Estimating RHI returns

I talk a lot about setting customer expectations early on in heat pump and renewable projects. In theory it ought to be a simple two part process. Firstly, explaining the differences in which these systems operate from fossil fuel and how to get the best out of them. And secondly, giving them a clear idea of how much they stand to save and – where applicable - gain from government incentives. The second part of this process ought to be the easier of the two, with a clear and simple figure to compare. Yet in many ways it is providing clear and unambiguous guidance on potential savings and gains that is currently causing the most confusion. Why? Because customers are routinely faced with not one estimate, but three, which are often widely divergent in their predictions.

  1. The first estimate is often produced by the installer and/or manufacturer of the heat pump and/or solar panels that are to be installed and is intended to help an installer and end customer understand the viability of the project. These are based on a manufacturer’s detailed understanding of their own products and an installer’s experience of performance under given circumstances. This estimate has the advantage of being project specific, but is not the product of a completely disinterested, independent standard that can be compared exactly like for like. Nor will it take into account improvements to the property that might be required by the RHI.
  2. If a project is progressed on this basis, a second estimate will be produced by the Green Deal assessor using RDSAP (reduced data standard assessment procedure). This provides a consistent approach for every project across the country as a means for the government to have a standard benchmark and produces the EPC (energy performance certificate) for the property. SAP focuses on the envelope of the building and bases its heat loss calculation on a notional building. As is entirely appropriate from a government standard, this method is set to provide the most conservative estimate of likely savings.
  3. The MIS3005 paperwork for eligibility for the RHI also requires the installer to calculate the heat loss and energy requirements for heating and hot water for the building in development. Unlike the SAP calculation this calculation is done on a detailed measurement of the actual building (or its plans) room by room, and takes into consideration the actual materials being used, even down the specific heat loss of different floor construction methods, walls, roof treatments and windows. On the other hand the MIS paperwork has less granularity when it comes to the performance of a heating system than that provided by a manufacturer. Whereas manufacturer’s will use their own efficiency data for the specific product they are supplying MIS requires the use of the standard heat emitter guide to come up with an efficiency rating for the system. In other words, all heat pumps of a given size will have the same efficiency rating under MIS, whereas in reality they may be more or less efficient. Moreover, even though there are standard procedures for calculating heat loss, there are many ways to calculate the energy consumption requirements, which may generate different results depending on which is used.

In short customers have a choice of a detailed and project specific estimate provided by parties who have a financial interest in the project, and which must of its nature be provided using non-standard data, or two independent estimates which offer a standardised approach, but which base their estimates on less specific data. My experience is that the differences can amount to up to a 25% difference between estimates.

So how do you balance these different results and justify them to your end customers?

It will perhaps be no surprise given all this complexity, that there is no simple answer. However, the presentation of data is key. Each different report must be explained in the context of its purpose. Manufacturer reports run using data simply based on the rough size and age of the building should be taken only as first indicators of project viability and the customer primed to expect a refinement of payback figures. SAP reports should be presented to end customers as government benchmarks and their conservative estimates seen in that light. In our experience, SAP estimates of fuel consumed by a property tend to be lower than fuel consumption in real life. Your cost savings on fuel could therefore be a good deal higher than the SAP estimate suggests.

In attempt to untangle this dilemma I can say that it is my experience that the most accurate prediction will come from a manufacturer’s estimate that is run later in the project using the input data from the detailed heat loss report. Often by this point in a project customers are so overwhelmed by estimates that they won't think about asking for another - but it is well worth running this additional scenario as something to sense-check actual performance. An installation working properly should be in the same ballpark for performance. It is still important to remember that this will still be an estimate and that by their very nature estimates are imperfect, but it should help you customers have a clearer picture.