Feed In Tariffs (FiT's)

The UK Government has today (February 1st 2010) released details of the Feed in Tariff (FiT) scheme for the UK — which they hope will act as a driver for an increased uptake of renewable energy systems as well as changing the way we think about energy, with a view to reducing demand.

The UK currently gets about 5.5% of its electricity from renewable sources and, in order to hit green targets in 10 years' time, this would have to rise to 30%.

The feed in tariffs scheme guarantees a set fee payable for the electricity generated and an additional rate for electricity exported back to the grid for a set period of time, which is linked to the type of technology employed.
Small-scale low-carbon electricity technologies include:

• Wind;
• Solar Photovoltaic (PV);
• Hydro;
• Anaerobic digestion;
• Biomass and biomass combined heat and power (CHP); and
• Non-renewable micro-CHP.

To try and facilitate the required rise in the use of small-scale low-carbon energy systems, the following generation rates for energy have been announced.

There is a belief that the increased certainty that this scheme will provide will encourage individual households, communities, businesses, schools, hospitals, universities and a host of other organisations to consider installing small-scale low carbon electricity generation technologies on their buildings.
Greater deployment of small-scale low-carbon technologies will:

• Engage communities, businesses and domestic households
  in the fight against climate change;
• Reduce reliance on centrally generated electricity;
• Increase security of supply; and
• Reduce losses through transmission and distribution networks.

It is expected that by 2020 the scheme will support over 750,000 small scale low carbon electricity installations and will have saved 7 million tonnes of carbon dioxide.
The general belief is that solar PV is going to be the most popular technology within the residential and commercial construction sector. Regarding the differing tariffs for different PV installations:

• 'New build' will apply to systems integrated into new buildings.
• 'Retrofit' will apply to systems mounted to existing buildings.
• 'Stand alone' relates to systems that are installed primarily to feed power into the grid, without much of the energy being used on-site.

The Government has proposed the above fixed payment from the electricity supplier for every kilowatt hour (kWh) generated for a period of 10-25 years depending on the technology utilised. In addition, for PV installations there will be a guaranteed minimum payment additional to the generation tariff of 3p for every kWh exported back to the grid, although customers can opt out of the export tariff and sell their electricity on the open market if they wish.

Generators receiving FiT’s will also benefit from on-site use; where they use the electricity they generate on-site they will be able to offset this against electricity they would otherwise have had to buy from their energy supplier, which would cost approximately 13p per kWh.

Installations prior to the 15th July 2009 which are accredited under the Renewables Obligation will be eligible for the FiT and will receive a generation tariff set at an approximately equivalent level to the value of their previous Renewables Obligation transfer rate i.e. not the full tariff.Any generating stations eligible for FiT’s where installation is completed after the 15th July 2009 and before the start of the FiT’s scheme will be able to benefit from FiT’s as if the installation had been completed on the start-up date of the scheme providing the technology is accredited under the Renewables Obligation, or the installation is MCS compliant.
In all cases, wind, solar PV and hydro projects of 50kW or less, and micro CHP projects supported through the pilot, will have to use MCS accredited products installed by MCS accredited installers to be eligible for FiT’s support.

Scheme Dates and Degression

You can join the feed in tariff scheme anytime on or before the 1st April 2010 and the 31st March 2021, and depending on which year you sign up the generation rate will be different for the lifetime of your tariff; please see the below table of agreed generation rates.

Click here to see the Table of Generation Tariffs to 2020

Accordingly, the tariffs that are available for new installations (for PV and certain wind installations) will “degress” each year, where they reduce to reflect predicted technology cost reductions to ensure that new installations receive the same approximate rates of return as installations already supported through FiT’s. Once an installation has been allocated a generation tariff, it remains fixed (though will alter with inflation) for the life of that installation or the life of the tariff, whichever is shorter. The degression rate has been set at an average of 9% each year, although the first reduction has been deferred for an additional year up until April 2012.

Additional Information

Additional key points of the Feed in Tariff:

• The income from the FiT is tax free for individuals to provide an additional incentive.
• All rates for FiT are linked to the Retail Price Index.
• Expected rates of return in real terms are 5 –8%. However, taking into account the link to the Retail Price Index this is more likely to be 7-10% in nominal terms.
• Large electricity generators will be legally obliged to provide FiT’s to all its customers who apply.
• Off-grid electricity supply will be eligible for FiT’s, replicating the procedures currently used under the Renewables Obligation requiring customers to declare that the electricity generated has been used and that they comply with the scheme requirements in relation to metering.
• Multiple technologies on a single site will receive multiple tariffs.
• FiT’s will be available for Zero Carbon Homes and also will be promoted under the new non–domestic buildings policy currently under consultation.
• The Government has withdrawn the grant scheme of £2,500 for PV early (4th February) but has transferred the money to other technologies.  Click here to go to our grants section for more information.

The UK Government is committed to having FiT’s in place in from April 1st 2010 and the scheme is being set up to run for 25 years
.
More Information

For more information please see the full response to the consultation document prepared by the Department of Energy and Climate Change, as well as a presentation on the key issues raised by the consultation; and if you have any questions please contact us at enquiries@sigss.co.uk or call us on 0845 873 8612 between the hours of 8.30am – 5.30pm Monday to Thursday and 8.30am – 5.00pm on Fridays.

• FiT Explained - Key issues raised by the FIT consultation (pdf 928kb)
• FiTs - Government Response to the Consultation

For more information on government strategies and legislation concerning renewable energy, please see the below documents and visit the legislation section of our website:

• The UK Low Carbon Transition Plan (pdf 5meg)
• The UK Renewable Energy Strategy 2009 (pdf 3.8meg)