Solar Thermal in the Crosshairs

Bullet Point Needed for DECC Action Plan

The Department of Energy and Climate Change (DECC) has released its consultation on reforms to the Renewable Heat Incentive (RHI), and this time it looks like it’s the turn of solar thermal to be under threat.  DECC's intention is to completely remove support for solar thermal by dropping it from the RHI while support for other renewable heat technologies such as heat pumps and wood chip boilers continues under the scheme.

As the solarblogger shows below, it's relatively straightforward to pick holes in the government's arguments for singling out solar thermal.  Whether DECC will be swayed from what is looking more and more like an ideological attack on solar is more open to question.

Busting The Arguments

DECC says:
Solar Thermal technologies account for 17% of total accreditations (7,445 out of a total of 45,111) but just 2% of heat (11TWh out of 598TWh).

Solarblogger says:
Solar thermal delivered 2% of all heat (11TWWh out of 598TWh), but accounts for only 1.4% of committed budget at the end of 2015 (£0.69m out of £49.3m).

So what?  So what if each solar thermal system contributes a small amount of energy?  It’s being unfairly compared to massive biomass boilers heating country piles, factories, and barns!  We already knew that solar thermal was more likely to be applied to domestic hot water in normal family homes where the small amount of energy each installation delivers still represents a significant proportion of household energy consumption (around 10%).

If affordability is the basis on which solar thermal is to be excluded from the RHI, then surely the relevant statistic isn’t to compare the proportion of all installations against the proportion of total heat, it’s to compare the cost against the heat delivered.  On this basis solar thermal looks much better value for money.


UPDATE (4.4.16) - figures should be treated with caution.  The committed budget is forward-looking and the delivered heat is backwards-looking, so it seems likely that large numbers of biomass boilers installed in the current year will be increasing committed budget but not contributing greatly to historic delivered heat.  Research into OFGEM figures by Mike Landy at the STA suggest that solar thermal represents 2.8% of payments made under RHI for 2% of delivered heat.



DECC says:
When asked, around half of all owner-occupier applicants said they would have installed it anyway.

Solarblogger says:
The DECC survey asked people to report their motivations for doing something after the event.  Such surveys are prone to a well-documented error called social desirability bias.  This is a tendency of respondents to answer questions in a way that paints them in a good light.

What DECC fails to mention is that the proportion of owner-occupier applicants saying that they would have installed other RHI technologies anyway was also extremely high.

Proportion of respondents saying they would have installed the same technology irrespective of the availability of the RHI:

Biomass         11%
ASHP 31%
GSHP 32%
Solar Thermal 49%

Installing renewable energy systems is seen as doing a social good.  People are less likely to admit that they only did it because of a government bribe.  The less expensive the system they have installed, the more ‘embarassing’ it would be to admit you wouldn’t have done it without the RHI.

The survey is flawed and to rely on it as a reason to take such a significant action against solar thermal is shocking.

DECC says:
We judge solar thermal to be a mature technology with a well-established global supply chain.  It is not clear that ongoing RHI support will serve to build this supply chain in the way that it can for other less mature technologies in the UK like heat pumps.

Solarblogger says:
Again solar thermal is being unfairly singled out.  A well-developed global supply chain for solar thermal is being compared with an immature domestic (UK) supply chain for heat pumps.

Heat pumps also have a well-established global supply chain, due to their high deployment in other European countries (27 million in operation across EU) according to Eurobserver and 1.7million heat pumps were sold in the EU in 2014.

Just like for heat pumps, solar thermal has a strong global supply chain but a nascent UK supply chain.  Just like for heat pumps, action to stimulate a strong UK supply chain has the prospect of reducing costs in the UK.  The Solar Trade Association estimates by as much as a 30% reduction in costs for a volume UK market of 200,000 systems a year.

Past Performance is not an Indicator of Future Success

DECC argues that deployment rates for solar thermal are too low to justify keeping solar thermal in the RHI, and that they can’t increase the subsidy levels as they are already set at the so-called ‘Value for money’ cap agreed with Treasury.

