The Assignment of Rights came into force on the 27th June 2018. It’s a new method to help households finance a renewable heating system which will hopefully allow homeowners to benefit from a more efficient heating and hot water system.
So, what is involved in the Assignment of Rights and how does it work? Hopefully, this blog will help you understand.
What is Assignment of Rights?
The Department for Business, Energy & Industrial Strategy (BEIS) is providing an option to help consumers overcome the barrier of the upfront cost of a renewable heating system, such as air source heat pumps, by introducing the Assignment of Rights which came into force on the 27th June 2018. This allows an ‘investor’ to help fund the initial cost of installing a renewable heating system and then the applicant would assign their Renewable Heat Incentive (RHI) payments to this investor. The applicant should then benefit from a reduction in heating costs and would also be the owner of the system. An applicant to the scheme can be a householder, landlord or social landlord.
How does Assignment of Rights work?
The registered investor and applicant enter into an agreement, then the heating system is purchased and installed. The applicant applies to Ofgem and as part of the application process nominates the registered investor, then if successfully accredited, the nominated registered investor receives the RHI payments for 7 years. The applicant will own the equipment from the beginning.
What’s in it for applicants?
The key reasons why an applicant would look at having a renewable heating system installed is:
- applicant benefits from having a brand new system
- the potential running cost of the new system should be lower than their current heating system, thereby benefiting from a reduction in energy bills
It’s important that applicants make an informed choice. Just because you could have a new system installed for next to nothing doesn’t mean you should have it. It’s important to look at your motivation for having the new system. Your first step could be to look at your existing heating system and evaluate its efficiency – you can generally do this by age and also if you have an Energy Performance Certificate it could show you how fuel efficient your existing system is and the potential savings from having a new system installed. Another important factor is what’s the new system going to cost you to run compared to your existing system? This is something you need to be aware of because if you have the new system installed it could potentially cost you more money to run than previously. A new renewable heating system is a good idea but for the right applicant.
Applicants should also bear in mind that they have ‘ongoing obligations.’ The ongoing obligations are the applicant’s duties and responsibilities under the RHI scheme.
A participant must comply with the ongoing obligations for the investor to receive DRHI payments and avoid enforcement action. Applicants will also need to declare annually that they are still compliant with the ongoing obligations.
What’s in it for investors?
An investor will generally finance the purchase, installation and maintenance of renewable heating systems for households in exchange for receiving the RHI payments. Investors will generally be looking for a return on investment and may even have a figure in mind, e.g. 5-10% return on investment. This means that the investor will need to consider many different elements of a potential installation, including the cost of the equipment, the cost to install and what maintenance is required for the upkeep of the system. This all means that an investor who has undertaken due diligence should have a model whereby certain property types with certain existing heating systems will not meet their criteria. This will hopefully mean that the deployment of renewable heating systems is undertaken in a controlled manner where the applicant is satisfied, and the investor receives a return on their investment.
To take part in the Domestic Renewable Heat Incentive (DRHI) scheme, investors must demonstrate that the installation meets the following:
- The equipment is on the DRHI Product Eligibility List
- An Energy Performance Certificate (EPC), less than 24 months old at the time of installation may be needed for the property where the equipment will be installed. If significant changes have taken place to the property since the EPC was issued, you may need another EPC
- A Microcertification Scheme (MCS) installation certificate number for the heating system
- That the investor is a member of a Chartered Trading Standards Institute (CTSI) Approved Consumer Code, if applying under the Assignment of Rights scheme
What’s HIES’ involvement in Assignment of Rights?
A potential investor under the Assignment of Rights will need to be a member of a Consumer Code and also register with Ofgem. HIES is a Chartered Trading Standards Institute (CTSI) Consumer Code and will require investors to go through an accreditation process which will involve us looking at:
- How they will generate leads
- Their sales process
- The equipment to be used
- The design and installation process
- Their aftercare customer service
We will also look at a copy of their model contract and may even require a third party to look at it from a consumer law viewpoint and provide HIES with sign off. Once approved by us, investors can make an application to Ofgem to become a ‘registered investor’. We want to ensure that applicants receive accurate information and therefore will be looking at any investors who are members of HIES to also join The Energy Performance Validation Scheme (EPVS) to have each contract independently checked.
Ofgem has released an assignment of rights guide which you can access by clicking here.