A Little Analysis of RHI Costs

One of the significant publications that has been analysed, since the RHI issues have come to light, is the NIAO report.  One of the outputs of this report is a comparison of incentive payments from NI and GB RHI schemes for boilers that are operating under the following scenarios:

  1. Based on a 99kw biomass boiler running for 12 hours a day, 5 days a week and achieving 93% efficiency.
  2. Based on 99kw biomass boiler running 24 hours/day, 7 days/week achieving 93% efficiency.
  3. Based on a 99kw biomass boiler running for 24 hours/day, 7 days/week and achieving 93% efficiency – but which is abusing the scheme by heating empty space and therefore not replacing a previous form of heating.

Calculations in this report show rates of return and payback time as well as annual and 20 year profits.  The problem is, some of these calculations contain numerous errors.  These are detailed below for scenario 1 but all scenarios have similar issues.

Copied exactly from NIAO Report:
12 hours x 99kw = 1,188kwh per day
1,188kwh x 5 days = 5,940 kwh per week
5,940 kwh x 52 weeks = 308,880 kwh per year
308,880 kwh x 93% efficiency = 287,258 kwh actual per year

This calculation is trying to establish the annual energy output of the boiler (line 3) and the annual wood energy input to achieve this (line 4). The first mistake is the application of boiler efficiency (93%) to achieve 287,258kWh. It should have been calculated as follows:

308,880 kWh / 93% efficiency = 332,129 kWh actual per year

You can’t get more energy out of a boiler than you put in!!

The report goes on to calculate the cost of wood for this system to be 287,258 kWh x £0.0401 = £11,519. Using the input from the corrected calculation above, it should have been 332,129 kWh x £0.0401 = £13,318.

However, when redoing all the calculations there is very little effect on paybacks etc. (a few months) as similar mistakes are present in the calculation of the subsidy payments.

NIAO Report:
RHI Annual subsidy in NI – 287,258 kWh x 6.4 pence per kWh = £18,385

As this is the subsidy being claimed, measured by a heat meter, it should be calculated on the output of the boiler and not the energy going into the boiler (which was calculated incorrectly as already shown).

Corrected RHI Annual subsidy in NI:
308,880 kWh x 6.4 pence per kWh = £19,768

Similar issues are present in the GB RHI Annual subsidy calculation.
Tier 1 hours: 1,314 hours x 99kw x 93% efficiency = 120,980 at 5.87 pence/kwh = £7,102
Tier 2 hours: 1,806 hours x 99kw x 93% efficiency = 166,278 at 1.56 pence/kwh = £2,594
Total RHI subsidy £9,696

As before it should be based on the output of the boiler (99kW) not the input (which was incorrectly calculated here again):
Tier 1 hours: 1,314 hours x 99kw = 130,086 at 5.87 pence/kwh = £7,636
Tier 2 hours: 1,806 hours x 99kw = 178,794 at 1.56 pence/kwh = £2,789
Total RHI subsidy £10,425

Apologies that this is not a political post but what I hope it shows is that the analysis of the figures surrounding the RHI scheme not simple and may go part of the way to explain the differing estimates in costs.  If names or business details are not published in the near future, as a minimum it would be good to see the kWh claimed by each boiler. If this was made available, simple analysis could be performed to show who is “abusing” the scheme as there should be a good correlation with weather for anyone heating a space!

  • Kevin Breslin

    “You can’t get more energy out of a boiler than you put in!!”

    Yes that would be basic second law of thermodynamic stuff

    The entropy of any isolated system always increases.

    Of course you can get more out than you put in by assuming the boiler is not an isolated system, in other words any situation that involves burning the boiler too.

  • Old Mortality

    Thank you Mark. No need to apologise. You are shedding light on a policy which is far more useful than yet another tedious post on whether she, should she resign.
    It seems staggering that a uniform subsidy was set which was higher than even the Tier 1 subsidy of the English scheme and four times higher than the Tier 2 rate. Mrs Foster needs to provide an explanation as she was the responsible minister at the time. The rest is just detail.

  • Anthony O’Shea

    I dont understand any of that but I know plenty of clever heads will be able to figure it out so thanks for posting.

