Quick Guide to Feed-in Tariffs
One of the ways in which the UK proposes to meet its climate change and renewable energy targets is by providing financial incentives for the generation of electricity and heat on a small-scale using renewable sources. This is also known as microgeneration.
Financial incentives for the generation of renewable electricity on a small-scale are called feed-in tariffs (FITs). FITs are a per-kiloWatt hour support payment (p/kWh) for electricity generated from renewable sources.
The scheme provides a fixed payment for electricity that is generated on-site (the generation tariff) and for any unused electricity that is exported to the national grid (the export tariff). FITs are available to everyone, including businesses, landlords, local authorities and households.
Qualifying technologies
FITs are available for small-scale renewable electricity (that is, an installation with generating capacity up to a maximum of 5 MW of electricity), for the following types of renewable energy technologies:
- Wind.
- Solar photovoltaic (solar PV).
- Hydro.
- Anaerobic digestion.
- Non-renewable mCHP installations (for the first 30,000 such mCHP projects, as a pilot programme).
Biomass and biomass combined heat and power (CHP) will not initially qualify for FITs.
The government is also planning to introduce financial incentives for renewable heat in 2011-12 in the form of a Renewable Heat Incentive (RHI).
Where we are now?
FITs were introduced on 1 April 2010 by:
The Feed-in Tariffs (Specified Maximum Capacity and Functions) Order 2010 (SI 2010/678). Modifications to the Standard Licence Conditions of Electricity Supply Licences, which added a new section C and Schedule to the Standard Licence Conditions (SLCs). The Order and the Modifications to the SLCs need to be read in conjunction with guidance produced by Ofgem (which administers the scheme).
The FITs scheme imposes an obligation on electricity suppliers in England, Wales and Scotland with a minimum of 50,000 domestic customers to offer FITs to all accredited small-scale generators of electricity using a low-carbon energy source that is eligible under the scheme. Electricity suppliers with fewer than 50,000 domestic customers can offer FITs on a voluntary basis.
The scheme provides a fixed payment for electricity that is generated on-site(thegeneration tariff)and for any unused electricity that is exported to the national grid(the export tariff).FITs are available to everyone, including businesses, landlords, local authorities and households.
The scheme applies to installations with a generating capacity of 5 megawatts (MW) or less. Installations with a larger capacity may be eligible for financial incentives under the Renewables Obligation (RO).
The government announced in the Spending Review 2010 that the efficiency of FITs will be improved in the next formal review (in 2012, with any changes coming into effect in April 2013) to rebalance FITs in favour of more cost-effective carbon abatement technologies.
What happens next?
In February 2011, the Department of Energy and Climate Change (DECC) announced:
1. A comprehensive review of FITs in 2011. This brings forward
the date of the review by a year.
2. A fast-track consideration of large-scale solar
installations.
3. A study on the uptake of FITs for farm-based anaerobic
digestion (AD) plants.
In June 2011, DECC published a summary of responses to its fast-track consultation on FITs, which includes the government response. It announced that, from 1 August 2011:
1. New, lower tariffs will apply to new large-scale and new
stand-alone solar photovoltaic (PV) FITs installations.
2. New, higher tariffs will apply to new farm-scale AD
installations.
The new tariffs will not be applied retrospectively, and will only apply to new entrants to the FITs scheme.