The Domestic Renewable Heat Incentive (DRHI) scheme annual report includes statistics on accreditations, payments made, a summary of our audit and compliance programme and changes to the scheme regulations for Scheme Year 9, covering the period 1 April 2022 to 31 March 2023.
The Executive Summary is provided here, and the full report is published at the bottom of this page.
Executive Summary
Ofgem runs a range of environmental and social schemes on behalf of government and for the devolved administrations. Together, these are worth over £9 billion each year. Our schemes fall into three main categories: renewable electricity schemes, renewable heat schemes, and energy efficiency and social schemes.
UK homes account for 26% of total greenhouse gas emissions in the UK. To reduce the UK’s carbon emissions and meet the governments Net Zero obligations, British homes need to switch to lower carbon heating systems. To help achieve this, the Domestic Renewable Heat Incentive (DRHI) scheme was introduced in 2014 as a government financial incentive to promote the use of low carbon heating technologies. Under the DRHI scheme, households in England, Scotland and Wales who meet the eligibility criteria and have installed air source heat pumps, ground source heat pumps, biomass boilers or solar thermal heating systems, were able to apply to receive quarterly payments over seven years for the low carbon heat their systems are estimated to produce. The DRHI scheme closed to new applicants on 31 March 2022.
Ofgem are responsible for the administration and successful operation of the scheme on behalf of the Department for Energy Security and Net-Zero. Ofgem’s role includes processing applications for support and making payments to accredited participants for the heat they produce. Additionally, Ofgem conducts annual audit programmes to ensure participants are complying with the scheme rules which helps ensure fair and effective use of public funds.
As a part of our responsibilities, we have produced this report to provide an update on scheme activity during the ninth year of the scheme (Scheme Year 9) covering the period 01 April 2022 to 31 March 2023
As of 31 March 2023, the DRHI scheme has supported 110,830* lower carbon heating systems. Air source heat pumps remain the dominant technology type accounting for 68.5% of accreditations since the start of the scheme. The majority of installations, 74.8%, are located in England, however, when looking at the proportion of households in each country benefiting from the scheme, it is highest in Scotland with 0.8% of households compared to 0.4% in England. Registered Social Landlords were one of the groups eligible to apply for the DRHI and account for 21.6% of all scheme accreditations.
A key scheme objective is the replacement of domestic heating systems with lower carbon alternatives. To monitor this, DRHI applicants are required to provide details of the heating system being replaced. As of 31 March 2023, 52.3% of installations on the scheme replaced boilers. Almost 96% of the replaced boilers used fossil fuels such as oil, gas, coal and liquified petroleum gas (LPG). ‘First heating systems’ installed in eligible new builds, where no heating technology was being replaced, accounted for 19.3% of all installations and storage heaters a further 18.4%.
A total of 5,602 accreditations were granted during Scheme Year 9 and in total 99.8% of outstanding applications in the queue at scheme closure have now been processed. This leaves just 15 outstanding applications at the time of writing. The remaining applications are complex cases for which we are engaging with applicants to gather information necessary to reach a decision.
As of 31 March 2023, seven years had elapsed for applications that received accreditation during the first two years of the scheme. As such a total of 40,309 installations have now reached the end of their support period and exited the scheme.
* We have changed the way we report on the number of installations to accurately reflect the number of individual installations.
In Scheme Year 9, payments made to participants totalled approximately £124 million, taking payments since the start of the scheme to over £943 million. Payments since the start of the scheme were made against estimated renewable heat generation of 8,030 GWh. The figure below presents a breakdown of payments and heat generation by technology type for Scheme year 9 and across the lifetime of the scheme.
Payments and Heat Generation by Technology Type – SY9* (2022-23) and Lifetime
Technology
SY9 Heat generation (GWh)
SY9 Payments
Lifetime Heat generation (GWh)
Lifetime Payments
Air source heat pump
682.8
£73,246,138
3,331.8
£299,265,929
Ground source heat pump
184.2
£40,520,165
1,367.2
£273,981,683
Biomass boiler
119.9
£9,172,669
3,236.1
£351,880,265
Solar thermal
5.5
£1,223,853
95.0
£18,345,797
Total
992.3
£124,162,825
8,030.1
£943,473,674
*SY = Scheme Year 9
Since scheme launch, payments and estimated heat output for Air Source Heat Pumps have continued to rise. Comparatively, Ground Source Heat Pump, Biomass and Solar Thermal technology types have risen and fallen over the lifetime of the scheme, with them all seeing a decrease in Scheme Year 9. Over the lifetime of the scheme, Air Source Heat Pumps account for the highest proportion of estimated heat output.
Over the next seven years, the number of payments will decrease as new applications are no longer accepted, and current accreditations gradually come to the end of their support period under the scheme.
As part of our commitment to protect and ensure the effective use of taxpayer money, Ofgem conducts an annual audit programme to make sure participants comply with scheme rules. The audit programme includes desk audits, which involve us asking participants to supply certain documents and records for inspection, and site audits, which consist of a physical inspection of the heating system in addition to documents and records. Site audits are carried out by an external auditor appointed by Ofgem.
In Scheme Year 9, a total of 1,326 audits were conducted, made up of 689 desk audits and 637 site audits. These audits provide assurance on this year’s payments of over £124 million. The audit work carried out in Scheme Year 9 resulted in the protection of over £780,000 in public funds, where we prevented incorrect payments made to participants, or initiated recovery of incorrect payments which had already been made. In Scheme year 9, there was a significant improvement in the recovery rate compared to previous years, with 82.7% of detected incorrect payments offset or recovered via direct repayment. The improved recovery rate can be attributed to an enhanced repayment process and a streamlined debt process that enabled the effective management of debt cases.
Please note: a spreadsheet containing the data used in the production of this report is published alongside the report on our website.
