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Financial analysis on the proposed renewable heat incentive for residential houses in the United Kingdom: A case study on the solar thermal system

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  • Abu-Bakar, Siti Hawa
  • Muhammad-Sukki, Firdaus
  • Ramirez-Iniguez, Roberto
  • Munir, Abu Bakar
  • Mohd Yasin, Siti Hajar
  • Mallick, Tapas Kumar
  • McLennan, Campbell
  • Abdul Rahim, Ruzairi

Abstract

This short communication paper focuses on the renewable heat incentive (RHI) scheme in the United Kingdom (UK); and in particular, on its implication on domestic installations of solar thermal systems (STSs). First, a short review on the STS in the UK is provided. Then, a detailed description of the RHI is discussed. A financial analysis is presented afterwards, analysing the impact of the RHI scheme on the applicants, in terms of the net present value and the internal rate of return. From the financial analysis it has been found that the RHI scheme for domestic installations is only attractive if a longer period of RHI payment, i.e. 17 years, or a higher RHI rate i.e. £0.32 per kWh is implemented. The current proposal from the UK government is not financially viable, and as a result, it may hinder the penetration of domestic solar thermal systems in the residential sector in the UK.

Suggested Citation

  • Abu-Bakar, Siti Hawa & Muhammad-Sukki, Firdaus & Ramirez-Iniguez, Roberto & Munir, Abu Bakar & Mohd Yasin, Siti Hajar & Mallick, Tapas Kumar & McLennan, Campbell & Abdul Rahim, Ruzairi, 2014. "Financial analysis on the proposed renewable heat incentive for residential houses in the United Kingdom: A case study on the solar thermal system," Energy Policy, Elsevier, vol. 65(C), pages 552-561.
    • Handle: RePEc:eee:enepol:v:65:y:2014:i:c:p:552-561
    DOI: 10.1016/j.enpol.2013.10.018
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    References listed on IDEAS

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    1. Dusonchet, Luigi & Telaretti, Enrico, 2010. "Economic analysis of different supporting policies for the production of electrical energy by solar photovoltaics in eastern European Union countries," Energy Policy, Elsevier, vol. 38(8), pages 4011-4020, August.
    2. Dusonchet, Luigi & Telaretti, Enrico, 2010. "Economic analysis of different supporting policies for the production of electrical energy by solar photovoltaics in western European Union countries," Energy Policy, Elsevier, vol. 38(7), pages 3297-3308, July.
    3. Abu-Bakar, Siti Hawa & Muhammad-Sukki, Firdaus & Ramirez-Iniguez, Roberto & Mallick, Tapas Kumar & McLennan, Campbell & Munir, Abu Bakar & Mohd Yasin, Siti Hajar & Abdul Rahim, Ruzairi, 2013. "Is Renewable Heat Incentive the future?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 26(C), pages 365-378.
    4. Muhammad-Sukki, Firdaus & Munir, Abu Bakar & Ramirez-Iniguez, Roberto & Abu-Bakar, Siti Hawa & Mohd Yasin, Siti Hajar & McMeekin, Scott G. & Stewart, Brian G., 2012. "Solar photovoltaic in Malaysia: The way forward," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(7), pages 5232-5244.
    5. Roulleau, T. & Lloyd, C.R., 2008. "International policy issues regarding solar water heating, with a focus on New Zealand," Energy Policy, Elsevier, vol. 36(6), pages 1843-1857, June.
    6. Cherrington, R. & Goodship, V. & Longfield, A. & Kirwan, K., 2013. "The feed-in tariff in the UK: A case study focus on domestic photovoltaic systems," Renewable Energy, Elsevier, vol. 50(C), pages 421-426.
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    Cited by:

    1. Chang, Keh-Chin & Lin, Wei-Min & Leu, Tzong-Shyng & Chung, Kung-Ming, 2016. "Perspectives for solar thermal applications in Taiwan," Energy Policy, Elsevier, vol. 94(C), pages 25-28.
    2. Lowes, Richard & Woodman, Bridget & Fitch-Roy, Oscar, 2019. "Policy change, power and the development of Great Britain's Renewable Heat Incentive," Energy Policy, Elsevier, vol. 131(C), pages 410-421.
    3. Renaldi, Renaldi & Hall, Richard & Jamasb, Tooraj & Roskilly, Anthony P., 2021. "Experience rates of low-carbon domestic heating technologies in the United Kingdom," Energy Policy, Elsevier, vol. 156(C).
    4. Wei-Min Lin & Keh-Chin Chang & Kung-Ming Chung, 2019. "The Impact of Subsidy Programs for Solar Thermal Applications: A Case Study for a Remote Island," Energies, MDPI, vol. 12(20), pages 1-11, October.
    5. Andrea Frazzica & Vincenza Brancato & Belal Dawoud, 2020. "Unified Methodology to Identify the Potential Application of Seasonal Sorption Storage Technology," Energies, MDPI, vol. 13(5), pages 1-17, February.

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