ProVantage Procurement is a company of MCIPS qualified procurement specialists with over 100 years’ experience in the NFP, Financial, Public Sector, Service and Manufacturing industries.
We help clients reduce bottom line costs and improve their internal processes so that they can realise cost savings faster. The savings we make are always measurable and sustainable.
Our experience shows that for most organisations there are always significant opportunities to make savings waiting to be unlocked but these can get missed through a lack of resource or relevant expertise. Our approach to cost reduction is to work with your key stakeholders to provide those resources for you, enabling you to see those savings.
What is the RHI Scheme?
The Renewable Heat Incentive gives financial support to organisations who use certain renewable technologies to heat their homes. The payments are designed to incentivise adoption by creating additional income streams and profits. Government-funded & guaranteed, it aims to cut carbon emissions and help the UK meet renewable energy targets. Government has set aside around a further £23 billion to drive the scheme.
How do RHI payments work?
After joining the RHI scheme, you receive a quarterly tariff payment for every kilowatt hour (kWh) of renewable heat you produce. You get these payments for 20 years. The rate you get rises annually in line with CPI (Consumer Price Index).
Air source heat pumps, ground source heat pumps and biomass boilers are all eligible to receive RHI payments.
An air source heat pump is usually placed outdoors at the side or back of a property. It takes heat from the air and boosts it to a higher temperature using a heat pump. The pump needs electricity to run, but it uses less electrical energy than the heat it produces – and the heat produced receives the RHI payments for 20 years, guaranteed.
A ground source heat pump system harnesses natural heat from underground by pumping water through it in pipes. The heat pump then increases the temperature, and the heat is used to provide heating and hot water. They need electricity to run, but again, they use less electrical energy than the heat they produce. The pump performs the same role as a boiler in a central heating system, but it uses ambient heat from the ground, rather than burning fuel to generate heat. The heat produced receives the RHI payments for 20 years, guaranteed.
Biomass boilers burn wood fuel in the form of pellets or chips to heat up the water in a connected buffer tank. Hot water from the buffer tank can then be fed to as many different locations as required. The heat is then transferred via heat exchangers connected into new or existing hot water and heating systems. Simplistically it’s one or two boilers that replace multiple smaller standalone boilers that connect to the existing pipework infrastructure to all relevant buildings. The heat produced receives the RHI payments for 20 years, guaranteed.
Almost £1 billion has been received in RHI by customers to date.
The key benefits that biomass brings:
- Cheaper fuel – wood will always be a lower cost fuel for a Heating System than whichever fossil-fuel is currently being used so there will be direct savings on fuel – on top of the benefits of having the RHI income stream.
- Lower maintenance and servicing costs
- RHI income – Many charities and commercial property owners see this as an opportunity for diversification income on top of their yields from their core business
- CO2 savings vs fossil fuels, giving the business tangible green credentials and a positive PR message
- Boiler lifespan – high-end European manufactured boilers have a life of minimum 20 years to be in line with the RHI scheme. Domestic ‘conventional’ boilers will have an expectancy of around 8-9 years before they need replacing.
- A client, housing vulnerable adults based in Hertfordshire has had a single boiler installed that will heat the entire site. They’ll return a guaranteed profit of just under £1M – that’s based on today’s RHI Rate but this rate will only increase with inflation. “Our biomass installation was a big leap of faith at the time, given a lack of understanding and experience of the system. As a charity with a responsibility to invest our capital we made the leap and it’s proven to be fully justified. The heating system itself is extremely reliable and the significant profits projected are being realised. As an NFP organisation, it also gives us a great PR message to our supporters in that we’ve actively sought to massively reduce our carbon footprint on the planet”
- A residential charity for adults with learning difficulties based in Gloucestershire has also had a single boiler installed that will heat their entire site; they will see a guaranteed profit of just under £0.5M – again based on today’s RHI Rate which will increase with inflation. “We wanted to invest in the future by being sustainable in our energy consumption. By moving to biomass heat we are significantly reducing our carbon emissions and saving money against previous heat sources. It’s good to know that we are no longer reliant on fossil fuels for heat which future proofs us against long term costs – and availability”
- As an example of a smaller scale user still creating a significant income stream – a farmer in Lincolnshire heating domestic and farm buildings; annual RHI of £3,500, fuel savings per annum of £1,400 giving an overall profit of £69,065.88 rising with annual CPI increases. “This was a major step for a farmer operating on tight margins and we’re delighted to see all the promised income and profits from the scheme being returned. This gives us a guaranteed 20 year income from outside of our normal operations which helps secure our future”
Renewable heating systems have been installed in thousands of farms, schools, stately homes, sports stadia, residential homes, sports centres, swimming pools etc – they are simply just an alternative heat source.
If you would be interested in taking advantage of Ofgem’s RHI scheme within your organisation, speak to McClarrons’ Care Network Member – ProVantage Procurement by clicking here.