Thomas Edison 1931
Feed In Tariff (FIT) | Feed in Tariffs Explained
From the 1st of April 2010 the UK feed-in tariff scheme came into effect. This form of incentive has been tried very successfully in other markets. Notable successes have included Germany, Spain and Australia.
There has been a lot of press in recent months about the feed-in tariff due to changes to the tariffs. In essence the fund was running out and therefore the tariffs needed to be reduced for the longivity of the scheme. Now all these changes have filtered through, we have found that material costs have been dramatically reduced. This has meant the average return on investment is now around 9%, STILL a very healthy return.
The UK scheme has the following main points
- Generation tariff- A fixed fee for each kW hour produced
- Export tariff- Can sell electricity produced in addition to receiving fixed payment
- Use of electricity- The electricity produced can be used on site instead of being exported
- Tariffs guaranteed for 20 years
- Tariffs index linked
- Funded via levy on all electricity bills
- Must be MCS compliant to receive tariff (GHE Solar are MCS registered)
|Scale||Rates as at 1st November 2012||Duration of tariff|
|≤4 kW (new build)||15.44p/kWh||20 years|
|≤4 kW (retrofit)||15.44p/kWh||20 years|
|>4-10 kW||13.99p/kWh||20 years|
|>10-50 kW||13.03p/kWh||20 years|
|Stand alone system||7.1p/kWh||20 years|
The above table shows the rates that will be paid under the generation tariff. This is a fixed rate that a generator will receive for every kilowatt hour of renewable energy generated regardless of where the energy is used. To measure the generation there must be an OFGEM approved total generation meter connected to the installation.
These rates are fixed for the duration of the tariff at the date the installation is registered. The installation can be registered as soon as they are completed. Once the installation is registered the rate is legislatively guaranteed for the duration of the tariff.
This is a fixed price per kWh for the surplus amount of energy which is sent back to the electricity grid. This is measured by an onsite export meter and the generator receives the export tariff payment in addition to the generation tariff payment. The sale price of the excess electricity generated by a large installation can be negotiated with the energy provider. There is a government guaranteed minimum of 3p per kWh. Energy providers are quoting higher rates than this at present. This is because this renewable energy goes towards the renewable targets providers have been set. It is possible to opt in and out of the guaranteed minimum on an annual basis.
Use of energy on site
The energy can be used on site at schools and commercial premises instead of being exported. The current average energy price is 12p per kWh. This means that it is more efficient to use the electricity on site rather than export it. The schools or commercial premises will be using electricity during the day when the arrays are generating. All of the electricity generated can be used at the site with any residual sold at the export tariff.
Tariffs fixed for 25 years
Once the installation is compete and registered the rate is fixed for the duration of the tariff. For PV arrays the duration of the tariff is 25 years. This applies to the minimum export tariff and the generation tariff. This is a term guaranteed by the government and paid by the registered energy suppliers. The site needs to be registered on the central FITs register. This is done through OFGEM by the installer.
Tariff index linked
The export tariff and the generation tariff are both index linked. The fixed rate will be increased each year in line with the RPI. The level of the RPI is defined as the RPI change in the 12 months preceding the year to 31st December. The first years RPI change was nearly 5%.
Funded via levy
The scheme is not funded from the treasuries purse and as such is not a target for spending cuts. The scheme requires that the tariffs are paid for by registered energy providers with in excess of 50,000 customers. They pay amounts equal to each company’s share of the market into a fund and the tariffs are paid from that fund. The energy providers then apply a green levy to all energy bills to recoup costs. The fund is guaranteed by the UK government. There is however a fast track review at present for arrays over 50kWp. The idea of this is to reduce the tariffs over this level to stop large ground arrays.
In order for the installation to be eligible for the Tariffs the installation must be MCS compliant. This means that the installer must be MCS registered. MCS are the regulatory body. GHE Solar are MCS registered for PV and solar thermal.