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Renewable Heat Incentive
© 2003-2012 SolarEssence® | Solar PV & Solar Heating Specialists
The Original FIT Scheme Explained Below
Also known as the Clean Energy Cash Back Scheme
The feed in tariff is a new scheme announced by the Government on February 1st 2010 to reward homeowners for generating clean renewable electricity. Homeowners who have a solar electric PV panel system installed from July 2009 onwards will benefit from the scheme and start earning returns from April 1st 2010.
1. Purpose of the scheme.
Renewable electricity is an alternative form of electricity generated from sources that releases much less CO2 into the atmosphere. A barrier to generating renewable electricity yourself can be the very high up front costs. To encourage more people to generate their own electricity the Government has created the Clean Energy Cash Back Scheme (or Feed in Tariffs). This creates an opportunity for everybody to become electricity generators. The scheme exists in Scotland, England and Wales but does not run in Northern Ireland.
Encourage more renewable electricity generators
2. Description of the scheme
The Feed-in Tariff (FIT) guarantees you a minimum payment for each unit of electricity you generate from renewable sources. This means that anybody that wishes to invest in buying and installing eligible technologies can be confident that the cost of their investment will be recovered. The name comes from the German system where generators were given a fixed price for every unit of electricity they exported to the grid. In the UK the Government calls it the Clean Energy Cash back Scheme. The scheme is different from the German scheme because in the UK (currently excluding Northern Ireland) the generator is paid for every unit they generate, even if they use all the electricity themselves (the generation tariff. If the generator does export electricity to the grid they will be paid an extra tariff on top of the FIT (export tariff).
You are paid for every unit you generate & extra
for selling unused units back to the grid
3. Length of the scheme
The FIT will last 20 years for all eligible renewable electricity generators, and 25 years for solar photovoltaic (PV). The FIT will be index linked so it will increase each year by the rate of inflation (RPI). The scheme will be reviewed every 5 years and due for the first review in 2013. The tariffs will be reviewed annually (from 2012) to ensure the tariff rates provide the correct rate of return. Generators who install systems between 15th July 2009 and 31st March 2012 will receive the current tariff. After 31st March 2012 new installations could receive a lower tariff (see 8.2, degression). This new tariff will be guaranteed for the full length of the scheme (20 -25 years) from the installation date.
Payments are guaranteed for 20 yrs (25yrs for PV)
4. Eligible technologies
The table below shows the main technologies that are eligible for the FIT and covered by the REAL Assurance Scheme and how much you will earn if your system is installed between 15 July 2009 and 31 March 2013. (Note: Tariffs will increase with inflation annually).
Tariff level for new installations in period 2012-2013 (pence/kWh)
|
Technology |
Scale |
Year 1: 15/7/09 – 31/3/11 |
Year 2: 1/4/11 – 31/3/12 |
Year 3: 1/4/12 – 31/3/13 |
|
Hydro |
≤15 kW |
19.9 |
19.9 |
19.9 |
|
PV |
≤4 kW (new build) |
36.1 |
36.1 |
33 |
|
PV |
≤4 kW (retrofit) |
41.3 |
41.3 |
37.8 |
|
PV |
>4-10 kW |
36.1 |
36.1 |
33 |
|
PV |
Stand alone system |
29.3 |
29.3 |
26.8 |
|
Wind |
≤1.5kW |
34.5 |
34.5 |
32.6 |
|
Wind |
>1.5-15kW |
26.7 |
26.7 |
25.5 |
|
Wind |
>15-100kW |
24.1 |
24.1 |
23 |
|
MicroCHP |
<2 kW* |
10* |
10* |
10* |
*FiT for MicroCHP is a pilot scheme, limited to the first 30 000 installations.
** For information on systems installed before 1st of April 2010 follow the link to the Energy Saving Trust’s webpage on FITs
A full table of eligible technologies and their FIT bands is available on the Department of Energy and Climate Change Website (DECC).
If you do not use all the electricity you produce you will also receive 3 pence for every kWh you export back to the grid (the export tariff). It may be possible for you to negotiate a better export tariff with your electricity supplier though they may only be interested in larger installations.
5. Example
A typical home uses 4500 kWh (units) of electricity annually. A 2kWp solar PV system would generate around 1700 kWh per year. Installed on an existing house the generation tariff would be 41.3pence per kWh.
Generation Tariff Income
The annual income from the tariff would be £702.10.
Number of Units Used/Exported
A typical household would use around 50% of the electricity (850kWh) and export 50% to the grid..
Export Tariff Income
The export tariff is 3 pence for every unit that you export back to the grid.
