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UK Feed In Tariffs (FIT’s)
In April 2010 the UK solar PV Feed in Tariff also known as the ‘Clean Energy Cashback Scheme’ came into force. The solar PV Feed in Tariff (FIT) is a government backed incentive administered and regulated by OFGEM. The Feed in Tariff obliges the traditional energy companies (known in this context as FIT Licensees) to pay the owner of a solar PV system above market rates for the clean energy that they generate and also guarantees an additional price (per kWh) for the energy that they sell/export.
The solar PV Feed in Tariff has been designed to recognised the financial commitment of the solar PV system owner through a guaranteed repayment on their investment; in most cases a healthy return over and above what the system cost to install and in recognition of the contribution made to lowering the country’s overall CO2 emissions.
The solar PV Feed in Tariff is available for everyone including homeowners, businesses, schools and landowners. Income from the Feed in Tariff is not subject to tax for homeowners.
Essentially the Clean Energy Cashback Scheme or FIT comprises of two tariffs, the first is the Generation Tariff.
The Generation Tariff
The solar PV generation tariff guarantees a fixed payment (usually paid quarterly) based on the size of solar PV system that is installed and the amount of power (measured in kWh) that the solar PV system is capable of generating. Payments are guaranteed for 25 years and payment rates are index linked to inflation (using the Retail Price Index). To kick start the scheme there are higher rates payable for systems installed before the end of March 2012. Payment rates are fixed based on the installation date, systems installed before 31st march 2012 will be fixed at the highest rate for the full 25 years. Please ask for the current generation rates.
The Export Tariff
The solar PV export tariff applies to the proportion of clean energy that is exported (i.e. sold via the grid for others to use) and is basically a guaranteed ‘floor price’ or minimum price, set at 3p per kWh. The export rate is guaranteed for 25 years and also index linked to the Retail Price Index (RPI). The export tariff is an opt-in arrangement which means that the energy generator also has the option to sell this energy more profitably on the open market. The export tariff is not applicable for off-grid PV systems.
Eligible Solar PV systems
The solar Feed in Tariff can be applied to any type of solar PV system including of-grid PV systems (the generation tariff) and Building Integrated PV (BIPV) systems providing that both the solar equipment and the solar installer have been inspected and accredited to UK Microgeneration Certification Scheme (MCS) standards.
How to Register a System
OFGEM administers a Feed in Tariff register which holds the details of all registered generators. System registration is carried out via the FIT Licensees (the power companies).
Once an eligible solar PV system has been installed you will be able to register your system. FIT payments are made by the FIT Licensees.
Key Points:
The Generation Tariff is based on the amount of power (measured in kWh) a system generates, this power does not need to be sold, you can use the free electricity you generate and export any excesses independently of the FIT.
FIT rates are set based on the installation date e.g. if your installation is carried out before 31st March 2012 the highest rate will be locked in for the next 25 years.
The power you export/sell via the grid can also be sold for a profit in addition to the Generation Tariff entitlement. Although the scheme does guarantee an index linked floor price for exported clean energy of 3p per kWh.
The Feed in Tariff is applicable to all types of solar PV system but both the equipment and the installer must be certified to UK Microgeneration Certification Scheme (MCS) standards.
FIT payments are index linked to inflation, this means that if inflation rises then so will the FIT payment.
FIT payments are non-taxable for homeowners.
FIT payments and rates are guaranteed for 25 years, set at the time in which the PV system was installed.
Different rates are payable for smaller systems fitted to existing buildings (higher) than those incorporated into new builds (lower). FIT registration and FIT payments are handled by FIT Licensees (the participating power companies).
The Future
Where solar PV Feed in Tariffs (FITs) have already been successfully implemented in countries such as Germany and Spain. After the first round of incentives had finished, after review the tariffs stayed in place but with less beneficial rates and terms for new applicants. The UK Feed in Tariff rates and terms are scheduled for review in early 2013, it is our belief that based on the depreciating nature of what has already been introduced and the experiences of Germany and Spain that both the terms and the payment rates of any future tariffs will be less beneficial than those available before 2013.
Our Two Pence – Get Prepared
Before a system is installed have a good idea of which energy company you will use to handle the FIT registration. Also remember you will be buying electricity as well as selling.
Have FIT application forms, terms, conditions and contracts ready for review at the system design stage. Work with your installer to ensure that the FIT application is right first time, paperwork is accurate and complete and the benefits of the FITS are maximised.
Don’t underestimate the export capabilities of your system; it is widely believed that electricity prices will rise significantly over time. The more energy efficient you are the more energy you will be able to export.
Look at your electricity usage in terms of times of the day, once installed it’s very easy to forget about your mini power station quietly pumping out free electricity during the day.