If the folks from DECC had been able to find an unconflicted solar thermal company to talk to (one that didn’t also make a living from PV), and asked them what was the one thing it could do to grow the market for solar thermal, the answer would have been “Reduce the subsidy for PV”.

The Feed in Tariff had four years’ head-start on the domestic RHI and domestic solar PV launched with tariff levels four times higher than the cap imposed on solar thermal.  Until the most recent shock reduction in the Feed in Tariff, support for PV was still higher than the cap (taking into account that the domestic RHI is for seven years, and the FIT is for 20).

Add in the loophole that pays owners of solar PV systems for exported electricity, even when they divert that power to heat water instead of exporting it and it’s obvious that the real reason for solar thermal underperformance is more linked to decisions made in the department at DECC that looks after the Feed in Tariff.

The Feed in Tariff has now been cut to a level that gives a much more level playing field with solar thermal, and many installers were starting to re-boot their solar thermal expertise and explore this option.  A recent survey of member companies by the Solar Trade Association found level of enquiry for solar thermal running at double the rate of the previous year.

The tragic mistake that the Heat team at DECC might be about to make is to have reached their conclusions about the performance of solar thermal based on a period during which a separate department at DECC was supporting PV much more generously.

Fixes Needed in RHI

Linking the domestic RHI to the Green Deal was a mistake, and the cost of having to get a Green Deal Assessment affected solar thermal disproportionately compared to more expensive technologies.  The decision to remove this requirement would boost solar thermal.

Solar thermal is an excellent companion to heat pumps, taking the strain on high temperature domestic hot water and allowing the heat pump to focus on working at lower temperatures, where its performance is more optimal.  The domestic RHI tried to reward people that installed both technologies together by allowing them to claim support for domestic hot water for both heat pump and solar.  Unfortunately the regulations were drafted in a way that ruled out the most popular implementation of a combined heat pump/solar system – a thermal store, see my earlier blog on this cock up here.  The Solar Trade Association has proposed a number of different ways that DECC could have fixed this problem to boost solar thermal deployment, suggestions that were sadly, ignored.

The proposal to remove solar thermal from the RHI is based on flawed logic.  The market has changed drastically since funding for PV was cut and early signs since then show indications of a return to growth.  Domestic hot water is the heat load that cannot be insulated away and solar thermal has an important part to play in decarbonisation our homes and addressing fuel poverty.

DECC should continue to support solar thermal and fix problems with the RHI that are holding it back rather than throwing it out of the RHI.

Is RHI More Trouble than it’s Worth?

To get support from the domestic Renewable Heat Incentive (RHI), there are some hoops it’s necessary to go through, but how much do these add to the cost of a solar thermal installation?

If you install a solar thermal system in the UK you can receive financial help from the government’s Domestic Renewable Heat Incentive (RHI).  RHI payments vary depending on factors such as the size of the solar panels, their location and orientation and especially the hot water demand of the house (which is taken from the number of people who live there).  It can be worth between £1,500 and £3,500, paid out over the first seven years.  In addition to the payments householders also benefit from savings on energy bills, the value of which are much higher the RHI payments over the long life of the solar heating system.

In order to qualify for the RHI, the solar panels must be of a certain quality - achieving accreditation with the Microgeneration Certification Scheme (MCS) or SolarKeymark, the installation company must also be MCS accredited and the household needs to demonstrate that it has taken straightforward energy efficiency measures such as insulating the loft and filling cavity walls (where there are cavity walls to fill).  The way that this last requirement is proven is to produce a Green Deal Advice Report that doesn’t show loft insulation or cavity wall insulation as a recommended measure.

In recent weeks it has come to light that some solar installation companies are advising customers that there’s so much cost and bureaucracy associated with installing a solar thermal system that qualifies for the domestic RHI that they are better off avoiding the scheme.

Let’s have a look at whether this argument stacks up.

