum Typical SPF 3.4 Radiator flow temp of 50◦ C Heat Energy Generated Renewable Heat RHI Contrib per annum Inst Cost INCL Rads Loan Finance Equity Required Heat Saving Total Heat Saving Equity Shortfall? CO2 Saving CO2 Saving kWh/annum kWh/annum Stg£ Stg£ Stg£ Stg£ Stg£ Stg£ mt/pa mt/life WW 3500 DT 5750 4,059 763 9,922 4,448 5,475 609 4,262 Yes 1.8 27.4 WW 5000 DT 8500 6,000 1,128 13,611 6,575 7,036 900 6,300 Yes 2.7 40.5 WW 6500 DT 10000 7,059 1,327 13,496 7,736 5,760 1,059 7,412 No 3.2 47.6 CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 29. 5 Business Model - RSLHOUSING ASSOCIATION WW 5000 DT Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 kWh pa kWh pa kWh pa kWh pa kWh pa kWh pa kWh pa kWh pa kWh pa kWh pa OUTPUTS Heat energy Generated 8,500 8,500 8,500 8,500 8,500 8,500 8,500 8,500 8,500 8,500 Renewable Heat 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 £ £ £ £ £ £ £ £ £ £ REVENUE (£): RHI Income 1,128 1,128 1,128 1,128 1,128 1,128 1,128 0 0 0 Energy Saving 900 900 900 900 900 900 900 900 900 900 Total Revenue 2,028 2,028 2,028 2,028 2,028 2,028 2,028 900 900 900 OPERATING COST (£): Depreciation (621) (621) (621) (621) (621) (621) (621) (621) (621) (621) Ext Warranty (200) (200) (200) (200) (200) (200) (200) 0 0 0 Interest (315) (276) (236) (193) (148) (101) (52) 0 0 0 Maintenance 0 0 0 0 0 0 0 0 0 0 Total Operating Cost (1,137) (1,098) (1,057) (1,014) (969) (922) (873) (621) (621) (621) OPERATING PROFIT (£): Net Profit pa 891 930 971 1,014 1,059 1,106 1,155 279 279 279 Depreciation 621 621 621 621 621 621 621 621 621 621 Capital (813) (852) (892) (935) (980) (1,027) (1,076) 0 0 0 Operating Net Cash flow 700 700 700 700 700 700 700 900 900 900 Net Capital outlay (2,745) 0 0 0 0 0 0 0 0 0 Net annual Cash (2,045) 700 700 700 700 700 700 900 900 900 Cumulative Cash surplus (2,045) (1,345) (645) 55 755 1,455 2,155 3,055 3,955 4,855 IRR 35% Return on net capital 25% 25% 25% 25% 25% 25% 25% 32% 32% 32% LOAN REQUIREMENTS (£): Loan Outstanding 6,575 5,762 4,911 4,018 3,083 2,103 1,076 (0) (0) (0) Capital payments (813) (852) (892) (935) (980) (1,027) (1,076) 0 0 0 Net Capital Outstanding 5,762 4,911 4,018 3,083 2,103 1,076 (0) (0) (0) (0) CARBON SAVING (Kg pa) CO2 Saving Kg pa 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 Cumulative CO2 saved Kg 2,700 5,400 8,100 10,800 13,500 16,200 18,900 21,600 24,300 27,000 CAPITAL COST (£): Installation 9,320 Loan Funds (6,575) 71% Net HA Investment 2,745 5kw model Inc RHI + savings Full loan service Cash positive year 4 loan clear year 7 Loan finance %CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 30. 5 Business model  RHI income is fixed and grandfathered  Loan finance and RHI terms are matched  Once installed and maintained the RHI will meet all loan obligations  Savings to tenants are from date of installation  The output is deemed for life s.t. annual confirmation that it remains installed  RHI qualified for GSHP that are MCS registered and installed  Dwelling must have a Green DealAssessment done first  Asset is installed and secure in known location CONFIDENTIAL – © Calorex Heat Pumps Ltd
  • 31. 6 Feedback on Approach & Questions  On approach taken by Calorex/GI Energy  Willingness to work with finance company  Ownership of installation and issue?  Method of claim of RHI  Via RSL  Via Finance company  Via installer  Any reservations re GSHP’s?  Any comments on consortia assembled? CONFIDENTIAL – © Calorex Heat Pumps Ltd