Social landlords could find their tenants are hit with higher energy bills if they take up the government’s Renewable Heat Incentive (RHI) scheme to install renewable technologies in their properties.
The caution from OFTEC, the trade body for the oil heating industry, comes in response to the Department of Energy & Climate Change (DECC) announcement that, from next April, changes to the RHI will make it easier for social landlords to sign up to the scheme.
With the price of oil at a three-year low, and forecast to stay low over the coming years while electricity prices are at an historic high, converting a property to operate on air source heat pumps (ASHP) may result in higher, not lower heating bills, according to latest analysis.
The latest quarterly figures from the Sutherland Tables, an independent, industry-recognised analysis of home heating costs, show that heating a typical three-bedroom house using an ASHP and radiators is currently 29% more expensive than using oil.
The report also states that oil heating is now just two per cent more expensive than mains gas to heat the same size house – equating to around just £25 per year – while LPG, the other primary off-grid fuel, is 67% more expensive than oil.
In its statement, DECC cites that, of the UK’s 2.28 million fuel poor households, 365,000 live in social housing. OFTEC agrees that this group desperately needs help to reduce their energy bills, but is concerned that unless extensive renovation work is carried out on rental properties to greatly improve insulation levels, technologies such as heat pumps cannot work efficiently. This would lead to higher energy bills, colder homes and the risk that tenants will resort to additional expensive and less efficient heaters to supplement the low performance of heat pumps.
Despite the promise of cheaper energy bills under the RHI scheme, which was launched earlier this year, take up has been slow due to the high upfront costs of installing renewable technologies, typically between £7,000 to £14,000 per installation for ASHP.
Jeremy Hawksley, director general of OFTEC, said: “Social landlords who sign up to the RHI will have to fund large upfront costs to install renewable technologies or their tenants may well face higher energy bills. While the RHI payments may be attractive to landlords, unless they also carry out extensive renovation work at the same time, there is a great risk of them leaving their tenants colder and paying higher energy bills. Despite DECC’s claims that RHI will cut fuel costs, the widely recognised Sutherland Tables report clearly shows that oil has seen a steady decrease in price over the last three years and offers a far cheaper option than ASHP for heating off gas grid homes.
“The government should be focusing on providing better incentives to improve insulation in homes as a way to cut energy bills and also introduce an all-inclusive boiler scrappage scheme to encourage more people, including social landlords, to upgrade to high efficiency condensing boilers which can save up to £225 on heating costs per year and also cut carbon dioxide emissions. The substantially lower cost of installing a modern condensing boiler of around just £3,000 compared to upwards of £7,000 for renewable technologies makes this option even more attractive to landlords.”
For the second year running, OFTEC is backing the Energy Bill Revolution’s (EBR) campaign to improve the energy efficiency of the country’s poorest homes. According to EBR, 25,000 people die from the cold each year and one of the main causes is th