The Times

16 April 2011

Time to go ‘green’ has come - but don’t rush

The Government’s renewable-energy schemes promise big savings, but make sure that you install the right equipment.

Households across the country will soon be encouraged to adopt renewable- energy technology laden with financial incentives, but the details surrounding the schemes are still unclear.

In his Budget speech George Osborne, the Chancellor, briefly mentioned the renewable-heat incentive (RHI) and the Green Deal, the former of which will be introduced in July this year and the latter in autumn 2012.

Both schemes are designed to revolutionise how people use energy in the home while enabling them to make long-term cash savings.

Doug Stewart, chief executive of Green Energy UK, says: “The Government is due to announce exactly how much people will be paid, but estimations are anything from a £300 incentive to install solar thermal collectors, £950 for a biomass boiler, right up to £1,250 for a ground-source heat pump. On top of this, anyone installing will be paid per kilowatt for the heat they generate.” However, consumers will also have to help shoulder the expense of implementing these schemes and will be responsible for maintaining them.

“The RHI is not a license to print money,” Mr Stewart adds. “There is good recompense, but if you are irresponsible with the running of your heating scheme, such as leaving the heating on all day, you could face sanctions.”

The sister scheme for electricity, known as Feed-in Tariffs, has been running for one year and has led many homeowners to earn thousands of pounds by producing their own electricity from renewable sources and selling any surplus back to the national grid. Dr Chris Jardine, of Oxford University’s Environmental Change Institute and a leading researcher in solar policy, says: “The Feed-in Tariff is already encouraging 2,000 households a month to become generators of their own electricity and now the renewable heat incentive could do even more for low-carbon heat technologies. “With millions of boiler replacements made every year, and a 12 per cent rate of return on investment achievable for households that decide to invest in renewable heating systems, the financial, environmental and social benefits to both individuals and society could be massive.”

The first phase of RHI this year will focus on the non-domestic market but £15 million has been ring-fenced to subsidise households that invest early in renewable technologies.

But before rushing out to buy any gadget with the word “green” appearing on the label, you need to ensure that you buy the right type of equipment otherwise you won’t benefit from a renewable heat premium payment, or subsequent financial rewards made available in the next phase of the scheme.

According to the Department of Energy and Climate Change, domestic installations completed and first commissioned on or after July 15, 2009, will be eligible for RHI as long as they meet certain criteria.

Details about which technologies will be accepted under the scheme have not yet been confirmed for the domestic sector but could include devices already encouraged by energy saving groups. For example, installing a biomass boiler, which produces heat and hot water from burning wood pellets or chips could save you £390 a year on heating bills, according to the Energy Saving Trust.

It can cost about £11,500 to buy an automatically fed pellet boiler, including installation, which not everybody will necessarily be able to afford. Different technologies won’t always fit or suit your home either, so not everyone will be able to make significant changes.

Ground-source heat pumps may also be supported under the scheme. These pumps use pipes laid under your garden to draw heat from the ground. Fluid circulating in the pipes absorbs heat from the ground, even in winter, and can be used for heating and hot water in the home.

The cost of installing a pump can range from £9,000 to £17,000, with annual savings varying depending on how efficient the system is. A range of green methods of energy production can produce cost savings on bills, but if you specifically want to benefit from the RHI, you need to wait for clarification of the products that qualify; the details of which are expected in May.

Qualifying products will need to be certified under the Microgeneration Certification Scheme (MCS) or equivalent schemes, which means that the product and the company or person installing it are certified, as is already the case with Feed-in Tariffs.

Another cost to consider is the effect that new technology could have on home insurance. It could be expensive and, therefore, need adequate protection. Your home insurance premiums could rise, particularly if you have to make a claim at some stage. A long-term financial benefit for using renewable-energy technology will be introduced through a special tariff. This support will form part of the second phase of the scheme and will be launched next year to coincide with the introduction of the Green Deal. The idea behind the Green Deal is for consumers to update their homes and make them more energy efficient without the burden of upfront costs. The work will be undertaken by accredited high street retailers but costs will be recouped through savings on monthly energy bills.

However, it will still be possible to pay for the entire project, or part of it, upfront. The “golden rule” underpinning the Green Deal is that estimated savings on your bill should equal or exceed the cost of the work to install the materials. However, this rule only applies to estimated savings and does not act as a guarantee because energy consumption can vary dramatically between households.

The deal will not be like a loan because it will be attached to a property. So if you move home the new occupiers will pick up the responsibility of payments through the energy bills.

Homeowners are reassured that the financing of the Green Deal is not secured against property, so if you default on your energy payments your home is not at risk as a direct result.

The Government is currently consulting on what types of measures will be encouraged, but insulation will most probably be the cornerstone of the project. In particular, loft and cavity wall insulation are likely contenders as their installation is relatively low cost at around £250 and they produce savings of around £45 and £115-a-year respectively because less fuel is required to heat the home.