Feed in Tariff
What are Feed-in Tariffs?
Feed-in Tariffs (FITs) are a new financial incentive for renewable electricity generators with an installed capacity below 5MW. It was developed by the Department of Energy and Climate Change (DECC) and is designed to encourage home-owners and businesses throughout the UK to generate electricity from renewable sources.
FITs make renewable generation more financially viable by guaranteeing generators a long-term fixed price for the renewable energy they produce. This will help the UK reach its target of generating 15% of total consumed energy from renewable sources by 2020. The incentive is particularly designed for first time generators and is therefore simple and easy to follow.
How do Feed-in Tariffs work?
The generator will receive both a ‘Generation Tariff’ and ‘Export Tariff’ – these will be paid by licensed energy suppliers.
(1) Generation Tariff – a fixed rate that a generator will receive for every kilowatt (KW) of renewable energy generated regardless of where the energy is used.
(2) Export Tariff – a fixed 3p/kWh rate for the surplus amount of energy which is sent back to the electricity grid. This is currently deemed to be 50% of total generation for smaller installations.
The Generation and Export tariff is guaranteed for the project lifetime and is set for 20 years and 25 years for Wind Turbine and Solar Photovoltaic (PV) projects respectively.
What can I expect earn?
Renewable Energy is of course not all about the money – but every little helps. The new incentive makes generating electricity profitable for the customer with a typical return of between 8 to 10%. The table below illustrates the Generation Tariff for different scales of PV and wind turbine installations.
Please note that these figures are linked to the RPI and will therefore follow inflation.
There are essentially 3 sources of income from a renewable technology on the FiT;
(1) Generation Tariff (see table above)
(2) Export Tariff (assumed 3p/kWh)
(3) Saving on electricity bill (approximately 12-15p/kWh)
The points at which these revenues are acquired are illustrated below.
To make things a bit easier, here is a case study from one of our local wind turbine installations (please refer to the illustration above throughout):
Case Study – 2.8 kW wind turbine generating 4,700kWh per annum
(1) Generation Tariff = (100% of 4,700kWh) x (26.7p/kWh) = £1254.90 per annum
(2) Export Tariff = (50% of 4,700kWh) x (3p/kWh) = £70.50 per annum
(3) Saving on Electricity Bill = (2,500kWh) x (12p/kWh) = £300 per annum
This demonstrates that the client sees a revenue of approximately £1625.40 per year. With a total installed cost of £16,500, the turbine presents a
payback time of 10.5 years.
