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

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

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    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.
    Original languageEnglish
    Pages (from-to)552-561
    Number of pages10
    JournalEnergy Policy
    Publication statusPublished - Feb 2014



    • solar energy
    • solar thermal system
    • reneable heat incentive

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