RHI and the Public Sector
HWEnergy are one of the UK’s leading biomass heating companies having installed and supported more than 150 commercial scale projects including around 60 in public sector buildings. Mark Ruskell of greenenergy.net caught up with Stuart Reid of HWEnergy to discuss the impact of the RHI on public sector organisations.
Mark Ruskell: There’s a lot of buzz within the renewable industry about the Renewable Heat Incentive at the moment, can you explain exactly what this is and what it will mean for biomass heating?
Stuart Reid: In the ministerial foreword to the Renewable Heat Incentive (RHI) launch paper published in March 2011, the UK government stated that the aim of the RHI is to “revolutionise” the way the country is heated by facilitating a mass shift from fossil fuels to renewable heat sources. The supporting documentation underpinning the RHI outlined the extent of the proposed transformation. By 2020, 71 TWh of heat will be delivered by Renewables across the UK – this is 12% of our annual heat demand. Whilst an array of technologies will play a part in delivering our renewable heat commitments, the government anticipate that biomass heat will account for 49% of all the renewable heat delivered with the contribution of biomass in Combined Heat and Power systems representing an additional 9%. Biomass will therefore account for the majority of the renewable heat introduced in the UK and account for between 30TWh and 39TWh of heat per annum.
MR: What will this mean for public sector organisations?
SR: To put this into laymans terms the government expect that by 2020, 90% of all new builds in the public and commercial sector will be heated by renewable sources. When we add this to the existing buildings that will be “retro-fit” with biomass we will see a very large number of buildings switch to renewables. An average secondary school uses around 1,500,000kWh of heat a year with a typical leisure centre using more – around 2,500,000kWh. It would be realistic to assume that around 30% of the uptake for biomass heating will be in this type of public sector facility. We would therefore expect that around 7,500 schools, leisure centres, care homes, social housing facilities and other community and public buildings will be heated by biomass across the UK.
Demand for hot water and space heating can represent around 80% of the energy use of this type of building. Converting these buildings to run on biomass rather than gas or oil will therefore be the single most significant step a public sector organisation can take to reduce CO2 emissions and will ensure carbon management plans can be achieved and Carbon Reduction Commitments (CRC’s) delivered. By providing a greater level of financial return than is required on the capital outlay for a biomass project the RHI provides the financial foundation on which the mass uptake of biomass heating will be built.
MR: Will the way in which the RHI is administered have any specific impacts on public sector organisations?
SR: Yes, it will. There are two key points concerning the admin of the RHI which will impact on how biomass heating projects are implemented in the public sector.
Firstly, the RHI payment is based on the actual units of heat produced by the boilers. If renewable heat is not being delivered – for whatever reason – then the RHI will not be paid. We have seen this already drive public sector organisations to look for a single point of accountability by purchasing fuel, servicing and Operation & Management services from a single provider under a “heat supply” contract. From the customers point of view this allows performance guarantees to be established to ensure that they can achieve projected levels of CO2 and cost savings at the same time as minimising risk and in-house staff resource. From the industry perspective it drives consolidation, closer partnership working and professionalism to ensure the customer receives a seamless service.
The second key point is that the nature of the RHI is that it will be paid quarterly over a period of 20 years – as opposed to being an upfront capital grant. Whilst over the lifetime of the project the total RHI income will be greater than the capital outlay associated with the project there is still a requirement to find the capital outlay upfront. Given the financial constraints being faced by public sector organisations it may be challenging to find the required capital. We are therefore seeing a growing demand for ESCO projects (Energy Service Contracts) which offer a no-capital outlay option for customers and can potentially deliver a revenue and CO2 saving.
MR: What are some of the key issues in rolling out biomass projects?
SR: In relation to the practicalities around biomass heating, some of the key considerations involve the delivery, storage and processing of woodfuel. A typical secondary school using 1,500,000kWh of heat a year will require around 550 tonnes of woodchip fuel or 400 tonnes of wood pellet fuel. This equates to around 30 deliveries of woodchip a year or 16 deliveries of wood pellets. Whilst wood pellets can be transported longer distances, wood chips are generally most effectively sourced from within 50 miles. Within some local authority areas we are therefore anticipating that the most effective method of rolling out a biomass programme will be that a cluster of projects will come to market on an ESCO or Heat Supply contract basis which will create the required critical mass for the development and deployment of local fuel supply chains.
MR: Why do you think biomass heating is a good option for the UK and the public sector?
Biomass heating will play a vital role in the future of the UK’s heating mix. It has a great ability to enhance our fuel security and deliver low carbon and sustainable economic growth that maximises the benefits of local resources and deliver affordable, renewable heat it is perfectly placed to complement the needs and requirements of public sector organisations.
