Promoting Renewable Energy: FITs, RHI and the Green Deal - by Rob Hill
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Promoting Renewable Energy: FITs, RHI and the Green Deal - by Rob Hill



Promoting Renewable Energy: FITs, RHI and the Green Deal

Promoting Renewable Energy: FITs, RHI and the Green Deal

By Rob Hill
Principal Energy & Resource Manager
Wardell Armstrong



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    Promoting Renewable Energy: FITs, RHI and the Green Deal - by Rob Hill Promoting Renewable Energy: FITs, RHI and the Green Deal - by Rob Hill Presentation Transcript

    • Promoting Renewable Energy: FITs, RHI and the Green DealRob HillPrincipal Energy & Resource Manager
    • HousingApproximately 75% of the UK’s housing stock was built before 1975.•Huge variety in types and styles of properties•Huge variety in construction types and materials used•Government policies must acknowledge the facts•Needs retrofitting to bring up to modern standards•More expensive to retrofit renewables than in a new-build
    • Energy efficiencyUK’s housing stock is notoriously energy inefficient and amongst the worst inthe Western world. Historically, little has been done to improve it.•Property is expensive in the UK, especially in city centres•People move frequently for economic & social reasons•Financial priorities•Energy has long been regarded as ‘cheap’, until more recently…
    • Energy is cheap (Really!)North Sea oil & gas meant that energy in the UK was cheap. Only recentlyhave the public thought energy has become expensive, but…“The reality is we have some of the lowest energy prices inEurope. We could get them even lower. The country with thelowest energy prices at the moment happens to be France” - Chris Huhne, 10th July 2011Is he right?
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    • Fuel PovertyA household is classed as being in fuel poverty if it needs to spend more than10% of it’s income on fuel to maintain a satisfactory heating regime.In 2009 approximately 5.5million households in the UK were classed as beingin fuel poverty, representing about 21% of all UK households.Since then, the impact of the recession and increases in fuel costs will havemade this situation worse.
    • Energy MantraAs well as fuel poverty and energy cost increases, the government has CO2emission reduction targets to consider too. Accordingly, the energy mantratakes centre stage:3.Be Lean – improved insulation, energy efficient products, etc…5.Be Mean – switching off, etc…7.Be Green – renewable & low carbon energy sourcesLeading to the creation of FITs, RHI & the Green Deal
    • Feed in Tariff (FIT)Launched in 2010, a scheme that provides a payment for every kWh ofelectricity generated from sub 5MW generating capacity installations of thefollowing technologies:•Solar PV•Wind•Hydro•Micro CHP•Anaerobic digestion
    • Feed in Tariff (FIT)The future…?•Significant breakdown in trust in the scheme following the Solar PV changes –change towards market caps driving tariffs rather than schedules?•Proposed links between installing technologies (eg, PV) and compulsoryinsulation/energy efficiency measures?•Community projects & multi-installation tariffs for social housing providersand community groups?
    • Renewable Heat Incentive (RHI)The first scheme in the world to provide a financial incentive (based onachieving 12% returns) for generating heat from the following renewableenergy sources:•Solar thermal (hot water)•Biomass (inc energy from waste)•Ground source heat pumps•Biomethane (grid injection or combustion)Phase 1: non-domestic installation launched November 2011Phase 2: domestic installation (due to launch in 2012)
    • Renewable Heat Incentive (RHI)“The Renewable Heat Incentive (RHI) will only support useful heat. It is notpractical to provide an exhaustive list of all the acceptable heat uses which willbe eligible. Instead, we can outline the broad principles of what we want tosupport:• The utilisation of useful heat;• The heat must be supplied to meet an economically justifiable heatingrequirement i.e. a heat load that would otherwise be met by an alternative formof heating e.g. a gas boiler;• This heat load should be an existing or new heating requirement i.e. notcreated artificially, purely to claim the RHI; and• Acceptable heat uses are space, water and process heating where the heat isused in fully enclosed structures.The only exception to this approach is for biomethane injection, where we willnot specify how the biomethane should be used, given it will be injected into theexisting gas grid.“
    • Renewable Heat Incentive (RHI)Similar to FIT:•Administered by OFGEM•Installers must be MCS certified•Banding, eg small, medium, large biomass (<200kWth, 200-1000kWth,>1000kWth)•20 year duration of tariff•Index linked•Disallows public funded grants
    • The Green DealWhat is it?“Put simply, the Government is establishing a framework to enable private firmsto offer consumers energy efficiency improvements to their homes, communityspaces and businesses at no upfront cost, and recoup payments through acharge in instalments on the energy bill.At the heart of the Government’s proposals is the “Green Deal plan”, aninnovative financing mechanism which allows consumers to pay backthrough their energy bills. This means consumers can see the Green Dealcharge alongside the reductions in energy use which generate savings on theirbill. It also means that if they move out and cease to be the bill-payer at thatproperty, the financial obligation doesn’t move with them but moves to the nextbill payer: the charge is only paid whilst the benefits are enjoyed. In this way,the Green Deal differs from existing lending – it is not a conventional loan sincethe bill-payer is not liable for the full capital cost of the measures, only thecharges due whilst they are the bill-payer. This is a market mechanism, fundedby private capital, which we believe will deliver far more to consumers than anysort of top-down Government programme.”
    • The Green DealWhere did it come from?The Energy Act 2011 made provision for the Green Deal and the EnergyCompany Obligation (ECO). Due to launch Autumn 2012.Green Deal and ECO will replace the Carbon Emissions Reduction Target (CERT)and the Community Energy Savings Programme (CESP) to be the main driversof the improvement of the UK housing stock and the route for energy companiesto fulfil their obligations.ECO will target low-income and vulnerable households as well as hard to treatproperties…very relevant to Stoke!