Extra Costs for the Installation

Let’s assume that the installation is of identical quality both with and without the RHI.  The installer cuts no corners on the installation standard and that the equipment that is used is registered with the MCS or Solarkeymark.

The installer must log the installation onto the online MCS database for the customer to be able to claim the RHI. There is a charge from MCS of £15 to do this.  Let’s add £20 to that to pay for the time for someone to fill out the online forms.  Total £35

In addition, the household needs to pay a Green Deal Assessor to visit and produce the Green Deal report.  You don’t need to undertake any of the recommended measures unless they include loft insulation or cavity wall insulation.  The report costs between £150 and £250. 

So the total Variable Costs (cost per installation) are between £185 and £285

Annual Costs for the Installer

For an installer to be MCS accredited, there are annual fees to pay and administrative time required.  Let’s take a look at the costs for a smaller company, as it is generally thought that the burden is highest for these.

The solar installer must pay a fee to join the scheme and be audited each year.  For a solar installer with less than 10 employees the MCS annual registration and audit fee comes in at around £470 (see NAPIT fee sheet). 

In addition there is an MCS requirement that the solar installation company must be a member of an approved renewable energy consumer protection code.  Joining RECC depends on the number of staff, but for 1-6 employees it’s £250/year. 

Let’s assume the company wouldn’t operate a formal quality system if it wasn’t going to be MCS accredited and add £1,000 of admin time to these figures to pay an office administrator to maintain the paperwork that the scheme requires each year and make sure the document handover packs and quotes remain compliant with the scheme.

Both the fees and overhead costs fall (per technology) if the company installs other MCS renewable energy technologies as well as solar thermal, but let’s assume it doesn’t.

For this small company then, the total annual Fixed Costs of maintaining an MCS solar installer registration is £1,720.   

Total Cost

The total additional cost per installation of being RHI compliant is found by dividing the Fixed Cost by the number of installations the company does each year and adding this to the Variable Cost per installation.

This is where the costs of accreditation can start to look very high – it depends enormously on how many installations the installer does each year.  See the table below.

How the admin costs of an RHI compliant solar system varies with the number of installations
the installation company does each year

If the installer does only one or two solar installations a year then, yes the costs of RHI compliance is high compared to the benefit in claiming the RHI, but even at only one system a month the extra costs start to become really quite small compared to the RHI payments. 

The more installations that the company can do each year, the more the costs trends down towards the cost of the Green Deal Report.   Nor will every customer see this as a valueless piece of paper; some may value the guidance on further measures they could take to improve their energy efficiency.

The problem for the RHI is that until the scheme starts to drive demand for a reasonable number of installations, then for small companies that perhaps combine general plumbing with a very occasional solar installation the barrier costs of being MCS registered don’t look worthwhile. 

An excellent time to encourage a customer to consider solar heating is at the same time that a hot water cylinder is being replaced, but the plumbing company standing in front of the customer won’t offer this option if it isn’t MCS registered  If they do offer solar they might encourage the customer to ignore the RHI.  This is, of course, a classic chicken/egg situation.  Unless this plumbing company starts to offer more customers solar under the RHI, they’ll never see enough demand to justify MCS accreditation.

It would be good if there was a way to encourage this plumber to promote solar thermal to customers, perhaps in cooperation with a local accredited solar installer.  For any installation company that’s doing more than a handful of solar thermal installations each year, the cost of the RHI requirements are small relative to the RHI payments.

However this is not to say that MCS couldn’t do something to reduce the burden on smaller installers to meet the ever-increasing demands of the scheme.

Slow Burner - how will the Domestic RHI Take off?

How much can the first year of the Feed in Tariff tell us about uptake for the Domestic RHI

How it went for the Feed in Tariff

A number of people (including the solarblogger himself) tried to temper expectations for the domestic RHI with the argument that the Feed in Tariff (FIT) took a bit of time to get going. The logic goes that it takes time for the public to become aware, for installers to work out how to market it, and especially for housing associations to get organised. 

