Feed-in Tariffs explained

Why are the Feed in Tariffs needed?

Renewable or 'green' electricity is generated from sources that release much less CO² into the atmosphere than the oil based energy we largely rely on. 

To encourage more people to generate their own electricity the Government created the Clean Energy Cash Back Scheme more commonly known as the Feed in Tariffs (FITs).  The Feed-in Tariffs (FITs) scheme is a subsidy, paid for by all consumers through a tiny addition to their energy bills, enabling small scale renewable and low carbon technologies to compete against higher carbon forms of electricity generation. The idea is that the income earned from the electricity your system generates helps you recover the cost of your initial investment over time. It is expected that the cost of producing renewable energy will reach 'parity' with oil based production in the next few years.

So how do the FITs work and what are the benefits?

There are three elements to the FITs

1. Generation tariff: the electricity supplier of your choice will pay you for each unit (kilowatt) of electricity you generate even if you use all the electricity in your property.
2. Export tariff: Energy that your property doesn't consume will be exported to the national electricity grid. You will be paid for exporting electricity as an additional payment (on top of the generation tariff). Unless you have a special export (smart) meter installed with your system this is assumed to be at 50% of the energy generated.
3. Energy bill savings: as you’ll be generating your own electricity for use in your property you won’t have to import as much electricity from your supplier so you’ll see this impact on your electricity bill. 

The two tariffs are linked to the RPI – so they will increase each year in line with inflation.
The term of the Feed-in Tariff scheme is now 20 years for new installations from 1^st August 2012.

 How much will we earn?

The Government has fixed the following generation tariff rates for solar PV from 1 August 2012 if the property reaches Level D for its energy performance: 

If the property fails to reach Level D - then 7.1p/kWh will be paid.

At the point of applying for a Feed-in Tariff an Energy Performance Certificate (EPC) demonstrating a rating of D for the building is required to be eligible for the standard generation tariff, otherwise the lower rates of payment will apply.

The export tariff has been increased from 3.2p to 4.5p from 1^st August 2012

What if we own more than one solar panel installation?

From 1st April 2012, new ‘multi-installation’ tariff rates were introduced where 80% of the standard tariffs would be paid for solar PV installations where a single individual or organisation is already receiving FITs for other solar PV installations. This changed from 1^st August 2012 to 90% as follows:

Individuals or organisations with 25 or fewer installations will still be eligible for the individual rate - a move which could be more helpful for community owned solar panels.

Is it easy to claim the Feed in Tariffs?

When your system is installed Just Power for Communities CIC will register it on the Microgeneration Certification Scheme database. Only MCS accredited installers can do this.  Your MCS certificate enables you to sign up with an energy supplier who will administer the FIT payments for you.

When you have a solar PV system installed you can choose any energy supplier to administer the FITs on your behalf – it does not have to be the energy supplier you purchase your energy from – needless to say some have a reputation for being better than others! 

Each quarter you'll need to submit your meter reading and in return you'll receive a cheque. Enabling you to reinvest the income into your community.

Our recommendation!

Good Energy pioneered the idea of the Feed in Tariff (FIT) and they are now working with over 7,000 generators who contribute energy to the grid. As a voluntary feed-in tariff administrator they pride themselves in doing a good job for their customers. We’re happy to recommend Good Energy to help you get your FIT payments hassle free and on time.

Will the Feed in Tariffs change again?

The Government has announced a ‘cost reduction mechanism’ to decide how the way Feed-in Tariff rates can be changed in the future. This is how they propose to do it:

• “tariff rate changes are scheduled to take place every 3 months - January, April, July and October each year,
• the tariff rate changes will be determined by the volume of deployment in the specified 3-month period,
• the tariff rate changes will be announced 1 month following the period in question and implemented 2 months later,
• if the threshold is breached a tariff rate reduction (from 3.5%-28%, subject to deployment) will be announced at the end of the following month, and come into effect two months later,
• if the deployment trigger is not reached, then no tariff rate reduction will take place,
• two successive quarters without a tariff rate reduction will be followed by a guaranteed tariff rate reduction of minimum 3.5% in the third quarter.”

Our advice is: even if you don’t yet have the funds for your project yet – start planning as soon as possible to maximise the opportunity provided by the FITs. Get in touch with us today so we can help you plan your project and find funders who can invest or sign up to our newsletter to ensure you're kept up to date with changes.

If you have question about the Feed in Tariffs which isn’t answered here please let us know. Our information is based on guidance from REAL and DECC. If you would like to read the guidance from REAL in detail you can find the link here.