Feed In Tariffs (FIT)

As of April 1st 2010, businesses, consumers and communities in Great Britain1 will be able to claim feed-in tariffs (FIT) for electricity generated from small scale renewables and other low carbon generation technologies. FITs are higher than previous incentives and could yield returns of 5-8%. These returns are lower than many energy efficiency measures and energy efficiency should remain an organisation’s top priority in cutting carbon and costs. Small scale renewables are complimentary and can generate additional returns in the right locations in particular with the new FIT incentive.

Summary points

  • The Carbon Trust can help you look at the business case for both energy efficiency and renewables for your site/business.
  • Feed-in tariffs (FITs) are being introduced in Great Britain[1] as part of the Government’s effort to increase the amount of electricity generated from renewables; the Government is working to a scenario where 2% of electricity is generated from small scale renewables by 2020, with up to one in every 30 homes having solar PV on their roofs.
  • FITs will be paid to small scale low carbon electricity generators (<5MW of generating capacity). They are being introduced to compliment the existing incentive mechanism, the Renewables Obligation (RO), which will continue to support large scale renewable generation.
    • FITs will be available across a range of technologies solar PV, wind, hydro, anaerobic digestion, MicroCHP.
    • An exception is biomass electricity, which will continue to be supported by the RO.
    • All micro generation (less than and including 50kW) will be supported by FITs.
    • Small generation (above 50kW and below 5MW) will be able to choose between FITs and the RO.
  • FITs offer a higher incentive than the RO in most cases and could yield returns of 5-8%, equivalent to paying back in 10-14 years (though this depends on specific installation conditions).
  • FITs will provide small scale electricity generators (<5MW) two elements of payment: a generation tariff and an export tariff. The generation tariff is received for every unit (kWh) of electricity generated and varies from 4.5p/kWh to 41.3p/kWh depending on the technology and capacity size. Generators receive an additional payment for the electricity that is exported into the grid, rather than used on the premises, either choosing a guaranteed 3p/kWh export tariff or opting to sell this exported electricity on the open market.
  • Businesses considering installing small scale generation should first make sure that all energy efficiency measures have been considered. Simple low cost energy efficiency measures save 10-20% off your energy bill and carbon footprint. 80% of energy efficiency measures payback within 3 years – much shorter than small scale renewables’ even with FITs. Small scale renewables are complimentary and can generate additional returns in the right locations in particular with the new FIT incentive.
  • FITs will make the market for small scale renewables more attractive for the supply chain, especially manufacturers and installers. Generation tariffs reduce each year, so the supply chain will need to drive down costs to continue to make small scale renewables an attractive a proposition to prospective customers.

Full information can be viewed on the Carbon Trust’s website or on their Feed In Tariffs Information PDF

Information taken from the Carbon Trust : www.carbontrust.co.uk

Latest News on Feed In Tariffs : http://www.decc.gov.uk/en/content/cms/news/pn11_091/pn11_091.aspx

[1] The scheme applies to businesses, consumers in England, Scotland and Wales but not in Northern Ireland.