I thought I'd take a look at the numbers to check whether they supported this idea. 

I wanted to compare the take up of PV in domestic installations before and after the introduction of the FIT. There is a wealth of data available from the Department of Energy and Climate Change (DECC) on the levels of PV deployment  under the FIT, but much less for the years preceding it. I relied upon this report on the Low Carbon Building Programme (LCBP) to build a picture of deployment rates before the FIT. 

Under LCBP phase 1 (the domestic stream) there were 4,428 installations of PV. The average size was 2.18kWp, for a total capacity installed under the scheme of 9.7MWp. 

Since the report doesn't disclose the deployment in each period, I estimated PV deployment based on overall scheme expenditure.  I then combined this with FIT data for systems below 4kWp, most of which is likely to be domestic. 

The results are very interesting. 

When you look at the plot of the overall data, it sure does seem that all the action started in year two of the scheme. But this is a trick of exponential growth. Look at the lower plot, where I have shown the data only up to the end of year one. The first year was spectacular. 

The level of deployment grew from round 700 installations a quarter before the FIT to 11,000 a quarter at the end of the first year. Before the FIT subsidy, solar thermal systems were being installed at a rate around 10 times higher than solar PV. By the end of the first year, solar thermal had declined slightly, but solar PV installations outnumbered them by almost double. 

And so to the Domestic Renewable Heat Incentive

There are a number of reasons why the domestic Renewable Heat Incentive won't take off like the Feed in Tariff did. 

1.  The Feed in Tariff.  

When the FIT was launched it was the only show in town. The grant scheme for renewable heat was derisory by comparison. As the domestic RHI launches, people interested in investing in their homes to reduce energy bills have the choice of both FIT and (I suppose) the Green Deal. 

2.  Installation complexity. 

With the exception of solar thermal, all the domestic RHI technologies replace an existing heating system, rather than being an add-on. People will be more cautious about installing a new technology when they worry that the impact of it not working is a cold house and no hot water.

Renewable heating installations are generally more intrusive too. A heat pump may require the replacement of radiators to cope with lower heating temperatures, biomass boilers can require a lot of space. New products such as this one which simplifies the installation of solar thermal to levels approaching that for solar PV may help overcome this barrier, at least for solar thermal where there's always the backup heater. 

3. Off Grid Target Market

The domestic RHI tariff levels were intended to stimulate a market in the 20% of homes that are off the gas grid. For sure, the returns are better when heating with oil or electricity, but returns for solar thermal on gas can also be good, as this analysis has shown. 

4. World First

The UK feed in Tariff followed the implementation of similar schemes in other european countries. Businesses could see the rapid take up of markets that had resulted and anticipating a similar trajectory for the UK, were pumped and ready once the scheme launched. By contrast the RHI this a genuine worlds first. There's no equivalent to look at to predict uptake. The many, many false starts for the scheme also didn't help. Many installation companies I spoke to weren't even willing to spend time thinking about it until they were absolutely sure it had launched. 

5. The Feed in Tariff (again)

My final reason is perhaps the most important. The way the government managed the Feed in Tariff has led to the widespread belief that as soon as any renewable energy scheme is successful it will be ruthlessly hacked back. The shadow that the treatment of the FIT scheme casts is long and pervasive. 

For all this, the scheme offers a level of financial support beyond anything that renewable heating technologies have benefitted from before. My plea to the industry is to give it a while before judging the success or otherwise of the scheme. 

It may take time to take some time to warm up, but warm up it surely will.  

The Domestic RHI and Solar Thermal Stores

The Law of Unintended Consequences Strikes Again

The domestic RHI was structured with the intent that the complementary combination of solar thermal with other heating technologies would be actively encouraged by receiving double subsidy for the domestic hot water energy.  Unfortunately, the wording of the legislation has prevented installers using the simplest way to implement a combined system (the thermal store) because it rules out solar systems that can make even a theoretical contribution to space heating.

