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New tariffs could rejuvenate solar thermal market

When the new improved tariffs for the Renewable Heat Incentive were announced, most attention was focused on the fact that air-to-water heat pumps were to be included for the first time.

However, the possible impact on the popularity of solar thermal installations could prove equally significant.

Currently just 2% of the UK’s heat is generated by renewables and the Department of Energy and Climate Change has set itself a hugely ambitious target to increase that proportion to 12% by 2020.

Biomass continues to dominate the commercial RHI, accounting for over 90% of installations, but to get anywhere close to the target, we will need the incentive scheme to work for a basket of technologies – including heat pumps and solar thermal.

There was a 7% rise in renewable heat during 2012, but the market is still some way short of where the government hoped it would be by now. When announcing the new tariffs, DECC admitted much still needed to be done to improve uptake of the RHI if the country was to meet its carbon reduction targets.

DECC statement said: “We have seen strong uptake in certain renewable heat technologies. However we have not, so far, seen the levels of uptake that were anticipated.”

“While applications of biomass installations smaller than 1 MWth have exceeded our expectations, uptake for the other technologies offered support has been lower than was originally anticipated. Based on current applications we estimate the total heat generated in 2013/14 will be about 1.2 TW/hr. This is just over a third of what was originally expected.”

The new tariff, applicable to solar thermal installations installed from October 2013 onwards, is 9.2p per kWh for systems below 200 kW thermal. The tariffs will be reviewed again later this year because DECC wants to keep a close eye on their impact on “underperforming technologies”.

However, 9.2p should be generous enough to rejuvenate the market for a technology that can make a significant difference to a building’s running costs.

It is even more attractive if you also consider the fact that insulation standards are improving. This reduces demand for space heating and makes hot water responsible for a greater proportion of overall costs. Payments are guaranteed for 20 years so can make a considerable difference over the lifecycle of a solar thermal array, particularly as energy prices are likely to keep rising.

Solar thermal has suffered unfairly because of the way the solar photovoltaic market was superheated by over-generous Feed-in Tariffs that then caused the market to collapse when they were cut.

There is only so much roof space available and too much of it was taken up by PV that would not have been economically viable without the very high FiTs. Solar thermal then suffered again when the general solar market went into decline despite having a very strong financial case compared with other renewables.

However, 2014 could see a new chapter in the adoption of this excellent, proven technology.

David Pepper is managing director at Lochinvar

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