What is the Feed-in Tariff?
The Feed-in Tariff (FiT) is a government subsidy scheme launched following the Energy Act 2008, to allow growth in electricity generation from green microgeneration technologies, (which if unsubsidised are otherwise more expensive than the current solutions). The UK Feed-in Tariff model closely mimics the German StrEG FiT scheme of the 1990s which encourages household and industry microgeneration of electricity using renewable technologies. To be eligible for feed-in tariff payments in the UK, installations need to have a declared net capacity of 5MW or less. In the past, installations with a declared net capacity of between 50kW and 5MW made the one-off choice of whether to use the FiT or the renewable obligation scheme. This has now closed to new applications.
The following low-carbon, renewable technologies are eligible for Feed-in Tariff payments:
How do feed-in tariffs work?
The FiT scheme provides a subsidy to any household or businesses that generates its own renewable electricity. This payment is funded by an small increase in people’s energy bills. Payments are based on your meter readings and paid by your energy supplier. The subsidy is an enabler for small scale renewable and low-carbon technologies to compete against the traditional fossil fuel forms of electricity generation. In the case of solar PV, wind power and Micro-CHP, to be eligible under the FiT scheme, your installer needs to be registered under the Microgeneration Certification Scheme (MCS), and the product installed also needs to be MCS certified. If you are installing hydroelectric or anaerobic digestion you will need to apply for ROO-FIT accreditation.
The tariff payments depend when you get the renewable technology installed and, in the case of solar PV, the payment amount is also dependent on the EPC rating of the home where the installation is due to take place. Payments are guaranteed for a period of 20 years and 10 years for micro CHP. Once you register at a point in time, the subsidy will be available to you for the duration of that time.
Until 2015, the Feed-in Tariff meant that solar PV systems could pay for themselves within as little as a couple of years, and any payments claimed after that were profit. This is no longer the case, as rates have dropped considerably. Payments may be index-linked, so from time to time they are adjusted to the RPI, and are regularly reviewed by the government. There are three parts of the Feed-in Tariff to consider:
The Generation Tariff
A payment made for every kWh of electricity produced, regardless of whether this is sold back to the grid or used in the home and this payment is guaranteed for 20 years. A generation meter determines the amount of electricity you produce and each quarter you give this reading to your energy supplier who will then send you a cheque through the post. This payment is guaranteed for 20 years (except micro CHP, which is only guaranteed for 10 years).
For commercial Solar PV systems, there are 3 different generation tariff rates depending on the circumstances of the system. Most businesses will get the full generation tariff (i.e. the tariff as advertised for that size of system). If however, the system provides power to a building with an EPC ‘E’ rating or lower, you will receive what is called the ‘lower’ generation tariff rate.
A ‘Medium Rate’ at 90% of the higher rate is payable where the owner has 25 feed in Tariff registered solar systems or more.
The Export Tariff
The export tariff is payment made to you for every kWh of electricity exported back to the grid.
Unfortunately, (for now at least) the UK’s National Grid does not have the technology to store energy , so needs to be used as it is produced; therefore if you are not in the property when the electricity is being produced it will automatically be exported back to the grid. In some instances properties have an export meter attached to their renewable installation, so an accurate assessment can be made with regards to the amount of electricity exported; however normally there is no export meter and it is assumed you export half of the electricity back to the grid regardless of whether this is the case or not!
This can work in your favour if you are using more electricity in your home than you are exporting to the grid, however if you are going to be exporting more than 50% back to the grid it is imperative you do install the export meter – for more details on why this is the case please visit here.
Savings on electricity bills
Every kWh of electricity that you create yourself and then use in your home means that you don’t need to buy that unit from the electricity company. Electricity is currently priced at about 15 pence/kWh when you buy it from any of the big six energy companies, so the more electricity you produce and use in your home, the more you save.
Feed-in tariff registration
In practice in the UK, the big six energy companies (British Gas, EoN, SSE, Scottish Power, EDF and NPower) are required by law to provide the FiT payments to homes and businesses. Other smaller electricity suppliers may not offer FiTs payments as it is not compulsory for them to do so. The full list of registered FiT licensed suppliers is available on the OFGEM website here.
Once you have the product installed through the MCS, you should receive a certificate confirming MCS compliance. Speak to your energy company (e.g. one of the big 6) that is approved for FiT payments – express your interest in receiving FiT payments. Your supplier will confirm your eligibility, cross checking your details to the MCS database. On confirmation of FiT payments your details will also be added to the OFGEM Central FiT Register.
You may also need to agree a process for meter reading and whether you want to opt out from export tariffs. An important point to note is that it is far more economical to use as much of the electricity you produce in the home as you can, rather than selling it back to the grid. Using a kWh of the electricity you produce in your home saves you buying it from the energy suppliers at 15p, while you can only sell it back to the grid for 4.77p.
How the FiT varies for different technologies
The Generation Tariff
This tariff is paid on the total amount of energy generated by the renewable energy source. The rate depends on the technology and the size of the system. You can find the latest rates for each technology here. These have been set provisionally until 2019, and are steadily dropping. Here are the current rates (1 October 2017 to 31 December 2017) for the smallest eligible capacity of each technology:
- Anaerobic digestion – capacity of 250kW or less – 8.26 per kWh
- Hydroelectric – capacity of 100kW or less – 7.78p per kWh
- [Higher rate] Solar PV – capacity of 10kW or less – 4.00p per kWh
- Micro CHP – capacity of 2kW or less – 13.95p per kWh
- Wind – capacity of 50kW or less – 8.33p per kWh
The Export Tariff
These are additional payments for every kWh of surplus electricity generated and exported back to the grid. When the electricity is sold back to the energy company, this can be then sold back again to another customer. The export tariffs is fixed and currently set at 4.91p/kWh for all renewable energy sources. The amount is index linked and is periodically adjusted for inflation.
In January 2015, there were some big changes to the FiT. As well as a general drop in rates, caps were also introduced to limit the overall amount that could be claimed for each technology. Essentially, these mean that once a certain number of payments have been claimed within the quarter, rates for remaining claimants will drop. Therefore, you can now expect to receive comparatively less money than in previous years.