What is a Feed in Tariff?
Feed in tariffs (FITs) first became available in England in April 2010. It is a Government backed financial incentive scheme that pays generators of renewable energy, be they domestic, residential or business generators, cash for any electricity that they generate but don't use, effectively selling surplus electricity generated by renewable power back to the national grid. Unfortunately and as a result of spending cuts implemented by the Coalition Government, it was announced that the scope of the feed-in tariff would be reduced in March 2011 so that PV installations of more than 50kwh would receive a reduced rate feed in tariff. The FIT is effectively a financial incentive designed to attract more people to the use of renewable energy, whilst at the same time enabling the Government to move closer to its overall carbon reduction obligations.
How the Feed in Tariff Works
When the feed in tariff was first implemented in April 2010, consumers were paid for all the electricity they generated, even if they used it or not, this has now been amended to mean only surplus electricity that is not used by the consumer. An average solar panel system of around 2.5kw that costs about £12,000 to install, will generate around £1000 of revenue a year from the feed in tariff, meaning that the system pays for itself after about 12 years. But the system can expect to last for about 25 years, so will continue to generate income for the consumer. If you add this to the savings that come from generating your own electricity throughout the year as opposed to paying your energy supplier the normal retail rate (about £200 a year), it is clear to see that switching to some form of renewable energy can be financially profitable for the consumer.
Commercial Feed in Tariff
The commercial feed in tariff applies to large scale renewable energy installations. Even though the rate at which the energy supplier will buy the energy back from the consumer is less for large installations of over 50kwh, it is still possible to earn a significant income from having a renewable energy installation. The kind of organisations that we mean when we talk about the commercial feed-in tariff are schools, hospitals, offices, town halls and local government and council buildings etc. Even though the feed-in tariff rate gets reduced for larger installations (over 50 kwh), the savings made on energy bills tend to be higher because the amount of energy that commercial buildings consume is greater. Businesses use the bulk of their energy during daylight hours so would benefit in particular from using solar power for example. On average, a commercial business or public sector organisation can expect to make around £2250 a year per 10kw, depending on the size of their system, from the feed-in tariff.
Eligibility for the Feed-in Tariff
The scheme is open to any organisation that has one or more of the following kinds of renewable energy installation; solar PV panels (roof-mounted or stand-alone), wind-turbines, hydroelectricity, anaerobic digestion (generating electricity from food-waste), and micro-combined heat and power (for new types of boiler). However commercial solar panel installations will only qualify for the full feed-in tariff if their renewable technology was installed between 15 July 2009 and 31st March 2010. Any installations made after this date must be by an installer who is Microgeneration Certification Scheme certified.
Recent Increased Interest
The number of solar panels installed in the UK has more than tripled in the last year, due largely to the introduction of the feed-in tariff. Overall, the amount of solar power installed in the UK has risen from 26 MW (megawatts), which was the total before the scheme started on 1st April 2010, to 77.8MW at the end of March this year, according to figures released by the Department of Energy and Climate Change (DECC). This in spite of the Government's decision to cut the scheme for installations over 50 KW. Almost 11,500 people, mostly homeowners, had solar panels installed in the first three months of this year, suggesting that interest in renewable energy technology is showing no sign of abating, which can only be good news in the long-run for the economy and the environment as a whole.