Thermal Stores in Hot Water

Solar thermal systems can make a contribution to space heating as well as domestic hot water (DHW) preparation, especially in spring and autumn where the days are still bright and there is a demand for space heating.  These systems are not yet as common in the UK as those for domestic hot water, but in more developed European markets such as Germany and Austria, so-called "solar combi systems" are popular.

In a thermal store the domestic hot water is heated in a heat exchanger
and the contents of the store pumped around the space heating circuit

A good way to combine solar thermal with space heating is to use a thermal store, essentially a large (typically 500 litre minimum to 1,000 litre) hot water cylinder with heat inputs from both solar and the backup heating system and with outputs to domestic hot water and space heating.  Typically the body of water in the thermal store is heating system fluid (primary water) and domestic hot water is heated on-demand in a heat exchanger as it flows to the hot tap.

Both heat pumps and biomass heaters operate well when running continuously rather than cycling on and off, so charging a thermal store is a good technical solution that improves the overall efficiency of the heat pump or biomass boiler.

Where the designer is seeking for the solar to make a reasonable contribution to the space heating, the solar panel array installed is large (around 12-18 m² for a domestic property).   The coverage of domestic hot water of such systems can be very high, 70% and above.

Where the designer is aiming for solar to mainly cover domestic hot water the panel array is smaller (typically in the range of 3  - 6 m²).  In this case there is still a theoretical possibility that the solar energy will contribute to the space heating, though in practice the system is sized with the aim of supplying 60-70% of water heating.

The current domestic RHI legislation completely excludes systems that can contribute towards space heating.  

The text in the RHI regulations defines an eligible solar system as follows:

a)     is designed and installed to provide heating solely to a single eligible property and solely for an eligible purpose using liquid as a medium for delivering that heat;

(b) meets the requirements set out in whichever of the standards for solar thermal plants specified in paragraph 1(5)(a) and (b)“eligible purpose” means, in relation to heat generated by— […](b) a solar thermal plant, the purpose of domestic hot water heating for an eligible property;

An implementation of solar where there is even a theoretical possibility of the solar contributing towards space heating is completely excluded from the scheme.

The reasoning behind ruling out solar space heating was that the domestic RHI is “deemed” – the solar energy is not measured, instead it is estimated using an approved calculation and the calculation only works for domestic hot water.

However, by ruling out any solar installation that does not solely heat domestic hot water, the domestic RHI has made the combination of complementary renewable heating technologies such as solar and heat pumps less likely. Solar thermal has lower associated carbon emissions than any form of back up heater, so every unit of solar thermal heat that can be used, whether for space heating or domestic hot water reduces carbon emissions.

Configurations where the solar is offsetting a proportion of fossil fuel space heating are also disincentivised by their complete exclusion from the domestic RHI.

When installing biomass or heat pumps with a thermal store, the additional cost to add a solar coil into the store is very low, making the marginal cost of adding solar thermal more attractive.  The domestic RHI would provide greater value for money if it encouraged, rather than discouraged such systems.

So how could the domestic RHI be changed to include solar space heating?

Two Suggestions

Two options occur, though I’d be pleased to hear of any other suggestions (please use the comments section).

First, it would clearly be possible to use a heat meter to measure the solar input into the thermal store.  Solar space heating systems cost more than solar systems aimed only at domestic hot water.  A requirement to fit a heat meter would be a relatively smaller proportion of the total installed cost and energy benefits, and houses that can fit large thermal stores are relatively thin on the ground, so it wouldn’t be too much of a cost for the scheme administrators to deal with the meter readings.

A second approach would be to allow space heating systems onto the scheme but to give RHI payments only for the domestic hot water energy provided, and calculate this with the current deeming method.  I’ve looked at this with the help of two years'  of data from a solar space heating system provided by Geoff Miller of GreenLincs Energy.  Simulations have also confirmed that the solar energy generated by a system providing solar space heating and domestic hot water is always higher than the same sized system targeted at only domestic hot water.  The RHI wouldn't be over-paying for solar heat.

