Feed-in-Tariff

UK Feed-In Tariff for Solar PV Installations

The Feed In Tariff (FIT) scheme was set up by the Government to allow people using renewable electricity technology such as solar panels to receive payments for the renewable electricity they generate and for any surplus electricity they are able to export back to the grid.

The Government needs to meet a legally binding target of 15% of total energy coming from renewable sources by 2020 and this scheme along with the Renewable Heat Incentive is being used by the Government to meet this target.

Feed In Tariffs can be utilised by any entity including private homeowners, businesses, farms, landlords and schools. The benefits of installing renewable electricity systems and using Feed In Tariffs are threefold. Not only do you receive a payment for all the electricity generated, including that which you use yourself, you also receive extra payments for surplus electricity exported back to the grid. You will also benefit from a reduced standard electricity bill.

To qualify you need to install a renewable electricity system up to a capacity of five megawatts and produce less than five megawatts of power. Any system installed after July 2009 is eligible and systems older than this which registered for the Renewables Obligation are also eligible but at a reduced rate of nine pence per kilo watt hour.

The best type of system to install will vary, depending on individual circumstances but all installations will need to comply with eligibility, legal and regulatory rules. The current list of eligible systems are solar electric photovoltaics (PV), hydro-electric power, wind power, small scale gas powered combined heat and power up to 2kW and anaerobic digestion to produce biogas. Fuel cells may also be included in the future.

The generation tariff is a set rate paid by your energy provider for every unit of electricity generated. The rate will vary each year for those just coming onto the scheme but once you have joined you will remain on the same tariff for 20 years, or 25 years for solar electricity. The export tariff will mean you receive an additional three pence per kilo watt hour for each unit you are able to export back to the grid. All systems are due to be installed with smart meters to fully automate the process of recording how much electricity is generated and how much is exported back. In the interim Feed In Tariff installations are having their exported electricity estimated at 50%. If you think that you are exporting more you can install another meter to confirm this.

To see how much a renewable system could benefit you financially a typical example of a 2 kilo watt per hour solar system would give you up to £700 a year from the generation tariff, £25 per year from the export tariff (at 50% exported) and savings of approximately £110 in electricity bills. To estimate your potential payback you can use the Solar Guide Solar PV Feed-In Tariff Calculator.

The scheme will help reduce carbon emissions and individual carbon footprints. The tariffs received from the system should cover installation costs and even earn a return of up to 8%. It is also worth noting that you don’t have to accept the fixed price on the export tariff, you can negotiate the price on the market once a year. Any income from the Feed In Tariff will be free of income tax.

One Comment

  • brichards 6th October 2010

    This is a great idea. About a year back, I saw that a city in Germany was doing this type of scheme. They would actually pay a nice premium for the energy sold back to the government. This provided very strong incentives for people to add solar panels and other energy generating technology to their homes. I think the government could also get involved in the lending side of the equation. They could provide loans to households that are going to invest in renewable energy. People could repay the loan with the savings in gas and electricity costs. This provides one more incentive for people to start becoming more green.

    Besides generating more energy, households need to evaluate their usage and help reduce this as well. Then, the progress will be significant and beneficial to all.

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Feed-In-Tariff Summary Facts

An average 3-4 bed household could expect to receive the following benefits by installing Feed-In Tariff qualifying Solar PV panels:

  • Earn up to £1,000 p/a by selling electricity back to grid
  • Reduce CO2 emissions by up to 1 tonne
  • Reduce energy bills by up to £200 p/a
  • Up to 10% tax-free return-on-investment