Details of UK Feed In Tariff Announced

by Jamie on February 1, 2010

The overdue announcement of the UK’s Feed in Tariff (FiT) is at last being made by Ed Miliband today, ending a period of uncertainty for the UK microgeneration industry. FiTs have, for the most part, been hugely successful in a wide range of countries around the world and their introduction to the UK is long overdue.

The good news is that it’s looking better than expected; it’s certainly better than the rates proposed in the consultation.

The key to the success of FiTs is that they offer security to people considering making the leap into the microgeneration world. The UK FiT will be have a lifetime of 20 years (25 years for solar photovoltaics) and should mean you can make a return of about 8% on the investment, considerably better than what any bank will offer!

The UK FiT will pay a fixed incentive for every unit of renewable electricity generated by microgeneration systems, whether the electricity is used on site or exported to the grid. The rates paid (detailed here) will vary depending on the technology and the size of the system.

For retrofit solar photovoltaic installations up to 4kW, the initial rate will be 41.3p/kWh (about 5p/kWh higher than the rate put out for consultation which is very good news). The average size of a residential PV installation is about 2kW to 2.5kW. Rates for larger PV installations are lower presumably because economies of scale will start to kick in you’ll get a lower installation cost per kW.

Small wind turbines are also eligible but not recommended in urban locations, along with micro hydro (probably a bit tricky in N16) and anaerobic digestion (ditto).

The announcement also includes details of the Renewable Heat Incentive (RHI) which is due to be introduced next year. My reading of the press release is that solar hot water will get 18p/kWh but that’s so high I can’t believe I’m reading the table right.

The FiT rate that an individual receives will be constant over the FiT lifetime but for some technologies the rate will reduce for later entrants, so the later you get involved, the lower the FiT paid over the lifetime rate will be. To illustrate, if you buy a PV installation this year you will get 41.3p/kWh, if you buy it in the third year you will get 37.8p/kWh.

On top of the FiT, any electricity you export to the grid also has value. The consultation was proposing to fix the export tariff rate but I can’t see any evidence of that in this press release, but you can search for the best export tariffs on the Energy Saving Trust’s website.

More good news is that the FiT will apply to installations made after July 2008 rather than July 2009 as proposed in the consultation. This is good because it means that some of the early adopters won’t be penalised for being ahead of the curve, although many will. (see update below)

Of course these things don’t come for free though and the cost of the FiT will be shared around all households, with the levy expected to be around £10 per year per household.

This is a fantastic incentive which will give the UK microgeneration industry a much needed boost, however you should really have done everything you can to lower your energy demand before opting for microgeneration technologies. Look at your home’s electricity consumption, insulation, air tightness and boiler efficiency before looking at microgeneration.

Updates:

  • It turns out that the DECC press release has a typo in it and installations made before 15th July 2009 will be ineligible for the FiT. Details can be found in point 179 of the Government’s Response to the FiTs Consultation.
  • The export tariff has been reduced from the proposed 5p/kWh to 3p/kWh
  • FiTs and export tariffs will be indexed to the Retail Price Index so they will rise with inflation.
  • FiT income from domestic installations will not be taxable for the purposes of income tax.
http://www.decc.gov.uk/Media/viewfile.ashx?FilePath=Consultations\Renewable%20Electricity%20Financial%20Incentives\1_20100201131016_e_@@_GovernmentResponsetotheFITsConsultation.pdf&filetype=4

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