Feed In Tariff
Feed-In Tariffs were introduced in April 2010 to provide financial incentives for individuals and businesses to install renewable energy generating technologies such as solar electricity panels and wind turbines. It does this by guaranteeing a minimum payment for the electricity generated, as well as any electricity exported to the grid.
What are the options for installation?
It’s worth noting that there are two types of panel; Solar Photo Voltaic and Solar Thermal. Solar PV generates electricity and solar thermal heats up water. The Feed-in Tariff relates only to solar PVs and there are two ways to go about it.
You can fund the installation of the panels yourself. This involves upfront capital and you are guaranteed a Feed-in tariff for 20 years. The cost of installation will depend on the size of the installation and can vary from £8-£25,000. The payback is usually around 8-10 years (usually dependent on the orientation of the roof) after which you should make a healthy return on investment until the 20 years is up.
If you are eligible to receive FITs you will benefit in three ways:
Generation tariff: your energy supplier will pay you a set rate for each unit (or kWh) of electricity you generate. Once your system has been registered, the tariff levels are guaranteed for the period of the tariff (up to 20 years) and are index-linked.
Export tariff: your energy supplier will pay you a further rate for each unit you export back to the electricity grid, so you can sell any electricity you generate but don't use yourself. At some stage smart meters will be installed to measure what you export, but until then it is estimated as being 50 per cent of the electricity you generate (only systems above 30kWp need to have an export meter fitted, and a domestic system is unlikely to be that big).
Energy bill savings: you will be making savings on your electricity bills because generating electricity to power your appliances means you don’t have to buy as much electricity from your energy supplier. The amount you save will vary depending how much of the electricity you use on site.
The second way of installing Solar PV is to work with a company who will entirely fund the installation – essentially the club is leasing its roof to the company. They will then sell you the electricity you need for about half the price you usually pay. The company then gets the Feed-in Tariff.
What other eligibility criteria is there?
For you to qualify for FITs, the installer and the products you use must both be certified under the Microgeneration Certification Scheme (MCS). The tariffs you receive depend on both the eligibility date and, for solar PV, your property’s Energy Performance Certificate (EPC) rating (the building to which the system is connected must be in an energy efficiency band between A and D as evidenced by the most recent Energy Performance Certificate, which must be no more than 10 years old.)
What is changing with the Feed-in Tariff scheme?
The generous initial rates of FIT meant that the uptake of solar panels was faster than expected so the government is planning to reduce FIT rates from 1 January 2016 by as much as 87%. For example, for the 4kWh band, the generation tariff will reduce from 12.92p to 1.63p p/kWh.