What is the Feed in Tariff scheme?
The Feed in Tariff (FiT) scheme was launched by the Government in 2010 as a way to encourage us to install renewable electricity-generating technology, such as solar PV (photovoltaic) panels.
While we might all wish to live a little ‘greener’, the cost of installing electricity-generating renewable technology can be prohibitive, so the scheme was introduced to help pay homeowners back for the capital cost.
Once properly set up, homeowners who join the scheme can expect to be reimbursed for the renewable electricity they generate.
Unlike the Renewable Heat Incentive (a similar scheme for those generating heat from renewables) which only offers payments for seven years from installation, you will be entitled to 20 years of payments under the Feed in Tariff scheme (or 10 years for combined heat and power systems). As a result, most people on the Feed in Tariff scheme will see the outlay for their renewables covered, and many will make a profit.
What renewable electricity sources qualify for the scheme?
The scheme covers:
- Solar photovoltaic (PV) panels
- Wind turbines
- Hydroelectric power generation
- Combined heat and power (up to a capacity of 2kW)
- Anaerobic digestion systems
To qualify, the technology must be issued with a certificate from the Microgeneration Certified Scheme (MCS). If installed by a registered supplier, this shouldn’t be an issue, but do check that the installer will be able to supply a valid certificate.
- Find out more about renewable electricity in our Guide to Renewables
How does the Feed in Tariff scheme work?
After applying to be part of the scheme, you will then be paid quarterly for the electricity you have generated. This will be measured when you submit electricity meter readings to your energy supplier (who is known as an FiT licensee under the scheme). To do so, you need to use an energy supplier who is part of the scheme.
In theory, the payments should be calculated from the date that you register, but there is a cap on the number of new installations that can be supported by the scheme, meaning you may be put in a FiT queue.
Beware of companies, usually dealing in solar PV, who will install panels on your roof for free allowing you to get ‘free’ electricity. They do this to register the installation and receive FiT payments for an array on your roof.
While it may sound appealing to have clean electricity at no cost, leasing your roof space in this way can affect your mortgage agreement.
How much could I earn on the scheme?
Once installed and accredited, a tariff will be allocated to your installation. The tariff is based on:
- the technology you have chosen
- the total installed capacity of that installation (how much energy it is capable of producing)
- when you register (the tariffs are updated quarterly)
- where you sit in relation to the FiT queue.
For Solar PV, the property’s Energy Performance Certificate (EPC) rating has to be supplied. If the rating is A to D, the higher rate applies; it is E or lower, a lower rate applies. A 4kWp solar array will produce around 3,200 kWh per year, and the owner will be paid 3,200 x 4.00p which equates to £128 a year.
Other technologies are more more difficult to predict, as they rely on variables like the wind at a particular site or the amount of water in a particular stream.
Can I sell back surplus electricity?
The big six electricity suppliers are required by the government to buy the surplus. The current rate is around 5.03p/kWh, which will vary with the supplier. For most domestic systems, the amount paid is estimated at 50% of production, but if a smart meter is installed the owner will be paid for the amount of electricity actually exported.
The supply company buying your electricity can deduct standing charges and admin costs from that sum, so you may not get the full 50%. It is worth checking the company’s policy on this issue as it can make a difference.
There are also many small supply companies out there – Ecotricity, Good Energy, Robin Hood Energy and Ovo Energy, for instance – that are worth looking at. These companies can choose to buy your electricity, or not, but often offer a better deal than the big six.
Does this futureproof me against future energy costs?
Investing in capital equipment is like buying future energy needs at a fixed price. The unit production cost of your renewable energy will be the same in 20 years’ time, while the purchase price of electricity from the National Grid, for example, is likely to be considerably higher.
So even without FiTs, renewable energy justifies itself in comparison to the likely future cost of energy. FiTs is simply the inducement that helps us make the decision.
This table shows current tariffs. They are reduced in line with the reducing capital cost of the equipment (known as the degression), although in some quarters there is no degression.
The tariffs are also inflated in line with the Consumer Price Index (CPI).
The rate you receive today will the rate you receive each quarter. So if you install a PV array today, your FiT rate will be 4.00p/kWh for 20 years, inflated in line with the CPI, regardless of what happens to the rate in that period.
|Description||Total Installed Capacity (kW)||Tariff (p/kWh)|
|Standard Solar photovoltaic receiving the higher rate||0-10||4.00|
|Standard solar photovoltaic receiving the middle rate||0-10||3.60|
|Standard solar photovoltaic receiving the lower rate||0-10||0.38|
|Standard large solar photovoltaic||250-1000||1.54|
|Stand-alone solar photovoltaic||0-5000||0.23|
|Combined Heat and Power||0-2||13.95|
Unit Cost of a Standard Solar PV Array
Another way to assess the benefit of a renewable technology is to look at the unit cost of the energy produced, rather than how long it might take for FiTs to return the capital cost of the equipment.
Take a 4kW solar array, a system that will serve a three-bed family home for four people:
- 4 4kWp solar PV array: will produce (in most parts of the UK) around 3,200kWh of electricity per year, for 20 years — a total of 64,000kWh
- Capital cost: around £6,000 installed (add £2,000 for maintenance and repair)
- Unit cost of production: 12.5p/kWh compared to the current price of electricity of around 16p/kWh (including VAT and standing charge). Bear in mind that the unit production cost will be the same in 20 years’ time, where the purchase price of electricity is likely to be much higher.
How do I claim?
- Assess your energy needs and which renewables would be best suited to your home.
- Use an MCS-certified installer to fit your technology. They will register you to the MCS database and issue you with a certificate.
- Apply for the FiT scheme with a registered energy supplier (see the list of FiT licensees).
- Receive payment from your energy supplier each quarter.