  • Jollyraj

    Well, you don’t need to understand something to agree with it, do you, Anthony?

  • T.E.Lawrence

    Great post Mark, brought back a few memories of me sitting in Belfast Millfield Tech doing similar calculations to get a few City & Guilds Exams ! Anyway on the political front “If names or business details are not published in the near future” It is up to the “Opposition Boys & Girls” up on the hill along with good old Stevie Nolan to keep hammering on ‘until the cows come home’ to get this information into the public domain. We the Tax Paying Public deserve to know who the Abusers are !

  • Gopher

    In the vein of there are no stupid questions. What is the total amount of boilers on the scheme,? Not the total number of users which we assume is around 2000 but the total number of boilers.

  • Jag
  • Gopher

    Well you would think it was a question some MLA would have asked. I have a couple of more stupid questions.

    When the scheme closed did that mean it was closed to everyone including new users or could existing scheme members continue to add boiler capacity?

    The calculations are based on a power rating, again sorry if this is stupid but is this maximum output or is it based on a temperature ie if one were to turn the thermostat up, you use more wood pellets. As with everything else the higher the temperature required the more fuel you use.

    Third stupid question, in cars and other machinery it is not complicated to re rate an engine to increase its capacity can these boilers be tinkered with to increase power output.

  • the rich get richer

    Don’t give them ideas about burning the boiler as well….What’ll it cost…..

    Ah ‘ No worries those South East Englanders enjoy Northern Irish Folk burning their money….At this stage they actually believe this is why Northern Irish Folk exist .

  • Gopher

    Next stupid questions. What is the average output of a biomass boiler in the scheme and say I am a user could I replace my 99kw with a 200kw boiler and remain in the scheme.

  • johnny lately

    And will the wood pellets used in the boilers stay at their present price for the next twenty years as obviously the total cost of the scheme is linked to the price of the wood pellets.

  • Gopher

    Yet another stupid question was there any parameter placed on the size or number of boilers in relation to the space to heat or was that left to the end user?

  • Gingray

    Ha ha ha

  • North Down

    I deserve to know who the abusers of the welfare system are, am sure there is many on hear, heating scandal is nothing compared to the amount of money wasted on handouts dla whiplash etc, we the tax paying public deserve to know

  • T.E.Lawrence

    Totally agree ND add in DLA, SIF, Civil Servants Expenses, Corporate Planning ……………..etc etc !

  • Jag

    Sorry if this appears dense, but are you saying

    (1) The Northern Ireland Audit Office report on RHI is wrong?

    (2) The NIAO report says the cost of a particular boiler (is this the most common sort) to the business is £11,519 and says the business receives a subsidy of £18,385. (if you divide £18385 by £11519, you get 1.596, so presumably that’s why we say businesses get paid £1.60 for every £1 they spend on fuel)

    (3) You’re saying the correct cost and subsidy are £13318 and £19768 which would mean businesses “only” get paid £1.48 for every £1 they spend.

    So, overall, you believe the NIAO report is wrong, but the correct position still is, businesses get paid more than they spend on fuel, thereby incentivising them to heat empty barns with the doors open.

  • murdockp

    93% efficiency for biomass is not realistic, more like 70%.

    And for Air and Ground Sources, the Coefficiency of performance will result in greater heat output than electrical input. Some of these units can be 300% efficient.

    The other factor is building fabric, not much sense in heating a dog of a property.

    Not sure the effect it has on PHI payments thought, interested to see.

    I think the answer to the problem is forcing through building fabric upgrades to recipients of the cash and you will see the boilers coming out of many properties if this happens and increased business rates for heated properties for buildings previously unheated and that includes farmers. Again boilers will be ripped out if rates are increased.

  • Mark Anderson

    Boilers can not be on the same hydraulic system (same plumbing), other than that, no limit! Not a perfect design and open to gaming, this is also an issue in the GB version.

  • Mark Anderson

    200kW would put you in the next band, therefore lower payments. Also a boiler accredited can not be replaced. One of my big gripes as an energy engineer is how this has forced some questionable design, eg two 99kW boilers heating the same areas on different hydraulic systems, all to game payments. Lack of backup and redundancy! This article on the GB RHI covers it, if you are interested in more engineering http://www.cibsejournal.com/cpd/modules/2015-10/

  • Mark Anderson

    I agree with all of this, recent publications on the GB RHI actually are saying a 66% as an efficiency. 93% is not suitable but this is what the NIAO used in their report. I was questioning the maths only in this post. Also agree about poor insulation i think this is a good option to investigate in some cases.

