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Utility Week 18th April

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UtilitY WEEK | 18th - 24th April 2014 | 13 Policy & Regulation Market view E nergy for heating generates more than a third of the UK's carbon emissions, yet the sector trails behind electricity when it comes to the development of renew- able alternatives to fossil fuels. With Electricity Market Reform taking up a lot of policy bandwidth, support for green heat has been repeatedly delayed and pushed down the agenda. It was with relief, then, that heating and renewables industries welcomed Wednes- day's launch of the domestic Renewable Heat Incentive (RHI). The scheme aims to do for heat pumps, solar thermal panels and biomass boilers what the feed-in tariff did for solar photovoltaics. It allows households to get paid for generating their own green heat. But what does it mean for utilities? In the short term, the answer is: not much. The target customers are the three million households not connected to the gas grid, which mainly rely on expensive heat- ing oil. On-grid customers are eligible, but unlikely to save money by switching from a gas boiler. So gas suppliers and networks have little to fear from the competition. Air source, ground source and water source heat pumps use electricity, which increases demand and load on the distribu- tion networks. Roger Webb, director at the Heating and Hotwater Industry Council, says the effect "is not anticipated to be sig- nificant" in the short term, but will "pose a potential pressure on the network" as the RHI accelerates uptake. Biomass is likely to be the "big winner", according to Richard Hiblen of renewable energy supplier Green Square. "It is an easy retrofit," he says, that works with high tem- perature systems. In the non-domestic RHI, launched in November 2011, biomass boilers made up 93 per cent of installations by num- ber, or 99 per cent by megawatt capacity. By contrast, heat pumps supply low-level heat of around 40 degrees. That works fine with underfloor heating in a well-insulated home, but not so well with standard cen- tral heating systems. As such, they are more suited to new developments than existing homes. Solar thermal does work with standard heating systems, but only part time. It is estimated to supply 80 per cent of hot water needs in summer and less in winter. Stu- art Elmes, solar thermal expert at the Solar Trade Association, says it offers a similar return to photovoltaics "when you take into account the high price inflation for gas and heating oil". Even if the direct impact on utilities is negligible in the short term, the development of the RHI will affect the direction of wider heat policy. While gas is a relatively efficient and low carbon option today, the gas networks can- not last forever as the UK seeks ever deeper emissions cuts. They will be replaced by some mix of electric heating, renewable technologies and district heating, the bal- ance of which is an open question. Warm welcome for the RHI The long-awaited domestic Renewable Heat Incentive will mainly interest those off the gas grid, and biomass boilers are likely to be the big winners, says Megan Darby. Technology Tariff Air-source heat pumps 7.3p/kWh Ground and water-source heat pumps 18.8p/kWh Biomass-only boilers and biomass pellet stoves with integrated boilers 12.2p/kWh Solar thermal panels (flat plate and evacuated tube for hot water only) 19.2 p/kWh non-domesTic rhi insTallaTions (november 2011 launch To february 2014) accredited installations capacity heat generated and paid for mWh % of total Biomass boiler 58,282 95 Solar thermal 327 0 Water or ground source heat pumps 8,402 1 Biogas or biomethane 31,661 4 Total 798,672 Source: Decc monthly statistics Biomass boiler Solar thermal Water or ground source heat pumps Biogas or biomethane Biomass boiler Solar thermal Water or ground source heat pumps Biogas or biomethane 3,160 644.4 120 1.8 125 5.8 5 0.4 93% 4% 99% 4% 1% Total = 3,408 Total = 652.4 Percentage of total* Percentage of total number megwatts *rounded figures. Do not ad d up to 100%

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