Feed-In Tariffs for microgeneration of electricity
Renewable electricity installations commissioned since July 2009 are due to receive a cashback subsidy for the lifetime of the equipment used, generally over 20 years.
The tariffs available have increased with inflation and decreased with degression into a bewildering diversity of tariffs that depend on the time of initial accreditation.
The table below is a summary of the eligible technologies and the current subsidy to be received from 1 April 2015. The full complexity can be found, with patience, via this link.
The feed-in tariffs are based on pence/kWh of renewable electricity delivered. The rates vary with the technology and scale used as follows:
|Feed-In Tariffs - FiTs
Table of rates
|Scale||Feed-In Tariff pence/kWh from
1 April 2015
|Feed-In Tariff pence/kWh from
8 Feb 2016
|Anaerobic digestion||<250kW||10.13||9.12 ?|
|Anaerobic digestion||250-500kW||9.36||8.42 ?|
|Anaerobic digestion||>500kW||8.68||8.68 ?|
¹ Photovoltaic rates are 10% lower if electricity is provided to a building without an EPC showing efficiency between A and D - or if the owner has more than 25 FiT registered PV installations.
Feed-In Tariffs are based on metered electricity generated - whether or not the electricity is fed back to the Grid. If the electricity is fed back to the Grid the consumer may be able to negotiate a further 4.85p/KWhr.
Feed-In Tariffs – FiTs – Clean Energy Cashback Financial Incentives
The UK government introduced Feed-In Tariffs for microgeneration of electricity from April 2010. The tariff levels for the electricity financial incentives were originally calculated to offer between 5-8% return on initial investment. The tariff levels for photovoltaic (up to 21 pence per kWhour) and wind (up to 36 pence per kWh) were set at a higher level per kWh than for the Renewable Heat Incentives to compensate for the high capital costs and lower efficiencies of these technologies. The tariffs for the Renewable Heat Incentive have been calculated to offer a rate of return of 12% across the tariff bands.
FiTs are intended to positive a business case for delivering on-site renewable electricity generation, not only to reduce electric bills and carbon emissions, but also to deliver an electricity related cash flow into your building. The FiTs cashback incentives were calculated to offer between 5-8% return on initial investment.
The RHI provides a positive step change in the business case for delivering on-site renewable heat generation, not only to reduce energy bills and carbon emissions, but also to deliver a heat related cash flow into your building. The RHI cashback incentives are calculated to offer 12% return on initial investment.
First review of Feed-In Tariffs in 2011
On 7 February 2011 DECC announced that the first review of the Feed in Tariffs (FITs) scheme for small scale low carbon electricity generation would take place in 2011, and have effect from April 2012.
Although only introduced from April 2010, government is concerned that already 21,000 installations have been registered and the take up of photovoltaic panels – for which the Feed-In Tariffs are generous – may exceed the budget allowed, especially in the case of super-sized solar installations.
On 18 March 2011 it was announced that FITs for larger scale PVs would be reduced (as shown in the table below) from 1 August 2011 (subject to a brief consultation period, which was concluded on 9 June and confirmed the proposed rates, and parliamentary approval in July 2011).
Second review of Feed-In Tariffs in 2011
On 29 October 2011 DECC confirmed that a second review of the Feed in Tariffs for low carbon electricity generation would take place in 2011.
The reason for the second review is that FITs are being taken up too quickly and that the DECC funding allocation for FITs is 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 has become less of an encouragement to install PV panels and more of an incitement to profit from excessive subsidies.
DECC rebalances renewable energy incentives
DECC has recognised the need to rebalance the renewable energy incentives by reducing the subsidy on expensive technologies like PV in favour of the more economic technologies used to generate renewable heat. The Renewable Heat Incentives had been set at a much lower level than those for FITs – and were introduced two years later.
DECC recognised the need to rebalance the Renewable Heat Incentive tariffs for ground source heat pumps in 2012. It published its Consultation in May 2013 which proposes a doubling of GSHP tariffs in 2014. These dramatic increases apply to applications received after May 2014.
Comment on the Feed-In Tariffs and RHI
While there are a number of renewable energy options to be considered, ICAX believes the most practical, affordable and reliable answer to generating renewable energy is to use Interseasonal Heat Transfer to heat buildings in winter and provide domestic hot water all year round.
Interseasonal Heat Transfer is a more economic technology than those which generate renewable electricity, and Renewable Heat attracts the RHI clean energy cashback which is calculated to provide a higher return on the initial investment than Feed-In Tariffs.
However, the FiTs and RHI are not alternatives: you can benefit from both forms of Clean Energy Cashback if you install photovoltaic cells to provide electricity to control your ground source heat pumps.
Tax free income from Feed-In Tariffs
Tariffs will be exempt from income tax. This means that domestic users and other income tax payers will not be taxed on any income received from the Feed-In Tariffs or the Renewable Heat Incentive.
See also: How Ground Source Heat Pumps work