Life Without RHI?

Do We Need The Rhi?

The RHI is exactly what it says it is, an incentive - it is not the primary objective.

Life without RHI

For consumers using Oil or LPG

Firstly,  we all know that we are going to need to change the way we are using ‘fossil’ fuels, the purpose of this piece is to show that being green can make the best financial option.

Let’s assume for a moment that your oil boiler is nearing the end of its life and will need replacing in the next few years. Recent analysis that has been carried out shows the "payback" on installing an Air-Source-Heat-Pump in an existing property can now be as little as 6-7 years, and that's without taking into account any possible RHI income or increases in oil prices! 

Example:

• Typical 4 bedroom detached house, heated by oil, with average cavity wall and loft insulation. 

• Annual heating and hot water costs: £2,300

• Heating system type: Radiators (so heat pump efficiency adjusted accordingly)

Expected savings from an Air Source Heat Pump:  

• Over an old, inefficient oil boiler: £1,230/ year

• Over a newer, more efficient oil boiler: £774/year

The approximate total replacement cost of the oil boiler with an Air Source Heat Pump and a new domestic hot water cylinder is around £8,500, including 5% VAT. Factoring in that if you were to replace your old oil boiler with a new one this would cost around £3,500 anyway.  So the additional cost to you is £5,000.

So if you are in this position, here are your options:

1. Don’t invest the extra £5,000 and install a new oil boiler instead.  Based on the above calculation that would save you £450 a year for 20 years for a £3,500 investment = £9,000 return (assuming oil prices stay the same, which is very unlikely)

2. Change to heat pump technology, which would save you £1,230 a year for 20 years for an £8,500 investment = £24,600

3. Here’s the curve ball, to make this even more appealing add a 1.2 kw solar photovoltaic system with battery back up to run your heat pump costing approx. £5,000 and pay nothing for your heating and hot water for the life of the system (more than 20 years) saving you a potential £46,000 in heating and hot water cost for an initial investment of around £13,500.

In summary going green costs more to start with, but more than competes on fuel price savings in the long run.

So, without RHI payments it makes sense, but add in the RHI for the same property, approx. £770 per year for 7 years = £5,390 meaning you would only effectively pay £3000 to install the heat pump system.

So, is sustainable living financially viable without the RHI? YES

We have all seen that our own Governments RHI Schemes are very much subject to change, whether it's a change to the MCS accreditation rules and guidelines, or perhaps a sizable reduction to the tariffs being offered as one technology phases out of interest and another moves in. In our industry, we can be certain about two things - sustainable living technology is improving immeasurably, and the RHI goalposts will be moved.

We also need to think about those that have bought houses with solar technology already installed - they are not entitled to favourable FiT (Feed in Tariff) by default, the previous owner was enjoying that until they decided to sell.

Perhaps this is why more and more people are taking matters into their own hands. They are experimenting with tried and tested systems to cater for their own needs, or their house’s needs, rather than spending time jumping through ever moving hoops.