The Department of Energy and Climate Change (DECC) has announced that air-to-water heat pumps (AWHP) are to be included in the non-domestic Renewable Heat Incentive (RHI) scheme.

Installations of AWHPs are now eligible for a tariff of 2.5p/kWh. The new tariff applies to AWHPs, regardless of size, which now means building owners have a greater choice of renewable heating technologies supported by the RHI.

DECC will also replace the current banded tariffs for ground source heat pumps (GSHPs) with a single tariff of 7.2p/kWh, which will be tiered. The first tier of 8.7p/kWh will be paid on the initial heat generated for an eligible purpose, while the tier two tariff of 2.6p/kWh will be paid on the remaining eligible heat generated.

In his statement to parliament, Energy and Climate Change Minister, Greg Barker, said: “The scheme is designed to bridge the gap between the cost of fossil fuel heat sources and renewable heat alternatives. It is vital that we get the level of support right so that the market can invest with confidence.”

Peter Verkempynck, managing director at Daikin UK, believes the announcement recognises that AWHPs have an important role to play in decarbonising heating, particularly in the retrofit market.

“By recognising AWHPs as a viable alternative to fossil fuel systems, this helps ensure parity with other renewable technologies and gives commercial building owners a full range of options to reduce their running costs,” he said.

“This is excellent news which will help stimulate growth in the renewable heating sector and help the government meet its 2020 renewable energy targets.”

Phil Hurley, managing director at NIBE Energy Systems, hailed the move as well-deserved recognition of the vital role the technology will play in the UK’s low-carbon future.

“The decision to include air source heat pumps (ASHPs) in the non-domestic scheme represents long-awaited recognition of the benefits of this technology, and marks a much-needed step forward in the movement to cut emissions in the commercial sector,” he said.

“We are also pleased to see an increase in the non-domestic tariff for GSHPs. While these have not reached the level suggested in the original consultation, increasing tier 1 payments to 8.7p/kWh will undoubtedly provide an important market boost. Heat pumps continue to deliver high-performance results in commercial applications across the UK, and we look forward to seeing even more positive results as the updated scheme rolls out.”

Kensa’s commercial director Chris Davis believes the GSHP industry is in a better place, with more certainty, than it was last week. However, it just could’ve been so much better.

“The rise in tariffs is a good thing and the certainty it brings will help the industry move forward,” he said. “But we are disappointed that the final tariffs are at the lower end of what was suggested in the consultation. To make the industry really fly and address the in-balance that has skewed the market in the past two years the tariffs need to be at the top end of what was initially proposed.”

John Felgate, head of technical at Stiebel Eltron UK, said: “This announcement is good news for manufacturers and installers alike – there has been much lobbying to include AWHPs as part of the commercial RHI and the industry will be happy that DECC has listened to our advice.

“The tariff itself of 2.5p is pitched very well to give businesses the right kind of return that they need.

“Up to now only GSHPs have been incentivised and we have certainly seen an increase in take-up – we hope to see a similar rise in demand for AWHPs now that consumer confidence will grow and a return on investment is guaranteed.”

Tony Bowen, president of the Heat Pump Association, said: “The combined impact of revised tariffs for GSHPs and the long awaited addition of AWHPs promises to have a very significant effect on the adoption of these technologies and the achievement of the goals of the RHI policy. We look forward to assisting with policy refinements over the next few months.”