What are Feed-in Tariffs?

The Feed-in Tariff (Fit) scheme was an initiative launched in 2010 to encourage households and businesses to generate their own renewable energy. The two main benefits of signing up for the FiT scheme were:

  • Generate your own energy to cut your electricity bills
  • Make money by any surplus energy generated back to the National Grid

There was also the added environmental benefit of widespread renewable energy generation across UK homes and business, which would also help take pressure off the National Grid.

So far, so good - but then the government pulled the plug on the scheme.

Is the Feed-in tariff scheme now closed?

Yes. New applications to the feed-in tariff closed on April 1, 2019.

If you installed an eligible system with Microgeneration Certification Scheme - also known as an MCS certificate, which is an internationally an recognised quality assurance scheme - on or before March 31, you were given a further year to sign up to the FiT scheme, until March 31, 2020.

If you have an eligible system in place and have already successfully applied for FIT payments, then you won't be affected by the closure of the scheme, and your payments will carry on until your solar PV system is at least 20 years old, though in some cases this could be 25 years.

Why did the government close the FiT scheme?

The government had always planned on putting a time limit on the scheme, and set out in its Industrial Strategy and Clean Growth Strategy a plan to move towards fairer, cost-reflective pricing right across the industry to help cut consumers average energy bills.

But the move was still criticised as the scheme was experiencing significant year-on-year growth - the Department for Business, Energy and Industrial Strategy (BEIS) recorded a 4% rise in the number of installations between March 2018 and March 2019, which translated into a 3% overall increase in capacity.

How much money could be made from a Feed-in Tariff?

The Energy Saving Trusts estimated that the average household could earn around £150 a year from the FiT scheme, that's on top of any money saved by generating their own electricity.

The actual cost of installing and maintaining the systems also needed to be factored in, as £150 in earnings over 25 years amounts to £3,750, which might not cover the installation costs alone.

There were two parts to the Feed-In tariff:

The generation tariff - This paid a fixed amount for every single unit of electricity generated, the rate of which was determined by the type of technology installed, its capacity and the energy tariff period.

The higher rate tariff paid 4.25p per kWh for solar panels with a capacity of less than 10 KW or 8.39p for a wind turbine with a total capacity of less than 50 KW. This was only available for systems installed between July 1 and September 30, 2016.

This rate then dropped to 4.18p per kWh for solar and 8.33p for wind turbines, on installations carried out between October 1 and December 31, 2016. This then fell even further, to 3.76p and 7.50p, for systems with a deployment cap, a scheme put in place to limit the amount of FIT payments in a given tariff period.

Any payments were also dependent upon a property's Energy Performance Certificate, with those rated A to D getting the higher generation tariff, while band E or lower were paid a reduced rate.

The export tariff - The export tariff was an additional payment made for each excess unit of energy generated and exported back to the National Grid and was set at 4.91p per kWh on all installations fitted on or before March 31, 2017.

This was paid as an estimated rate of 50% of the electricity generated or 75% for hydro installations, unless a smart meter was installed, in which case the export tariff would be based on the actual amount of surplus energy exported.

Are there any alternatives to the FiT scheme?

On January 1, 2020, the government launched the Smart Export Guarantee (SEG), a replacement FiT scheme that will see small-scale low-carbon electricity generators, including domestic solar panel owners, paid for each unit of electricity fed into the National Grid.

The responsibility for payments is with the individual energy suppliers, and those with more than 150,000 customers are required by law to pay their customers for each unit of electricity they generate. Suppliers with fewer than 150,000 customers aren't legally obliged to pay out, but can opt-in to the scheme.

SEG is only available to systems with a capacity of 5MW or less and using any of the following technologies:

  • Solar photovoltaic (PV)
  • Hydro
  • Micro-combined heat and power (with an electrical capacity of 50kW or less)
  • Anaerobic digestion
  • Onshore wind

For information on how to apply for the SEG scheme, visit Ofgem.

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