FeatureFeed-in Tariffs

Feed-in Tariffs (FITs) are a new UK government policy (also known as the "clean energy cash back" scheme), introduced in April 2010 to incentivise small-scale, low carbon electricity generation.

Feed-in Tariffs (FITs) are a new UK Government policy that provide a financial incentive to install small-scale renewable energy systems, such as photovoltaic (PV) panels.

FITs will help the government meet its target of sourcing 15% of UK energy (electricity, heat and transport) from renewables by 2020. FITs will work alongside the Renewable Obligation Certificates scheme, which incentivises large-scale renewable energy projects. A Renewable Heat Incentive (RHI), to incentivise generation of heat from renewable sources at all scales, will go ahead in 2011.

The Department of Energy & Climate Change (DECC) hopes FITs will encourage deployment of additional low carbon electricity generation, particularly by organisations, businesses, communities and individuals who are not traditionally part of the electricity market.

The FITs scheme replaces previous public grant schemes and a generator cannot usually benefit from both FITs and a public grant.

Covers small-scale renewables (<5MW)

Energy utility companies will make FITs payments to generators of less than 5 MW of energy, produced via:

  • Photovoltaics (PV)

  • Wind Turbines

  • Hydroelectricity

  • Anaerobic Digestion

  • CHP (<2kW)

Tariff payments

FITs rewards the amount of energy generated, whether you consume the electricity or not (Generation Tariff). There is an additional payment for unused electricity exported back to the grid (Export Tariff).

Generation Tariff

Energy utilities will pay a Generation Tariff payment for each kWh of electricity generated, according to installation size and technology used. Payment rates remain at the installation tariff rate for 25 years for PV, and 20 years for other renewable energy technologies. Table 1 shows the current Tariff rates by technology.

Export Tariff

Utilities will pay owners 3 pence per kWh exported back to the national grid, in addition to the Generation Tariff.

Guarantees

The government guarantees FIT payments for PV for 25 years. These are also index linked. PV manufacturers are guaranteeing their products for 25 years, and some technologies have proven life spans of 30-40 years.

Table 1: FIT rates by technology

Small Scale Renewable Technologies covered by the FIT

 

System size

 

 

Generation
 Tariff

(for April 2010 to March 2011*)

 

Export Tariff

 

 

 Tariff lifetime
(starts on the date of installation, and remains fixed at that rate for the number of years shown below)

Photovoltaics

≤ 4 kW (retrofit)

41.3 p/kWh

3 p/kWh

25 years

 

≤ 4 kW (new build)

36.1 p/kWh

3 p/kWh

25 years

 

4 to 10 kW

36.1 p/kWh

3 p/kWh

25 years

 

10 to 100 kW

31.4 p/kWh

3 p/kWh

25 years

 

100 kW to 5MW

29.3 p/kWh

3 p/kWh

25 years

 

Stand alone system

29.3 p/kWh

3 p/kWh

25 years

Wind

≤ 1.5 kW

34.5 p/kWh

3 p/kWh

20 years

 

1.5 to 15 kW

26.7 p/kWh

3 p/kWh

20 years

 

15 to 100 kW

24.1 p/kWh

3 p/kWh

20 years

 

100 to 500 kW

18.8 p/kWh

3 p/kWh

20 years

 

500 kW to 1.5 MW

9.4 p/kWh

3 p/kWh

20 years

 

1.5 to 5 MW

4.5 p/kWh

3 p/kWh

20 years

Anaerobic digestion

≤ 500 kW

11.5 p/kWh

3 p/kWh

20 years


≥ 500 kW

9 p/kWh

3 p/kWh

20 years

Hydro

≤ 15 kW

19.9 p/kWh

3 p/kWh

20 years

 

 15 to 100 kW

17.8 p/kWh

3 p/kWh

20 years

 

100 kW to 2MW

11 p/kWh

3 p/kWh

20 years

 

2MW to 5MW

4.5 p/kWh

3 p/kWh

20 years

Micro CHP

≤ 2 kW

10 p/kWh

3 p/kWh

20 years

Degression

After April 2012, the government will reduce the Generation Tariff rate slightly every year. Degression encourages earlier installation of renewable electricity systems.

How the FIT scheme is funded

All consumers pay fractionally higher annual electricity charges, providing the electricity utilities with funds to make the FIT payments.

Micro-generation Certification Scheme Certification

Renewable energy installations must be certified by the Micro-generation Certification Scheme (MCS) and the installer must be MCS accredited.

Energy Service Companies (ESCOs)

ESCOs are organisations which pay for installation and maintenance of PV systems, at no cost to the customer. In return the organisation takes the benefit of the FIT payments.

 

Getting FIT payments

  • Find an MCS certified installer to do the installation.

  • Upgrade electricity metering to record what the renewable energy system generates.

  • Inform your utility that you are eligible for the FIT; agree payment schedule and whether meter readings needed.

 

Benefits of the FIT scheme

  • Good rate of return on investment (8 to 10% p.a.) based on payments for energy generated and reduced energy bills.

  • More stable energy costs for 20-25 years.

  • Security of supply. Critical systems can be made more secure with site-based generation capacity.

  • Increases property value. FIT payments run with the property, so if a building with a PV array installed in 2010 is sold in 2012, the new owner will continue to get the benefit of the FIT Generation and Export Tariff payments.

  • Lower CO2 emissions than conventional grid sourced electricity, helping meet Carbon Reduction Commitment and corporate responsibility obligations.

Author

Sean Lockie Director - Carbon+SustainabilityContact me

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