What is a Feed In Tariff?

On 1st April 2010 the Government introduced the Feed-in Tariffs (FITs) to encourage new investment in low carbon green technologies such as Solar PV, Wind Turbines, Hydro Generators and Anaerobic Digestion (AD) units.

Under the FITs, anyone who installs an eligible Solar PV system will receive a guaranteed fixed payment for all the electricity they generate, including what they use, for a period of 20 years. They will also receive an additional payment for any electricity they don’t use that they feed back into the National Grid. To top it all off, people installing systems will also benefit from reduced electricity bills as they’ll effectively become their own power stations and so won’t need to use as much from electricity suppliers and the grid.

This means that there has never been a better time for you to install a Solar PV system. Not only will you be significantly reducing your carbon footprint, you’ll also be reducing your energy bills and getting paid to do it!

How are Feed In Tariffs paid?

Feed-in Tariffs are paid by electricity suppliers in one of two ways; either as a direct payment into your bank account or as a credit line to your energy bills. Although the FITs are a government initiative, the actual fund used to pay generators is paid into by electricity suppliers based on the proportion of the UK that they supply. Suppliers are recovering this cost through an increase in electricity bills to standard consumers, though this is estimated at only £3 extra per bill by 2016. This would be similar to the Climate Change Levy (CCL) currently added to UK energy bills.

How much will I be paid and what will I save?

The amount you are paid will depend on the size and type of system that you install as different technologies receive different amounts for different lengths of time. These payments are intended to give a certain percentage return each year based on the initial cost of a system. Solar PV has been given the highest rate of payment and so for the majority of people it is the best option. The exact amounts available for the different sizes of PV systems are detailed below:

Feed-in Tariff Rates Table

These feed-in tariff rates are paid for each unit of electricity generated, even if you use it in your own house/building. In addition to this if you have any excess electricity it can be exported back to the grid and you will get an extra 4.91p/kWh. This export can be measured by having an export meter installed by your electricity supplier, but in most cases this will not be financially worthwhile and so a deemed export amount of 50% will be used.

Are the Feed-in Tariffs here to stay?

Many other countries have successfully introduced FITs, as well as several individual states in the US, Canada and Australia. Examples of countries where FITs have worked well include France, Italy, Spain, Portugal, Poland, Czech Republic, Switzerland, Netherlands, Slovenia, Belgium, Slovak Republic, Latvia, Lithuania, Belgium, Greece, Bulgaria and Hungary.

One of the biggest success stories is Germany who have the largest PV market in the world and can also boast the world’s second and third largest solar farms in Strasskirchen and Lieberose. Germany’s solar generation capacity has grown exponentially since the first version of a Feed-in Tariff was introduced in 1990. Germany currently has over 8,877MW of installed solar generation capacity thanks to FITs.

The FITs were originally introduced by the Labour government but have since been backed by the coalition government who have pledged to ‘establish a full system of Feed-in Tariffs for electricity’. Chris Huhne recently told the Observer that the UK had no option but to speed up efforts to move away from oil. “Getting off the oil hook is made all the more urgent by the crisis in the Middle East. We cannot afford to go on relying on such a volatile source of energy when we can have clean, green and secure energy from low-carbon sources,” he said. “The carbon plan is about ensuring that the whole of government is engaged in a joined-up effort to lead us into a low-carbon world.”. The coalition government are currently undergoing a review of the FITs, but we are confident that this will not change the current levels too much, if they genuinely intend for the UK to meet its renewable energy targets, then microgeneration encouraged by the FITs is a key component of it being done.

Are Feed-in Tariffs beneficial to the wider economy?

The renewable sector in Germany employs over a quarter of a million people, whilst the UK sector is currently around 10,000. Renewable energy isn’t going away, it is a sector that will inevitably grow as fossil fuel prices increase and reserves inexorably decrease. Not only does the renewable sector provide jobs, it also produces taxes and profits that will help nourish the economy. As the initial investment comes from individuals and is not reliant on government funding, it is exactly the sort of fiscal stimulus the government keeps talking about to help Britain work its way out of the worst recession since the 1930s.

Before too long the electricity demand in the UK will outweigh the amount of energy we can produce. By empowering ourselves to be our own renewable energy generators we can help ensure that our energy needs for the future are being met without having to rely on depleting reserves of pollution-generating fossil fuels.