A
feed-in tariff
A feed-in tariff (FIT, FiT, standard offer contract,Couture, T., Cory, K., Kreycik, C., Williams, E., (2010)Policymaker's Guide to Feed-in Tariff Policy Design National Renewable Energy Laboratory, U.S. Dept. of Energy advanced renewable tariff, ...
is when payments are given by energy suppliers if a property or organisation generates their own electricity using technology such as
solar panels or
wind turbine
A wind turbine is a device that converts the kinetic energy of wind into electrical energy. Hundreds of thousands of large turbines, in installations known as wind farms, now generate over 650 gigawatts of power, with 60 GW added each yea ...
s and feeds any surplus back to the grid. In the United Kingdom, they were entered into law by the
Energy Act 2008 and took effect from April 2010.
[Gipe, P]
"Britain to Launch Innovative Feed-in Tariff Program in 2010"
/ref> The scheme closed to new applicants on 31 March 2019.
Scope
The Feed-In Tariff applies to small-scale generation of electricity using eligible renewable technologies. To encourage development of these technologies, feed-in tariffs pay the generator a certain amount even for energy which the generator themselves consumes. Electricity fed into the grid receives an additional export tariff, currently (May 2020) 5.24p per kWh. Costs for the programme are borne by all British electricity consumers proportionally: all consumers will bear a slight increase in their annual bill, thus allowing electricity utilities to pay the FIT for renewable electricity generated at the rates set by the government. Payments through the mechanism are intended to replace the ROCs available through the Renewables Obligation
The Renewables Obligation (RO) is designed to encourage generation of electricity from eligible renewable sources in the United Kingdom. It was introduced in England and Wales and in a different form (the Renewables Obligation (Scotland)) in Scot ...
for small-scale renewable energy generators and is based on a few key elements:
* The tariff is available only to renewable sources producing up to 5 MW power. Specific rates are set for different technologies and at different scales of installation for those technologies. Generators of renewable electricity larger than 5MW remain eligible to earn Renewables Obligation Certificates within the existing Renewables Obligation quota mechanism. To prevent companies from moving large scale (for example big wind) projects from the ROCs to the Feed-in Tariff programme, a number of anti-gaming provisions have been inserted in the policy design; this should avoid the breaking up of bigger projects into several small ones, to fit within the 5 MW energy size cap.
* There are several other qualification requirements including: certification under the Microgeneration Certification Scheme and the REAL Code for systems up to 50 kW; the use of specific metering standards; and systems being installed no earlier than July 2009. Energy efficiency requirements were added in March 2012 for buildings fitting PV systems under FITs.
* The contract term is 20 years, 25 years for solar photovoltaic projects: this means that, starting from 2010, British providers of Wind Energy, Hydropower, Energy from Biomass and Anaerobic Digestion eligible for the FiT scheme will be rewarded with a tariff rate guaranteed for the next 20 years - 25 years for Solar PV generators.
* The tariff made available to generators will be subject to degression. That is, the tariff level available for new generators will decrease annually. The rate of degression will vary by renewable energy technology. The price for individual renewable energy generating plants is fixed once the plant becomes operational.
* Costs for the programme will be paid by the energy suppliers. It should be expected that the suppliers will pass on the cost to their electricity customers: consumers will bear an increase in their annual bill, thus allowing electricity utilities to pay the "Feed-in" Tariff to renewable energy generators at the rates set by the government.
The government estimated that feed-in tariffs to support small-scale low-carbon generation would cost £8.6 billion up to 2030 and produce monetised carbon savings worth £0.42 billion.
Feed-in-Tariff payments are tax-free in the UK.
Year one feedback
A study from the University of London assessed the first year of the UK FIT scheme through interviews with both users of the scheme and government figures. The key findings were that users have had a wide variety of experiences, depending on the technology they are working with, and that the government had very limited ambitions on small-scale renewable energy generation.
Domestic solar performed well in the first year, with 28,028 of the 28,614 total solar installations (totalling nearly 78MW). Wind power was the next highest installation level with 1,348 (20.4MW). Small hydro had 206 (12.1MW), although many were not new installations, but had been transferred from the Renewable Obligation scheme. Micro- CHP had 98 installations (0.09MW), and Anaerobic Digestion
Anaerobic digestion is a sequence of processes by which microorganisms break down biodegradable material in the absence of oxygen. The process is used for industrial or domestic purposes to Waste management, manage waste or to produce fuels. Mu ...
