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Renewable Heat Incentive

What is the Renewable Heat Incentive Scheme

The non-domestic Renewable Heat Incentive program (RHI) is a government environmental program that provides financial incentives to increase the uptake of renewable heat. Broadly, it provides a subsidy payable for 20 years to eligible renewable heat generators subject to the detailed scheme rules.

Ofgem is responsible for implementing and administering the scheme on behalf of the Department of Energy and Climate Change.

The purpose of the RHI Scheme

The purpose of the scheme is to provide a long term financial incentive and increase the proportion of heat generated from renewable sources.

Who is the scheme for

The non-domestic RHI is open for the industrial, commercial and public sector and includes small businesses, hospitals and schools. All applications are subject to the detailed scheme rules.

The timber industry and the RHI

Many sectors in the timber industry have a requirement for drying their timber products to specific moisture content. Subject to the rules of the scheme, drying wood is an eligible process.

Therefore, those companies producing wood waste as a bi-product of production with a drying requirement have a particular opportunity. Please see below some examples of energy use for various sectors along with approximate benefits from the RHI. These are only intended to be a guide as actual benefits depend upon many factors such as moisture content reduction, species, thickness of wood, boiler efficiency etc.,

Biomass boiler plants are divided into three size categories:-

Small 0-199 kilowatt Medium – 200-999 kilowatt Large – over 1 megawatt

Small and medium boilers have two tariff bands, Tier 1 and Tier 2, whilst large boilers over 1 megawatt have just a single tariff.

Tariff bands as at 01 April 2016

Boiler Size Tier 1 Tier 2
0-199 kilowatt 3.62 pence 0.96 pence
200-999 kilowatt 5.24 pence 2.27 pence
1000 kilowatt and above 2.05 pence Not applicable

To calculate the maximum benefit from Tier 1 on both small and medium boilers first take the boiler output then multiply this by the Ofgem Multiplying factor of 1314.

Examples

Boiler size 160 kilowatt x 1314 = 210.240 kilowatt hours. Therefore the first 210.240 kilowatt hours used is paid at the current Tier 1 rate of 3.62 pence per kilowatt hour. Any additional heat used in the same year is paid at the current Tier 2 rate of 0.96 pence per kilowatt hour.

A 199 kilowatt boiler x 1314 would have maximum Tier 1 benefit of 261,486 kilowatt hours x 3.62 pence = £9,465.00 per year with any additional heat used in the same year paid at the Tier 2 rate of 0.96 pence per kilowatt hour.

A 330 kilowatt boiler x 1314 would have a maximum benefit of 433,620 kilowatt hours at the Tier 1 rate of 5.24 pence per kilowatt hour = £22,721 per year with any additional heat used paid at the Tier 2 rate of 2.27 pence per kilowatt hour.

A 750 kilowatt boiler x 1314 would have a maximum Tier 1 benefit of 985,500 kilowatt hours x 5.24 pence = £51,640.00 per year with any additional heat used in the same year paid at the Tier 2 rate of 2.27 pence per kilowatt hour.

For those companies currently using oil to dry their wood products it is useful to know that each litre of 35 second fuel oil has approximately 10.8 kilowatt hours of energy therefore to replace each litre of oil with wood chip at 20% moisture content would require 3 kg of wood chip.

From experience we know that on average to dry one cubic metre of softwood from 55% moisture content down to 18% would use around 280 kilowatt hours of energy which equals 26 litres of oil or 78 kg of wood chip.

For more information regarding the RHI scheme log onto the Ofgem website.

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