  • Mark Anderson

    The maths in the NIAO report is flawed. As i said flawed to the point where two wrongs “almost” make a right! Also the NIAO is using 4p as a cost of fuel if you read the report this includes more than the wood cost.

  • Mark Anderson

    Boilers should not burn above 99kW, this is governed by the size of their heat exchanger so not up for much manipulation. If you are at 99kW you can increase capacity without changing tariff so unlikely to happen. Numbers of boilers and users will be interesting, because of gaming some business have many boilers each one of them counting as one in the 2000 applicants. Im assuming when they quote 2000 they mean there are 2000 heat meters registered.

  • Jag

    Thanks Mark, but when you say “flawed”, the correct position is, businesses are being paid £1.48 in subsidy for every £1 they spend on energy, which is in the same ballpark as the £1.60 that’s hitherto been accepted.

  • the rich get richer

    Would it make more sense to burn the actual money……

    Would there be less global warming and climate change and that malarky…..

    You could probably set up some sort of video website where people that enjoy watching money burn could subscribe……

    Maybe some sort of religious service / or whatever heats your boiler……..

  • SeaanUiNeill

    “It’s not about money, it’s about sending a message……’everything burns’……”

  • johnny lately

    Money wasted on whiplash – What has that got to do with anyone other than insurance companies ?

    “Wasted on DLA handouts” Another unionist misconception – You obviously know better than the doctors and specialists who’s opinion and evidence ensured the claimant qualified for the benefit ?

  • the rich get richer

    I just posted something along the same lines in the other thread…

    I didn’t steal your idea……honest guv………

  • Dreary Steeple

    When the scheme was first introduced the pellets were £200 a tonne, but as oil came back so did the pellets to £140 a tonne.

  • Kevin Breslin

    Given that this is more costly than a whole season of bonfires … You would think some in the DUP were cynically letting this exaggerate to highlight costs of green energy!

  • Kevin Breslin

    Wait until Carney says the UK needs quantative hardening as opposed to quantative easing, then there will be plenty of money to burn!

  • Kevin Breslin

    Depends what the efficiency is measured relative to. If 100% is the calorific output at maximum feul oxidation of available chemical energy, I would agree 70% and that may well be high too …. If it’s relative to a standard burn it may around the same value as a standard measurement.

  • Mark Anderson

    I was only looking at the NIAO report, their costs of fuel and efficiencies etc. And this is what I found. I wouldn’t accept the ballparks especially when the mistakes outlined above are so obvious. I have failed students for less 😉

  • johnny lately

    Of course there will be fluctuations in fuel costs over a twenty year period but it would take a brave person to predict that the overall cost of the scheme would remain on the lower side of present predictions at the end of that twenty year period using £200 a tonne as a variable for total cost.

  • Neonlights

    Sorry, but from my reading of the report I don’t understand why you invert the 0.93. In the AG report it states in example 1 that a 99kw biomass boider, burning ash for cash 12hrs/day 5days/week at running at 93% efficiency produces 287258 kwh of energy.

    Wood when burnt doesn’t give out more energy than you put in. So that’s why we lose 7%. I burn 100 units of resource to get 93 units of power.

    What am I missing, am I as thick as the Auditor General?

  • North Down

    Truth hurts, no one is screwing the welfare system, it’s the tax payers who pays for thousands of wefare cheats, I bet u have family members who is cheating the system that’s fact,everyone does, thousands of people have claimed they got whiplash and got thousands, u think they all tell the truth, no.1 song up the falls used to be dla dla dla… sf go to them they can tell u how it’s done, sorry that’s unionist misconception to . don’t want to get into a stupid dabate, all I was saying thousands of people orange and green ,cost the tax payers billions of money on welfare fraud every year throughout the UK, heating scandal is nothing compared to that,

  • johnny lately

    Yes lots of Christians eat the alter rails but act far from Christian when the walk out the Church doors but in relation to the RHI scheme, whats it got to do with it

    I see by your list of people you believe are parasites on the taxpayer you left out the biggest one, a billionaire who lives in a palace and who’s extended family and all their affluence are all funded by the taxpayer. A billionaire who attempted to claim a heating grant from the DHSS for one of her palaces.