(AD) had just 2 (0.66MW). AD came under scrutiny in 2011 to determine why development was so poor.
The study suggested that technologies have a variety of factors affecting their performance in terms of installation levels. The factors include cost, size, availability, standardisation of the technology, planning issues, ease of installation, perceived sensory impact (sight, sound and smell) and administrative complexity. Domestic PV scores very positively on all these factors, while small hydro and AD do far less well.
The proposed changes to the tariff levels for PV have been met with anger by many in the solar industry, but the FIT policy, along with the Green Investment Bank
Green Investment Group Limited (GIG) is a specialist in green infrastructure principal investment, project delivery and the management of portfolio assets, and related services.
The business was launched initially by the UK government in 2012 a ...
and now carbon reduction targets, are widely understood to be threatened by the Treasury department. This is due to the schemes being considered as liabilities on the national balance sheet.
Reviews to feed-in tariff rates in 2011
Less than a year into the scheme, in March 2011 the new coalition Government announced that support for large-scale photovoltaic
Photovoltaics (PV) is the conversion of light into electricity using semiconducting materials that exhibit the photovoltaic effect, a phenomenon studied in physics, photochemistry, and electrochemistry. The photovoltaic effect is commercially us ...
installations (greater than 50 kW) would be cut. From 1 August 2011 the rate for installations over 50 kW was to range from 19p/kWh to 8.5p/kWh for the largest qualifying installations (5MW), with the Government claiming that this would prevent the scheme from becoming 'overwhelmed'.[New Feed-in Tariff Levels For Large Scale Solar and Anaerobic Digestion Announced Today](_blank)
DECC published 2011-06-09, accessed 2011-06-13
Revised tariffs for farm
A farm (also called an agricultural holding) is an area of land that is devoted primarily to agricultural processes with the primary objective of producing food and other crops; it is the basic facility in food production. The name is used ...
-scale anaerobic digestion
Anaerobic digestion is a sequence of processes by which microorganisms break down biodegradable material in the absence of oxygen. The process is used for industrial or domestic purposes to Waste management, manage waste or to produce fuels. Mu ...
initially of either 14p/kWh or 13p/kWh, depending on the installation size, were introduced from September 2011.
On 31 October 2011 a second review of the Feed in Tariffs for low carbon electricity generation was announced which is likely to take effect from 12 December 2011. The rates for small photovoltaic installations have been reduced from 43.3p/kWh to 21 pence/kWh. The reason for the second review is that FITs for PV were being taken up too quickly and that the DECC funding allocation for FITs was in danger of being exceeded. A further reason is that the cost of installing PV panels has reduced by around 50% and therefore the FITs had become less of an encouragement to install PV panels and more of an incitement to profit from excessive subsidies. See revised tariff tables for FITs.
Reviews to feed-in tariff rates in 2012
In its second year, the government announced further cuts to the FIT scheme. On 3 March the tariff was cut to 21p/kWh. This cut was originally scheduled for 12 December 2011 but was delayed, following a successful joint appeal to the High Court by Friends of the Earth and two solar companies, Solar Century and HomeSun. The 1 August review of the FIT brought an additional cut to 16p/kWh. The cut was partnered with a rise in export rate (the price at which the homeowner can sell excess electricity back to the supplier) from 3.1p to 4.5p for every kWh of electricity exported to the grid. The latest cut came into effect on 1 November, the tariff dropping to 15.44p/kWh, and this rate is set to remain until 1 February 2013. In addition to this, generators with more than 25 Solar PV installations were granted a 10% increase in the amount they receive of the FIT, from 80% to 90%, this however will not be likely to affect domestic users. The cut in FITs was due to the falling installation costs, and the fact that people were applying for the feed-in tariff scheme in numbers exceeding DECC forecasts and funding allocations. The aforementioned rates would only affect new installations - existing schemes would not be affected . The new tariffs would also now be paid over 20 years instead of 25 years (It will remain linked to the Retail Price Index
In the United Kingdom, the Retail Prices Index or Retail Price Index (RPI) is a measure of inflation published monthly by the Office for National Statistics. It measures the change in the cost of a representative sample of retail goods and servic ...
