UK Government's Feed-In Tariff
On April 1, 2010 the Government launched its Feed-In Tariff.
Also referred to as the ‘FIT’, the incentive pays people who create their own green electricity using solar PV panels and other renewable technologies.
Out of all the renewable technologies associated with the tariff, solar has so far been the most popular.
Anyone – from households, landlords, businesses and communities – can take advantage of the tariff, which is overseen by Ofgem, which regulates the electricity and gas markets in Great Britain.
The Feed-In Tariff guarantees a minimum payment for all electricity generated by solar power. This is known as the Generation tariff. As well as this, there’s an additional payment for the unused electricity produced that can be exported to the grid, known as the Export tariff. These payments will create household savings as bills will be reduced by using electricity generated on-site.
Facts about the Feed-In Tariff
- Anyone who installs a solar PV system with a capacity of five megawatts or less is eligible.
- Solar PV tariffs are paid for 25 years. Others are 20 years.
- Tariffs are index linked so they follow the retail price index.
- Between April to September 2010, Ofgem registered 11,370 renewable installations.
- Solar PV is the most popular green energy associated with the tariff.
Profiting from the Solar Feed-In Tariff
There are three main ways to earn or save money from the FIT.
- With the Generation tariff you will receive payments for each unit or kWh of electricity produced. How much you receive from the tariff is dependent on the size of your solar installation.
- The Export tariff pays an additional 3p per kWh for each unit of electricity exported to the grid.
- Thirdly, you will make notable savings on your energy bills. It is estimated that an average three to four bedroom house fitted with 2.5kw solar PV panels and normal electricity usage will earn over £850 a year.
The cost of solar PV
For homeowners, installing solar PV will cost between £4,000 to £6,000 per kWp, plus a fixed cost of approximately £2,000 to £3,000. The type of installation and the panels used will result in different costs. An average 2kWp system will cost around £9,000 to £12,000.
According to the Government, the savings made by the Feed-In Tariff should cover the cost of your initial installation and produce a return of eight per cent.
Funding and Offers
Households wishing to install a solar system, but needing help with the funds can look into extending an existing mortgage. This option will be dependent on a good payment history and no affordability issues.
Some companies are offering to install solar PV for free on residential roofs otherwise known as 'rent-a-roof' schemes. With this type of partnership the homeowner would receive the free electricity, while the company collects the tariff income. These schemes are suitable for consumers not wishing to move in the near future and not wanting to reap the considerable benefits offered by the feed-in tariff, you will however receive free electricity.
If you have access to adequate funds it is more beneficial to finance the installation yourself. By owning the system you can benefit directly from tax free earnings via the feed-in tariff and generate your own electricity for free. You can calculate potential earnings and payback via our solar feed-in calculator.
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