  • SeaanUiNeill

    “Great minds think alike…”

  • Steptoe

    It is a fact that benefit fraud is less than 1% of total welfare expenditure. Do not conflate these issues, they are completely seperate.
    From a personal perspective, my child attends a special needs school whose hours are being cut, as apparently there is not enough money, according to the people who have just pissed away many many millions of pounds. Reverting to Daily Mail type mindsets where everything is the fault of immigrants and “layabouts” detracts from the real story. You fail to grasp the anger that is present. I have never been so angry in my life.

  • North Down

    Welfare fraud is way more than 1 percent, an mp told me the public can never know how much is wasted on liers, u forget about the thousands of people in work ment to be living by themselves, then go home to their girl’s house with there children, who gets money because they live by themselves not, and get paid every thing for them ,I can go on , am very happy to pay for your child and people who is out of work and r trying there best to find work

  • North Down

    She is not a billionaire, and she brings millions into the UK every year

  • Mark Anderson

    The out put of the boiler is 99kW this is the only thing that is set.

    if you buy a 99kW boiler you get 99kW out of it not 99 x 0.93 = 92kW.

    so in this situation you will have 99kW going through your heat meter and to get that you will have to supply your boiler with 99 / 0.93 = 106kW of wood to achieve this.

    If you want to calculate the correct liability of an RHI installation this is the way to do it.

  • Steptoe

    From the Independent:

    “Indeed, despite tabloid headlines about a feckless underclass intent on milking the benefits system, tax evasion is a far bigger social scourge than fraudulent benefit claims. Just 0.7 per cent – or £1.2bn – of total benefit expenditure in 2012/13 was overpaid due to fraud. This compares with £5bn a year that the government loses through tax avoidance.

    In other words, for every £1 swallowed up by benefit fraud, £4 disappears because of people like Gary Barlow. Get angry about people playing the system by all means, but start at the top and work your way down if you expect to be taken seriously”
    That’s 0.7 per cent. Can you produce evidence of your claims? Who is the MP- Where is the MP’s source?
    Also, name the individuals (if you are so confident, you will have nothing to fear from defamation) who are committing this type of behaviour, and produce statistics from this to debunk the fact that it is less than 1%

  • Neonlights

    I follow your thinking, but I have a doubt. It seems to say that in general the policy meant that the more in-efficient a bio-fuel was, then the greater its subsidy would be. That’s surely not the case here. So I am still being thick I suppose. I can’t see anything in https://www.economy-ni.gov.uk/sites/default/files/consultations/deti/Consultation%20on%20phase%202%20of%20the%20NI%20RHI.pdf that clarifies that.

  • Mark Anderson

    As i said the 99kW does not change. Regardless of efficiency (well up to a point)

    The heat meter still sees 99kW form the boiler but it will have to add more wood fuel (energy) to achieve that 99kW.

    So if the system is only 70% efficient
    99 / 0.7 = 141kW into the boiler.

    Hope this helps

  • North Down

    Name the individuals u say, over half of the work force am in , and they tell me , we’re I live half the people, next door neighbour tells me what she gets and her partner is not ment to be in the house, that 0.7 percent is way higher , that 0.7 percent is the ones who has been caught fact, that doesn’t count thousands of people who r lieing about living by themselves when they r living with their partners ,I could go on and on, there r tens of thousands of people screwing the system , next door neighbour got 5 thousand whiplash she told me nothing wrong with her , kids get free dinner money and so on, 0.7 percent u say

  • Gopher

    On my travels I was seeing multiple instalations which looks like the system is very much gamed. Thank you for your responses, my knowledge of boilers is limited to that of a sixth century history student so excuse any stupid questions. Can accelerators be used in Wood Pellet boilers like were used in traditional steam engines to increase the rate and completeness of burn?

    You talk about insulation as a factor what safeguards are there that the user has not increased the length of his plumbing and insured it has little or no insulation even in the most modern building?