The best outcome would be for it to be the choice of the homeowner whether or not to go to the expense and hassle of having a heat meter.  If they wanted the extra payments for space heating, then they would need to install a heat meter, otherwise they could claim for only the solar heat in their domestic hot water.

This has formed the basis of a proposal submitted to the Department of Energy and Climate Change (DECC) yesterday outlining how the scheme could be improved by allowing solar space heating.

Replace or Refurbish?

What to do with older solar heating systems 

It could be so much better



I've been getting correspondence from solar installation businesses asking what the domestic RHI might mean for older solar systems, specifically ones that were never entered onto the Microgeneration Certification Scheme (MCS) when installed.  Is there any way for these to claim the Domestic Renewable Heat Incentive (RHI)?

Can you just inspect that the solar heating system is compliant with the current MCS scheme, re-commission it and register it as if you've just installed it?

Do you have to rip it out and put in a whole new one?  Would even this be allowed on the scheme?

Setting aside the fact that the intent of the dRHI was to stimulate new installations of renewable heating, and that finding a way to register an existing (and potentially working) system is not really in the spirit of things, let's have a look at the regulations and see what they have to say about it. 

MCS

A review of the MCS standards (MIS3001 and MCS 004) finds that they are silent on whether the equipment used when installing a solar system must be brand new to be registered with the scheme. The implication is therefore that an installer could go through the standard line by line to ensure that the existing installation is compliant, making changes to components as required and registering the system on the MCS database.  In effect the installer is building a system from ‘second hand’ parts, some of which happen to already be on site and fixed in place.

However, just getting MCS registered does not mean you can get the domestic RHI.  It's also necessary to comply with the eligibility requirements of the RHI scheme itself.

Domestic RHI

The domestic RHI legislation has now been laid in parliament, so it’s possible to see the basis that OFGEM will be using to create the scheme rules.

The relevant section of the domestic RHI regulations is on page 12 in section 9:

Plants used to generate heat before the first commissioning date9.—(1) The requirements referred to in regulation 3(b) are that no part of the plant which generates heat, other than any of the components listed in paragraph (2), was used before the plant’s first commissioning date.(2) The components referred to in paragraph (1) are—(a) immersion heaters and other components which solely generate heat for the purpose of heating domestic hot water;(b) supplementary electric heaters; and(c) circulation pumps.

From the above it seems that so long as the heat generating part of the installation is new, then other parts of the heating system can be re-used.  This makes sense – it would be crazy to insist that a new biomass boiler installation also had to replace all of the connecting pipes, radiators and hot water cylinder in the home.

In relation to a solar thermal system, the parts of the plant that can generate heat are:

1. Solar Collector
2. Pump
3. Immersion heater in cylinder

Items 2 and 3 are specifically excluded in the regulations.  It seems to me that to modify an existing solar thermal installation so that it is eligible to join the domestic RHI scheme, it is necessary to change the solar panels, but that all other components could be re-used.

Have I missed something?

Domestic RHI Regulations Laid Before Parliament

58 Pages of Pure Reading Pleasure

The Regulations for the domestic RHI were laid in parliament yesterday, a significant step towards the imminent launch of the scheme. 

You can read them here:

As a result, some remaining points of clarification for solar thermal on the scheme have now been made public:
 

• Solar for space heating / indoor swimming pools are not eligible, in fact solar DHW is not eligible if it is combined with space heating or swimming pool heating.

• Air heating  (transpired) solar panels are not eligible.

• Hybrid PV-T panels are not eligible.

• The regulations refer to version 1.0 of the MCS deeming calculation (MCS024) and not the most recent version 1.1, this means that the MCS standard is immediately out of synch with the RHI and it omits the Incidence Angle Modifier from the deeming method, putting evacuated tube collectors at a disadvantage.

