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Feed-in tariff

The Feed-In Tariff scheme (FITs) was introduced by the UK Government in April 2010 aimed at promoting widespread uptake of a range of small-scale low carbon electricity generation technologies.

FITs will require electricity suppliers to pay fixed tariffs to small renewable electricity generated and exported to the national grid.

As of 1st August 2012 the tariff lifetime is 20 years providing your property has a current Energy Performance Certificate (EPC).

Background

SunflowerDue to mainly environmental concerns, but also because of our reliance on fossil fuels and the associated energy security issues, international agreements have been made to reduce carbon emissions. In response to this, European Directives have been signed by member states to enforce carbon reduction and increase renewable energy use.

Targets set by the UK Government are a 34% reduction on CO2 by 2020 and 20-30% of electricity to be produced from renewable energy sources. The Scottish Government’s target for electricity produced from renewable energy is 100% by 2020.

However, renewable energy is initially expensive and has struggled to compete with low-cost electricity produced from fossil fuels. Therefore, the FIT is a scheme that makes renewable energy more competitive and will allow the solar industry to mature. In fact, Germany introduced the FIT many years ago and now has more solar PV panels than any other country in the world.

Financial benefits

LandscapeTo be eligible for FITs your system components and system installer must be MCS approved, and your system must then be registered to the MCS. You must also have an EPC for your property. After your system has been registered with the MCS you will be entitled to the FITs.

The tariff levels will typically provide an annual return on your initial investment of between 8-13% making PV a sound investment.

You will benefit from financial savings in 3 ways:

1. Generation tariff – a set rate paid by your electrical supplier for each unit (kWh) of electricity that you generate. As of August 01, 2012, this rate is 16p per kWh for a retro-fit system below 4kWp. A different rate applies for new buildings and systems 4kWp or above. To receive the full rate of 16p your EPC must be Band D rating or higher; Band E or less will receive the lower rate of 7.1p per kWh.

2. Export tariff – this is an additional tariff for exporting any units to the National Grid when not used in the property. This tariff is set at 4.5p per unit of electricity.

3. Savings from your electrical bill – The amount you save from your bill depends on a few factors and will vary. But you will be making savings on your electricity bills, because generating electricity to power your appliances means that you don’t have to buy as much from your electrical supplier.

Typical example

An existing house with an EPC Band D rating has a PV system rated at 3.92kWp installed. The system generates about 3300kWh (units) of electricity per year, of which 25% is exported to the national grid. The house owner currently pays 15p per unit of electricity brought into the house. The financial savings would be:

1. Generation tariff: 3300 x 0.16 = £528
2. Export tariff: 825 x 0.045 = £37
3. Bill savings: 2475 x 0.15 = £371

The total annual savings would be £936 per year.

Remember that energy prices are due to increase over the next few years!! Also PV systems are a valued asset onto your property.

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