  • Andrew Webb

    Thanks for the post. Can i check something to help my understanding?
    Line 3 of the niao calculation as you say is energy output of boiler. This line is working off basis of 100% efficiency so line 4 applies a 93% efficiency to that boiler. 93% of 308,880 is 287,258. so…the boiler can generate 287,258kwh per annum and cafre have calculated that it costs £0.0401 to produce each kwh.
    What am I not getting?

  • Mark Anderson

    See the comments below with Neonlights

    The out put of the boiler it the output of the boiler, its what runs through the meter at full power and what RHI liability or subsidy generation should be calculated on.

    The efficiency of the boiler is then used to calculate how much wood energy it takes to produce 99kW.

    It you purchase a 100hP (75kW) car, you expect it to put out 100hP regardless. If your car is more efficient than my 100HP car it will use less fuel than mine, but both do 100HP.

  • Mark Anderson

    Accelerants could be used but probably wouldn’t be renewable and cost more than the cost of wood pellets per kW. As there are no checks on sustainability of biomass etc in NI (or checks of any kind) this could happen i guess. But its not a simple way to increase payment, certainly not as simple as opening the doors and increasing ventilation rates.

    There were minimal checks on insulation on plumbing etc but some, and anyone who made mistakes got the opportunity to put it right according to OFGEM PAC mins.

  • Andrew Webb

    Ahhhh. with you. Thanks for that.

  • Mark Anderson

    Pleasure

  • Belfastoddball

    I’m not sure that this analysis is correct. I read the NIAO report calculation as follows:

    Line 3 is calculating the heat output of the boiler

    Line 4 is estimating the heat input into the building as recorded by the heat meter

    The report is estimating a 7% heat loss between the boiler and the heat meter, and if one assumes that this heat loss is an accurate estimation, then the calculation of actual ‘eligible’ heat is correct.

    As RHI payments are based on ‘eligible heat’, the combustion efficiency of the boiler is irrelevant.

    Payments are only made for heat that enters the building through the heat meter, hence the reports of buildings with windows open in the middle of winter.

  • Mark Anderson

    So why was the cost of the fuel taken from the energy at line 4 also? You cant have the fuel energy and the “eligible heat” the same value as there is a conversion efficiency.

    Also go look at an installation, look where the heat meter is installed and report back on the measurement of eligible heat.

  • Belfastoddball

    That’s because the NIAO report is calculating the heat eligible for payment, not the fuel energy used.

    RHI payments are based on the eligible heat only. That is, the kWh recorded by the heat meter. The amount of pellets burned is irrelevant, as is the combustion efficiency of the boiler.

    The regulations are quite clear on the definitions of eligible heat, and indeed, on meter placement. That’s why you don’t receive payment for the heat lost through the primary pipework, buffer vessels etc.

    No matter where the meter is placed, the kWh recorded through it (the eligible heat) will always be less than the boiler output. I presume that NIAO have estimated the heat loss as 7%

    Your example appers to suggest that payments are made on the basis of fuel energy burned, rather than delivered to the building/load. But to follow that example to its conclusion would mean that applicants would benefit from using boilers that are *less* efficient!

    I know the regulations are flawed, but jeepers, they aren’t that bad.

  • Mark Anderson

    I am not suggesting that, I’m saying the RHI is calculated on the output through the meter in these cases 99kW. This report goes on to calculate the cost of fuel also to look the profit over 20years. My comment above was why would they use the same number of kWh for the calculation of RHI and the cost of fuel per kW?

    If you look at the appendix of the report perhaps you will be able to see the point I am trying to make. You can’t get 287,258kWh through the meter and only use 287,258kWh of wood fuel. As the example and the calculations in the report suggests.

  • Neonlights

    Gotcha. Having read up some more documents I just don’t get why the Audit Office added in the efficiency number at all now given the examples in the gov-ni documentation. Anyway, it’s not important in the grand scheme of things. The modifiers don’t change the fact there is a big gap between NI and GB

  • Mark Anderson

    I think efficiency was brought in to include fuel costs, and show the “profit” from high use boilers heating an eligible installation and a non eligible. The real goal of the calculations was for this comparison.