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April 2012 update

Get paid for the energy you generate and use for yourself at an attractive rate of return

That is the premise of the both the Government Feed-In Tariffs and Renewable Heat Incentive. In fact, you could say it is the ultimate win-win because not only will your money be working for you but you will also be taking greater control of your own energy. At a time of rising energy prices, that can only be a good thing!

Feed-in Tariffs (FITs) became available in Great Britain on 1st April 2010. Under this scheme energy suppliers have a compulsary obligation to make regular payments to householders and communities who generate their own electricity from renewable or low carbon sources such as solar electricity panels (PV) or wind turbines.

FIT savings

Feed-in Tariffs

Once you have a renewable energy microgeneration technology installed, you will experience a monthly reduction in your electricity bill as you generate part of your energy requirement. However, a much larger saving will be generated by an income from your Feed-in tariff provider (energy supplier).

Feed-in tariffs are designed so that if you take out a loan for the capital expenditure, the average monthly income from your installation will be significantly greater than your monthly loan repayment (with a 25 year loan). The scheme covers the following electricity-generating technologies, up to an installation size of 5 Mega Watts:

  • Solar electricity (PV) (roof mounted or stand alone)
  • Wind turbine (building mounted or free standing)
  • Hydroelectricity
  • Anaerobic digestion
  • Micro combined heat and power (micro CHP) (limited to a pilot at this stage)

The tariffs available and the process for receiving them vary, depending on when the technology was installed, and whether the system and the installer were certificated under the MCS* scheme. (DJK Renewables are fully MCS certified). You will qualify for the full FIT payments if the system was installed after 1st April 2010 using an MCS* certificated product and installer and you can provide an Energy Performance Certificate that shows your home has an energy efficiency rating of band D or better.

Government Comprehensive Review of FITs

From 1st April 2012, following the Government Feed-in Tariff Comprehensive Review, solar PV tariffs based on systems <4kWp were re-aligned to 21p/kWH. Research conducted by Parsons Brinckerhoff for the Department of Energy & Climate Change (DECC) and published in January 2012, showed PV installation costs have fallen extensively. The report identified that the cost of a typical domestic installation was 45% less to install in 2011, compared to 2009.

The original tariffs were leading to typical rates of return for investors well in excess of the return they were intended to deliver and so the tariff rates were re-aligned to take account of lower installion costs and also to reduce government spending. However, as the cost of installation has fallen, we believe the rate of return on investment for a PV installation remains an attractive proposition.

The Tariff levels are set to reduce on a quarterly basis depending on market deployment. From 1st August 2012 the new rate for 4kW systems will be 16p/kWh and will be paid over 20 years instead of 25 years. The government still estimates a return of 6%. After that, the level will be assessed every three months, and frozen or cut depending on the number of installations in the quarter before. However, the export tariff is set to rise from 3.2p for every kWh exported back to the grid, to 4.5p/KWh after 1st August 2012. See further information on the Guardian website.

Energy Performance Certificate (EPC) requirement

From 1st April 2012 a domestic property must meet a specified minimum energy efficiency requirement to be eligible for the highest available tariff under the FIT. The Government have set this at Energy Performance Certificate (EPC) rating D or above. If it does not meet these energy efficiency requirements, the Solar PV installation may receive the lower tariff of 9p/kWh. This requirement to reach a minimum energy efficiency standard will also apply to extensions of existing PV installations. There are no transitional arrangements.

If the PV installation is not on a building or not on a building for which an EPC can be obtained, the highest tariff is still available so long as the solar PV system is wired to provide electricity to a building that it is possible able to obtain an EPC for. The Government state that for the 51% of dwellings that do not already meet the required standard, reaching a D rating may require the installation of some, but not all of the following measures:

  • loft insulation
  • cavity wall insulation (but not solid wall insulation)
  • heating controls
  • hot water cylinder insulation
  • installation of a replacement boiler

What sort of income/savings can I expect?

If you are eligible to receive the FIT then you will benefit in 3 ways:

  • 1. Generation tariff - A set rate paid by the energy supplier for each unit (kWh) of electricity you generate. This is irrespective of whether you use the electricity yourself or sell it back to the grid - you will be paid a regular guaranteed income for 25 years in the case of solar PV, just for generating the electricity. Once you join the scheme you will continue on the same tariff for the duration of the scheme (25 years for solar PV). The tariff is also index linked to RPI inflation.
  • 2. Export tariff - You will receive a further 3.1 pence/kWh from your energy supplier for each unit you export back to the electricity grid. This is surplus electricity not used on site. The export rate is the same for all technologies and again index linked to RPI inflation.
  • 3. Energy bill savings - You will be making savings on your electricity bills , because generating electricity to power your appliances means you don't have to buy as much electricity from your energy supplier. The amount you save will vary depending how much of the electricity you use on site.

Domestic FIT installations are likely to have their export deemed (estimated) at 50% in most cases until smart meters are rolled out.

A typical example

As an example shows from the Energy Saving Trust website, a typical domestic 3 kWp solar electricity system could earn:

  • £530 per year from the Generation Tariff (based on 21p/kWh)
  • £40 per year from Export Tariff (based on deemed value of 50% of electricity being exported at 3.1p/kWh)
  • £100 per year reduction in electricity bills (based on 12p/kWh, with 65% of electricity consumed on site)

This gives a total income/saving of around £670 per year. This assumes 65% of the electricity generated is consumed on site during daylight hours. If you have no smart meter then 50% of electricity generated is deemed to be exported to the grid. It therefore makes ecconomic sence to maximise the use of electricity generated on site by running appliances during daylight hours to reduce your electricity bills, and sell any surplus electricity back to the grid at the lower rate of 3.1p/kWh.

Installation and registration

You will require an additional electricity meter (known as a total generation meter), to measure the electricity that your system is generating. You will also require an export or feed-in/feed-out meter to measure the electricity being fed back into the grid.

You will be required to provide meter readings to the suppliers, usually every quarter, which is also the period that payments are typically paid from your supplier.

  • Once installed, we will register you on the central FIT database and you will then receive a certificate confirming FIT compliance.
  • You inform your chosen energy supplier that you are eligible to receive the FIT by providing the certificate.
  • The supplier will cross reference your installation with the central FIT database.
  • Payments will then be made by your energy supplier at intervals to be decided between you both.
  • You may be required to provide meter readings to the suppliers if requested.

A list of energy suppliers who can provide FITs can be found on the OfGem website.

If you want to opt out of the guaranteed export tariff you must inform the supplier. You may wish to do this if you opt for a power purchase agreement. (This is a legal contract between you and your electricity provider).

Tariff levels (from 1st April 2012)

Technology Scale Generation Tariff (pence/kWh) Tariff lifetime (years)
Solar electricity (PV) <= 4 kW 21.0 25
Wind <= 1.5 kW 36.2 20
Wind > 1.5 - 15 kW 28.0 20
Micro CHP <= 2kW 10.5 10
Hydroelectricity <= 15 kW 20.9 20

All generation and export tariffs will be linked to the Retail Price Index (RPI) which ensures that each year they follow the rate of inflation.

* The Microgeneration Certification Scheme (MCS) is an independent scheme that certificates microgeneration products under 50kW and installers in accordance with consistent standards. Any commercial or larger scale systems, over 50kW, and all anaerobic digestion installations must apply directly through the Renewables Obligation Order feed-in tariff process for larger installations (ROO-FIT) process as they are not covered by the MCS. Information on the ROO-FIT process is available on Ofgem's website.