Renewable Heat Incentive.
Introduction.
This section has been put together for businesses who are currently using oil to heat their business premises. This factsheet will provide those clients with the following information:-
1. A projection of the approximate costs involved with buying and installing a water source heat pump, utilising your on-site borehole, when compared to running an oil boiler.
2. Calculation of Renewable Heat Incentive payments to be paid to the client by the government as part of this lucrative incentive scheme. Payments have been calculated using the commercial tariffs which were confirmed on 10th March 2011.
3. A comparison of running costs between a water source heat pump and an oil boiler.
4. A calculation of overall costs of buying, installing, running and maintaining a ground source heat pump for 25 years (The life expectancy of a GSHP) when compared to an oil boiler.
Please note the figures stated on the second page of this document are an estimation based on current energy prices and do not take into account the increasing energy prices over a 20 year period.
Summary of the RHI for Businesses.
On 10 March 2011, the Government announced the details of the Renewable Heat Incentive, a scheme created to revolutionise the way heat is generated and used in buildings. This is the first financial support scheme for renewable heat of its kind in the world.
The RHI Scheme for commercial, industry and public sector has been announced and tariff payments will commence in July 2011, however this is Phase One of the RHI and does not apply to domestic systems.
In the right application, a water source heat pump will significantly reduce running costs when compared to oil and LPG. The system will also have a far longer lifetime with no annual service requirements. The owner of the heat pump will not only reduce their carbon footprint and reduce their running costs but will also qualify for generous annual payments through the RHI.
For a complete overview of the Renewable Heat Incentive Scheme, see the enclosed RHI Factsheet. Continue down the page to see the overall costs involved with installing, maintaining and running an oil boiler compared to the costs of installing and running a water source or ground source heat pump.
300m² Commercial property currently served by oil versus GSHP.
Assumptions:-
A building of 300m2 in size, typically has an annual energy requirement of approximately 34,000kWh/Per year.
Assuming the cost of electricity is 10p per kW/hour - A heat pump with a coefficient of performance (COP) of 3, means a running cost of approximately 3.33p per kW/hour. A COP of 3 means that for every 1 unit of electricity used by the heat pump, 3 units are produced.
We are assuming the cost of oil is 59p per litre. If an oil boiler runs at 86% efficiency, the cost of running an oil boiler is 6.6p per kW/hour.
OIL BOILER HEAT PUMP
Initial Supply and Installation Costs, plus the maintenance of oil boiler for a 25 year period* | £12,150 | £13,320***** |
Running Costs per year ** | £2,244 | £1,133 |
Running costs for 25 years *** | £56,100 | £28,325 |
Overall costs including supply, installation, on going maintenance plus running costs for 25 years | £68,250 | £41,645 |
RHI Payments per year **** | £0 | £1,462 |
RHI Payments over 20 years **** | £0 | £29,240 |
Overall Costs for 25 Years—subtracting yearly Renewable Heat Incentive Payments | £68,250 | £12,405 |
* Typical installation costs for heat pumps and oil boilers. Kensa have factored in a cost of £3750 as an estimate for 25 years maintenance for an oil boiler and a cost of £8400 to account for two boiler replacements over a 25 year period. No maintenance costs or replacement costs have been factored in for water source heat pumps as there should be no requirement for ongoing maintenance. Ground source heat pumps have a life expectancy of 25 years.
** Based on oil costing 59p per litre (6.6p per kW/hour) and electricity costing 10p per kW/hour.
*** Assuming the cost of oil and electricity do not increase or decrease over the next 25 years.
**** RHI Payments as per the official Commercial RHI Tariff, which was announced by the Government on 10th March 2011.
***** The installation figure has been calculated based on utilising an existing on site borehole as the energy source.