Edie explains: Feed-in Tariffs
In this week's 'edie explains' we take a look at the renewables subsidy Feed in Tariffs (FiTs). Although the small-scale focus of the scheme means it's very popular for domestic buildings, it can also benefit many SMEs.
What is the FiT scheme?
Feed-in Tariffs were introduced in the UK on 1 April 2010 with a view to helping the UK meet its legally-binding target of 15% of total energy from renewables by 2020 (up from under 2% in 2009). They are open to households and community groups in England, Scotland and Wales (but not Northern Ireland).
The FiT scheme is a government programme introduced to help renewable electricity generators overcome the cost disadvantages of installing and operating renewable energy technology.
If a householder, community or business has an eligible installation (less than 5MW), FiTs pay them a subsidy for the electricity they generate, as well as a bonus for any electricity exported back to the grid.
How much would I receive?
The FiT rates vary depending on the technology, but on average a business or home can expect an annual ROI between 5-8%. For example, a typical 3.5kWp system in central England costing £7,000 will earn about £586 a year.
The payments - which are paid for through a levy on all consumers' energy bills - are guaranteed by the government.
Am I eligible for a FiT?
Any organisation or community is eligible to apply for a FiT for systems with a capacity up to 5MW. Most domestic technologies qualify for the scheme, as long as they have less than 5MW capacity, including:
- solar electricity (PV)
- wind turbines
- anaerobic digesters
- micro combined heat and power (CHP)
FiTs or ROCs?
The FiT scheme is set up to complement the Renewables Obligation Certificat (ROC) which is the support mechanism for large scale generation. (Watch this space for another 'edie explains' on ROCs...)
If your generation capacity is above 50kW but below 5MW, you need to decide between a FiT scheme or ROC. One big difference between the two is that ROCs can vary with market forces, but FiTs are fixed and index-linked.
What was the controversy?
When it was first launched, the FiT rate for solar PV was a generous 43.3 p/kWh. But due to its success and the falling cost of solar panels, F9T rates for new installations were halved in August 2012 to their current rate.
The government now reviews the FiT rates on a regular basis, and applies a 'degression mechanism' which will reduce the tariff if installation costs continue to fall.
In response to the tariff cut, 17 solar companies tried unsuccessfully to sue the government, because of the 'sudden and precipitous fall in solar panel uptake'.
Where can I find out more?
Ofgem, which are administering the FiT scheme on behalf of the Department for Energy and Climate Change, have published specific guidance on their website.