) with a review every three months based on solar PV uptake levels in the three different bands: domestic (size 0-10 kW), small commercial (10-50 kW) and large commercial (above 50 kW and standalone installations). Despite suggestions that the European solar market is in decline, a report by the International Energy Agency has shown that for a second year in a row solar PV was the dominant form of new electricity installation during 2012, ahead of both wind and gas power.
Replacement by the Smart Export Guarantee
The Department for Business, Energy and Industrial Strategy (BEIS) published a consultation on 19 July 2018, and stated their intention to close the FIT scheme to new applicants from 1 April 2019 and not replace it with a new subsidy.
On 10 June 2019, Ofgem
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announced that BEIS had introduced the Smart Export Guarantee (SEG), in force from 1 January 2020. This is not a direct replacement of the feed-in tariff scheme, but rather a new initiative that rewards solar generators for electricity exported to the grid. Energy suppliers with more than 150,000 domestic customers must provide at least one export tariff. The export tariff rate must be greater than zero. Export is measured by smart meters which the energy supplier installs free of charge.
In September 2021, Ofgem published the Smart Export Guarantee (SEG) Annual Report 2020–21, stating that 4,593 generators signed up to a SEG tariff in 2020–21, with a total installed capacity of 19,195 kW; exports totalled 2,568,810 kWh and generators received £114,480 in payments.
Related schemes
A similar incentive for renewable heat Renewable heat is an application of renewable energy referring to the generation of heat from renewable sources; for example, feeding radiators with water warmed by focused solar radiation rather than by a fossil fuel boiler. Renewable heat technol ...
– the Renewable Heat Incentive The Renewable Heat Incentive (the RHI) is a payment system in England, Scotland and Wales, for the generation of heat from renewable energy sources. Introduced on 28 November 2011, the RHI replaces the Low Carbon Building Programme, which closed in ...
– was introduced in November 2011.
Free electricity schemes
The FIT scheme has created a number of start-up companies providing free electricity in return for installing solar panels on the homeowner's roof. If the homeowner cannot afford the capital outlay, the companies offer a capital-free way of getting the benefits of solar and free electricity.
After the December 2015 Feed-in Tariff reductions were announced, some free solar panel installers ceased trading, or had plans to stop installing, as the returns were no longer financially viable. The change in the feed-in tariff equated to a 64% decrease in the generation tariff for solar arrays below 4 kW, which is the largest decrease since the scheme began in 2010.Current Feed-in Tariff Rates - 2016 Decrease
SolarPanels.cheap", accessed 2016-02-02 The changes meant that larger systems (over 10 kW) received a higher feed in tariff rate than smaller domestic-sized systems, which might have led to the remaining free solar panel companies exclusively providing commercial installations.
See also
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Microgeneration
Microgeneration is the small-scale production of heat or electric power from a "low carbon source," as an alternative or supplement to traditional centralized grid-connected power.
Microgeneration technologies include small-scale wind turbin ...
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Energy policy of the United Kingdom
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Energy use and conservation in the United Kingdom
Energy in the United Kingdom came mostly from fossil fuels in 2021. Total World energy supply and consumption, energy consumption in the United Kingdom was 142.0millionTonne of oil equivalent, tonnes of oil equivalent (1,651TWh) in 2019. In 20 ...
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Climate Change and Sustainable Energy Act 2006
The Climate Change and Sustainable Energy Act 2006 (c 19) is an Act of the Parliament of the United Kingdom which aims to boost the number of heat and electricity microgeneration installations in the United Kingdom, so helping to cut carbon emi ...
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Renewable energy in the European Union
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Feed-in tariffs in Germany
Feed-in electricity tariffs (FiT) were introduced in Germany to encourage the use of new energy technologies such as wind power, biomass, hydropower, geothermal power and solar photovoltaics. Feed-in tariffs are a policy mechanism designed to ...
*
Feed-in tariffs in Australia
Feed-in tariffs in Australia are the feed-in tariffs (FITs) paid under various State schemes to non-commercial producers of electricity generated by solar photovoltaic (PV) systems using solar panels. They are a way of subsidising and encourag ...
*
Renewable Heat Incentive The Renewable Heat Incentive (the RHI) is a payment system in England, Scotland and Wales, for the generation of heat from renewable energy sources. Introduced on 28 November 2011, the RHI replaces the Low Carbon Building Programme, which closed in ...
References
{{Energy in the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and North ...
Renewable energy in the United Kingdom
Electric power in the United Kingdom
Law of the United Kingdom