I suspect that the solar industry might be most aggrieved by the fact that a solar system that heats an indoor swimming pool is ineligible.  Setting aside the politics of envy, swimming pools are an ideal application for solar heating, the low temperature of the pool meaning that panels operate at higher efficiency than when preparing domestic hot water alone. 

Under the rules published yesterday, if a solar system is installed to prioritise domestic hot water with a divert to a pool once the hot water is satisfied, then the renewable heat for the domestic hot water is also ineligible.  This creates a perverse incentive to install the solar system as two separate systems, one for the pool and one for the hot water.

A simple way to deal with a complex system such as this would be to allow the owner to opt to meter heat rather than deeming it.

The scheme is not set in stone and there will be opportunities to amend it over time.  However, if the Department of Energy and Climate Change (DECC) is going to expend resources to do so, then the industry is going to have to build a strong case to support the argument that any prospective change is worth the cost and trouble. 

Should any of these omissions from the scheme concern us?  What do you think? 

 

 

 

 

The Future of Energy Bills

Getting to an inflation rate for domestic energy

Electricity generating renewable energy technologies have been sold as financial investments as much as energy saving products since the Feed in Tariff was launched in the UK.  These financial returns can be very sensitive to assumptions about the future of electricity costs.

The Department of Energy and Climate Change (DECC) has revealed that its own modelling is based on an assumed of electricity cost inflation of 2.6% a year over and above general price inflation (this figure is called the real rate of inflation).  Responsible industry bodies such as the Solar Trade Association have used this rate of inflation for calculating the financial returns from solar photovoltaic systems.

In 2014 a range of renewable heat generating technologies such as heat pumps, wood pellet stoves and solar heating panels will benefit from a ‘Feed-in tariff for heat’ called the domestic Renewable Heat Incentive.  In presenting the financial case for these technologies, industry will need credible assumptions of future costs for domestic gas and heating oil as well as electricity.

Where has the 2.6% figure come from for electricity?  What are the equivalent values for heating oil and for gas?

The Past as a Guide to the Future

No one has a crystal ball to know about price rises in future, so it’s common to substitute a simpler question “What have energy price increases been in recent times?”

DECC publishes data collected by the Office for National Statistics in compiling the Consumer Prices Index (CPI).  The table below shows prices of various fuels for the most recently published data range that covers the fourteen years from 1998 to 2012.

source:  https://www.gov.uk/government/statistical-data-sets/monthly-domestic-energy-price-stastics

The chart at the top of the page shows the prices from the table rebased to set prices in 1998 to 100.

General inflation increased costs by 37% over the whole for the fourteen-year period.  It can be seen that all energy costs have risen by much more. Electricity has risen by 100% in the same time, gas by 195% and heating oil by 428%.

What can also be seen is that prices have not risen steadily.  Fuel oil prices in particular are volatile with prices falling back before rising steeply again.  Any measure of fuel inflation is therefore very sensitive to the choice of start and finish date of the period considered, a fact that can be used by those who want to present a biased picture.  For example choosing a period from 2000 to 2009 produces a real inflation rate of 4.7% a year for heating oil, whereas selecting 1998 to 2008 yields an eye-watering 14.3%.

If our goal is to assess an unbiased and justifiable inflation rate for industry to use to present financial to potential customers, then we need to make sure that we're not open to such criticism.  I calculated the real rate of inflation for each and every start and finish date possible in the data set. 

The chart below shows the resulting rates of real annual inflation plotted against the length of the period for domestic electricity prices. 

Predictably, the shorter the period considered the wider the range of results, which narrow as the period covered lengthens.  Also shown on the plot is the average for each period length (diamond shape).  The best fit line for the averages is a real rate of inflation of 2.8%, an identical figure to that used by DECC for forecasting future price changes of electricity.

The analysis was repeated to produce a real rate of inflation of 5.8% for gas and 8.5% for heating oil.

Based on this analysis of government statistics, the rate of energy price rises above inflation can be summarised as:

Fuel Type	Real Rate of Inflation
Electricity	2.6%
Gas	5.8%
Heating Oil	8.5%