    • The Green DealWhat is it not?It is not a guarantee of energy savings – it only predicts savingsIt is not linked to a homeowner or resident – it is attached to the propertyLinked to gas bills – it is paid via the electricity bill although the gas usageforms part of the initial assessmentIt is not a grant – no public funds are used, it is like a private loanIt is not compulsory – homeowners can still install insulation or renewablesother ways, but it is intended to offer an affordable finance option
    • The Green DealIt includes a number of measures and rules to protect consumers, including thefollowing prerequisites:•The expected financial savings must be equal to or greater than thecosts attached to the energy bill, known as “the golden rule” of the GreenDeal.2. The measures must be approved and the claimed bill savings must bethose accredited through this process.3. The measures installed must have been recommended for that property byan accredited, objective adviser who has carried out an assessment.4. The measures must be installed by an accredited installer.5. For householders, the Green Deal provider must give appropriate advicewithin the terms of the Consumer Credit Act and take account of theindividual circumstances of the applicant.
    • The Green DealContinued…6. The Green Deal provider must have consent from the relevant parties,including the express consent of the current energy bill-payer.7. The presence of a Green Deal must be properly disclosed to subsequentbillpayers (e.g. new owners or tenants) alongside energy performanceinformation.8. Energy suppliers must collect the Green Deal charge and pass it on within theexisting regulatory safeguards for collecting energy bill payments –including protections for vulnerable consumers.
    • The Green DealHow does it work?3.Unlocking demand – marketing via various channels5.Accredited Assessment – provision of EPC + Green Deal recommendations7.Finance at no upfront cost – financed according to preference9.Accredited Installation – MCS approved installer, Quality Mark11.Repayments – via electricity bills13.Moving on – disclosure of Green Deal to prospective house buyers
    • The Green Deal30 technologies are eligible:NB: For ECO, the key technology is Solid Wall Insulation
    • The Green DealHow does it work for SMEs?“SMEs will be able to play a key role in delivering the Green Deal. Their localcustomer base and ability to engage them through other works will be a majorlink between potential customers and the Green Deal.We would expect to see SMEs in the role of advisors (carrying out buildingassessments) and installing measures. We have also designed the Green Dealso that any size of organisation can become a Green Deal provider as long asthey can fulfil the authorisation requirements and ongoing obligations. The mainrole of the Green Deal provider is to arrange the Green Deal finance plan underwhich the customer makes repayment for installation of works, so thoseongoing obligations include responsibilities under the Consumer Credit Act1974. SMEs who do not want to be Green Deal providers will be able to partnerwith a larger Green Deal Provider either to act in their supply chain or to act ontheir behalf.”
    • The Green Deal
    • The Green Deal1. SMEs entering the supply chain for Green Deal Providers (GDP): One model, based on existing practice, is for larger companies to use local suppliers of goods and services. Under this model a GDP would market the Green Deal to customers and then pass on the installation work to companies engaged in its supply chain. This could also work with Local Authorities becoming GDPs and then creating local supply chains to maximise the local economic benefits.3. SMEs working in partnership supply chain with GDPs: Under this model SMEs would be the face of the Green Deal and make full use of their local networks and customer base. The GDP would, effectively, become a silent partner behind the scenes, providing the financing. One or a number of SMEs could discharge the ongoing obligations of the Green Deal Provider including assessment, installation, customer services and ongoing customer relations.5. SMEs in partnership as agents with GDPs: SMEs could become agents for these GDPs and would be able to offer their customers access to Green Deal financing following an assessment. They could find clients for GDPs thus providing access for their customers and at the same time, increasing the remit of their business. This model could involve SMEs directly becoming agents of GDPs, or becoming agents through their trade body (who could partner with a finance provider on their behalf). Alternatively, trade bodies or trade suppliers could become GDPs on behalf of their members/customers
    • The Green DealAccreditations & QualificationsAbove all will sit the Green Deal Code of Practice which applies to everyoneparticipating in the Green Deal.To be an Advisor, will require building upon energy assessor qualifications (EPCprovider). It will add Green Deal specific requirements, eg finance andcommunication skills. The qualification is still being developed.To be an Installer, will require becoming a registered installer, requirements forwhich are contained in PAS 2030. It will require additional training – still beingdeveloped.
    • The Green DealQuality ManagementThe Green Deal Mark: to cover all energy efficient measures in PAS 2030Green Deal Providers to provide guarantees & warrantiesGreen Deal Providers to have an obligation to put things right where faulty orpoorly installed – including obligations on the installerPossible ‘Carding of Operatives’ as a means of quality assurance
    • The Green DealLessons learned from the pilot scheme (67 homes in Sutton):Most popular measures included:•Boiler upgrade (75%)•Loft insulation (73%)•Solid Wall Insulation (73%)•Draught proofing (72%)•Heating controls & double glazing (50%)Average spend was £13,000 (Maximum was £33,000)28% chose a 10 year payback period, 72%, chose the 25 year optionOnly ¼ met the Golden Rule, ¾ had bills averaging £256 higher then fuelsavingsAverage CO2 savings of 26% (maximum achieved was 52%)