Feed-in Tariffs, also known as FITs, are a government-backed scheme to encourage households to move to renewable energy to power their homes. The FIT scheme allows households to reduce their carbon footprint, reduce the cost of energy bills, live more self-sufficiently and to earn money.
On 31st October proposed changes were announced for the Feed in Tariff in the UK, we will keep you up to date with all the latest information and rates.
The FIT scheme is one part of the Clean Energy Cashback scheme; the second part is the Renewable Heat Incentive (RHI). The schemes have been introduced to encourage more households and businesses to move their energy supply to renewable sources to help the UK reach its target of 15% of energy coming from renewables by 2020. This target is part of the EU target and is a legally binding commitment that the government is taking very seriously. In 2009 renewable energy only made up 2% of all energy consumption in the UK, so there is quite a way to go!
What is the benefit of FITs?
There are three financial benefits for households or businesses:
1. A payment is made for every unit of electricity produced.
2. An additional bonus payment is made for all electricity that is sent back to the grid.
3. Energy bills are reduced in cost, as the property is able to make use of the energy that it is producing.
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Who can take advantage of the FITs scheme?
The FITs scheme is designed to be available to almost everyone; households, landlords, businesses and even certain organisations such as schools.
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What type of renewable energy is eligible?
Most types of renewable energy are included and backed by the scheme, it covers systems that generate up to 5 megawatts, which would be enough for a large factory.
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How do the generation tariffs work?
The main element of the FIT scheme is the generation tariff, this is based on the total amount of energy produced by the system whether used by the property or sent back to the grid. A fee is paid for each kilowatt-hour produced, unless any energy is wasted, that energy will not be paid for.
The level of tariff paid depends on the type of system and the size. Most tariffs are for 20 years, with the exception of PV solar panels, which is guaranteed for 25 years and Micro-CHP, which is set for 10 years. The tariff amount also varies depending on whether it has been fitted to a new build property or a property that is already occupied.
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The Feed-in Tariff generation tariff until April 2012
These are the current UK Feed in Tariff rates:
43.3p per kWh generated for systems smaller than 4 kWp;
37.8p for 4-10kW systems;
32.9p for 10-50kW systems;
19p for >50kW - 150kW systems;
15p for >150kW - 250kW systems;
8.5p for >250kW - 5MW and stand alone installations.
In addition there is a bonus payment of 3.1p per kWh exported to the grid.
If a household or property has more than one source of renewable energy it is possible to have a feed-in tariff for each energy source providing it fits the eligibility. The sources would be monitored separately to measure their individual energy production.
Export Tariffs
It is also possible to receive payments for any electricity produced that is then sent back to the grid for use by the energy companies. A bonus is paid for every kWh sent back to the grid in addition to the generation tariff.
The export tariff is a set amount across all types of renewable energy. A 'floor price' is set each year as minimum payment, properties can accept this, opt out or choose to try and negotiate with their energy supplier to get a better rate. For the year starting April 2011 the 'floor price' was set at 3.1p/kWh.
In time, smart meters that will be installed in all properties signed up to the scheme that will measure the exports, but currently the export element is seen to be 50% of the power generated. If a property believes they are exporting more than 50% then they will be able to install a meter to monitor this.
Who pays for FITs?
The FITs scheme although backed by the government is actually paid for by the energy suppliers. The suppliers are able to afford this as they pass on this cost to all of their customers. There are exemptions to stop smaller companies having to match the amounts the larger suppliers are paying. The scheme is complex in its make-up to ensure it is fair across all companies. |
How often are the payments made?
The payments will depend on how you have set up your scheme, if your energy supplier for your evening electricity is the same supplier that is buying your energy then this will usually be settled within your energy bill. There are agents available that households and businesses can employ to manage any ongoing work for the system and to arrange collecting payments, this will of course be subject to a fee. |
- Taxation – Private Individuals
There is an exemption in place for private individuals, providing they are using renewable technology to generate electricity mainly for their own use. The exemption states that for both the generation tariff and export tariff the income will be exempt from income tax. |
- Taxation – Businesses
There is no exemption in place for businesses, therefore any income generated from the renewable sources must be declared as part of their taxable revenue. |
- Eligibility
There is important criteria that must be met to be eligible for the feed-in tariff schemes. One really important item to note is that the products and installer MUST be accredited under the Microgeneration Certification Scheme (MCS) if the system is under 50kW. For systems over 50kW there is an accreditation process called ROO-FIT, which is based on the Renewables Obligation. The basics of this are that Ofgem must accredit any system based on the designs and specifications before the system is installed.
It is possible for systems installed before the scheme was launched to be eligible for FITs. The feed-in tariffs scheme was launched in April 2010 so any renewable energy system installed after that date is eligible. The government has agreed that any systems installed after 15th July 2009 will also be eligible for the scheme. Systems installed prior to this date are only eligible if they were registered for the Renewables Obligation or did so before 31st March 2010; the tariff for these systems is lower though at a basic rate of 9p per kWh.
The following renewable energy sources are not eligible for the scheme; all refurbished and second hand equipment, biomass, landfill gas, waste-to-energy, power from liquid biofuels, tidal/wave power, geothermal energy and other 'innovative technologies'.
The scheme is still in its infancy and is likely to evolve over the following years. Any property that has signed up to the scheme will be guaranteed the same contract throughout the agreed period even if the scheme changes in the years to come. Feed-in tariffs are a great way to make your solar panels affordable over a period of time. |
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