Solar feed in tariff is to decrease in April

UPDATE: The Feed-In Tariff is now closed for new applications. To find out about the new scheme designed to replace it, click here.

If you are familiar with some of the content on TheGreenAge, you will know that the feed in tariff is a government backed payment made to properties for producing their own electricity. If you have a renewable electricity generating system installed you get a guaranteed payment for 20 years (provided the install was carried out by a MCS certified installer), fixed from the point you install and apply for it.

This is the time of year when the feed in tariff is reviewed and usually reduced, to keep the rate of return on a solar PV system in line with the falling prices of solar systems available in the market. You can now buy a 4 kW system for around £6,000 if you shop around; this means a typical return on investment of just 8 years or so, whereas when the tariff first started, prices of systems were nigh on double that figure, so the payback took a little longer (although the FIT payments were considerably higher!)

You will not be surprised to hear then that the Government have scheduled a FIT drop for the end of March – so your quarterly payment will drop.

What does the rate cut in the Feed-in tariff actually mean?

The reduction is relatively small, with the current rate of 13.88p/kwh being reduced to 13.39p/kwh. This is fairly similar to the other reductions that the market has seen over the last few years, and it certainly won’t stop people from getting solar installed. What it does do is create a big drive to install systems before the rate cut, and installers will be very busy in the next few months getting systems installed before the rates reduce.

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Whilst they see it as a good marketing opportunity, the reduction itself is small at around 3 per cent. So while it is better to plan your installation for March rather than April, you shouldn’t be rushed in to something with the thought you might lose out. That small percentage reduction equates to something like £10 a year for a typical system, so it’s not a reason to change your solar plans.

How much can I expect from the feed in tariff?

With the new tariff rates you can expect the following amounts in your first year:

What does the tariff change mean for payback?

This small change really means very little for the payback time on a system. You are still looking at a payback period of around 8-10 years, depending on the size and price of your system.