Salix Finance and Government Incentives: Renewable Heat Incentive & Smart Export Guarantee

Salix is pleased to have worked with our clients since 2004 to improve the energy efficiency of public sector buildings, drive down energy bills and reduce greenhouse gas emissions. Many of our clients continue to find innovative ways of driving down the energy consumption of their sites. Some are moving to consider renewables as the next step to further reducing their reliance on fossil fuels.

The Renewable Heat Incentive (RHI)

To help our clients maximise the benefits of renewables, Salix has worked with OFGEM to produce some general guidance for our clients looking to access Renewable Heat Incentive (RHI) schemes while benefiting from a Salix interest-free loan.

What is OFGEM’s position?

OFGEM have advised Salix that the interest-free loan should not stop a client from applying for the RHI schemes, however, each application for the scheme is assessed on a case-by-case basis by either OFGEM or the RHI Licensee. For further information on the RHI scheme, how to apply and other general information, please visit OFGEM’s FAQ page.

How can you apply for a Salix loan including the RHI?

When you apply for a Salix loan, the RHI benefit can be incorporated into the energy price (p/kWh) when completing our Compliance Tool. By doing this, the combined financial benefit to our clients (energy cost reduction and RHI benefit) will reduce the overall payback of the project.

Incorporating the RHI benefit into your Salix loan application:

A client is in the process of installing an Air-Source Heat Pump and is looking to register the installation for the RHI scheme. The organisation currently pays 10 pence per unit of electricity used (kWh). The project is due to complete in August 2019 and from OFGEM’s RHI tariff tables, discovers they could be eligible for an RHI tariff of 2.69 p/kWh of generation.

For the purposes of applying for Salix financing, the full financial fuel saving benefit of the energy displaced (10p/kWh) and the RHI generation benefit (2.69p/kWh) can be entered into the Compliance Tool as a blended fuel price of 12.69p/kWh.

Salix also advises clients to review their state aid guidance to make sure that by taking on a Salix loan and the RHI the organisation will still be operating with EU state aid rules.

Solar PV – Feed-in Tariff and Smart Export Guarantee

Salix is proud to support our clients in reducing their energy consumption, enabling them to benefit from lower energy bills and a reduced carbon-footprint. When you apply for a Salix loan to support a solar PV installation, Salix would like to understand how your organisation is working towards becoming as energy efficient as possible and how renewables will complement other energy conservation measures (ECM) that you have already installed or will be installing in conjunction with the solar PV.

Salix works closely with all our clients to see how they can maximise the efficiency of their site to get the best results in terms of reducing their energy consumption. For information on past projects, best practice and support material, please visit our knowledge sharing page or contact one of the Salix team directly for more information at [email protected].

Feed-in Tariff

The Feed-in Tariff (FIT) closed on 31 March 2019 to new applicants. Full details can be found on the OFGEM website.

Smart Export Guarantee

The FIT export tariff will be replaced by the Smart Export Guarantee (SEG) from January 2020. Under the SEG, energy suppliers will provide solar PV generators with an agreed rate per kWh for electricity exported to the grid. Full details of the SEG scheme can be found here.

In the case where clients wish to oversize their PV installations to benefit from additional exporting revenue with the SEG, Salix can only provide finance for the proportion of the installation that tackles the site energy consumption. The client has to finance the revenue-making proportion of the installation.

Exporting example:

A client plans to intentionally oversize a proposed solar PV installation to create a revenue stream for the organisation. Its estimated that up to 30% of the total energy generated over the course of the year will be exported to the National Grid and the organisation will receive a revenue benefit.

In this example, Salix would offer the client a maximum of 70% financing of the total project cost and the project will be assessed on the merits of the energy saving alone. Any additional export revenue benefit will be considered a private benefit to the organisation who will need to source 30% of the costs of the project.

Export and the education sectors

Salix understands that for some public sector organisations, namely those positioned in the education sector, building use and energy demand can vary according to seasonal occupancy of buildings. For such organisations it may be unavoidable to export an amount of electricity to grid even where PV systems are sized to maximise displacement of grid electricity within buildings.

Where evidence is provided to show that a PV installation has not been oversized to benefit from additional revenue with the SEG, Salix will consider funding up to the full project cost.

Exporting example:

A school plans to install a solar PV installation where 80% of the electricity generated will be used on site, with the remaining 20% exported to the National grid. The export occurs during the summer months when the school is not at full capacity for use and generation exceeds demand. Modelling supplied with the application evidences that the PV installation has been matched as closely as possible to the site’s electricity demand.

In this example, Salix will offer funding up to the full project cost. The project will be assessed on the merits of the energy saving which will be used to offset electricity use from the National Grid. Energy and revenue savings from export and SEG cannot be included in the Salix application to make the payback quicker as this will be considered a private benefit to the organisation.

For further guidance or for other technical queries, please contact one of the Technical Services team ([email protected]) who will be happy to assist.

Updated: September 19