Savings from Reduced Grid Electricity
There is also the added benefit that you will use some of the electricity generated, meaning that you will import less electricity from the grid. If you use 50% (850kWh) that will save around 12 pence per unit.
Total Benefit
You can calculate how much your particular system might earn you using the ‘Cash back Calculator’ on the Energy Saving Trust website found here.
6. Qualification
The Microgeneration Certification Scheme (MCS) is an important quality assurance mechanism that sets out both:
- standards for installers of small-scale heat and power generators; and
- standards for small-scale heat and power generating products.
To qualify for the FIT your renewable electricity generator must be installed by an MCS certified installer. The products must also be MCS certified.
Check the MCS website to see which installers and products are listed.
All products and installers must be
MCS certified for you to qualify for the FIT
Members of the REAL Assurance scheme must abide by the Consumer Code designed to ensure high standards of service. The REAL Assurance Scheme is part of the Office of Fair Trading (OFT) self-regulation Consumer Code Approval Scheme. MCS-certified installers must belong to an OFT backed Code.
Check the REAL Assurance Scheme website to see which installers are registered and what you should expect from a REAL member.
The REAL Assurance Scheme Consumer
Code is to protect consumers
7. Installing a system and claiming FITs
Before you sign a contract the installer should survey your site to ensure it is suitable for a particular technology.
For example:
- shading from trees and buildings would have a substantial effect on the performance of PV solar panels.
- trees, buildings, hills etc. can have an effect on wind speed and cause unwanted turbulence, affecting the performance of wind turbines.
Once your system has been installed, the MCS installer will provide you with a certificate of installation and register the installation with Ofgem on the central FIT register. You must then inform your chosen electricity supplier that you are eligible for the FIT and provide the MCS certificate to them. The electricity supplier will then cross-check the installation with the central FIT register. Payments will then be made by the energy supplier on a quarterly basis (unless otherwise agreed).
For a complete list of the Licensed Electricity Suppliers follow the link to the Ofgem webpage:
http://www.ofgem.gov.uk/Sustainability/Environment/fits/rfitls/Pages/rfitls.aspx
Generation
income
Export
income
Savings on current bills
Total value
Generation
Tariff
£0.413
Number of Units
1700
Tariff
Income
£702.10
No. of units generated
1700kWh
Percentage exported
50%
Export tariff units
850kWh
Export units
850kWh
Export tariff
£0.03
Export
income
£25.50
Units used
850kWh
Average tariff electricity
£0.12
Total import costs saved
£102
Tariff
Income
£702.10
Export
Income
£25.50
Import costs saved
£102
Total annual benefit
£829.60
2.5kWp installed January 2011
2.5kWp installed October 2011
Total capacity 5kWp
Eligible to claim 36.1/unit
2.5kWp installed January 2011
2.5kWp installed February 2011
2.5kWp at 41.6p/unit
2.5kWp at 36.1p/unit
Your installer carries out a site survey
Your installation is carried out by an MCS certified installer
The installer registers your installation on the MCS/Ofgem
central FIT register and provides you with a certificate
You inform your electricity supplier who checks the
central FIT register corresponds to your certificate
Your electricity supplier will then make payments
to you on a quarterly basis
8. The future
8.1 Inflation
The Tariffs are index-linked which means they will increase (or decrease) with inflation (RPI index). The tariffs will be adjusted annually from 2012 to ensure a positive return on investment (ROI )of 8-10%.
FITs will increase with inflation
8.2 Degression.
Systems installed after April 2012 will still be eligible for FITs but the rate of the FIT tariff may be adjusted to reflect the costs of the technologies. As the technologies improve and the volume of installations increases the costs of installing should decrease.
Systems installed after 2012 could get lower tariffs
8.3 Expansion
Two or more different technologies can be installed at the same site and be paid separate tariffs. (e.g. PV solar panels and a wind turbine).
If two installations of the same technology are installed at the same site within 12 months of each other they will be regarded as one installation – the combined capacity of the installations will determine the FIT. E.g. 2.5kWp PV system installed in January 2011 and another 2.5kWp installed in October 2011. The combined installed capacity is 5kW therefore the FIT is 36.1 pence per unit for the generation tariff.
Two Installations Within 12 months
If there are two installations of the same technology at the same site, installed more than 12 months apart, the first installation keeps the existing band and the second installation enters the band for the combined capacity.
Two Installations 12 months Apart
9. Electricity suppliers
FITs are paid to you by Licensed Electricity Suppliers approved by Ofgem, they are not paid by the government. The licensed suppliers raise the money for the FIT by charging a small premium to all of their electricity customers. They are also permitted to charge for administration costs. It is predicted that by 2020 each electricity customer in the UK will have to pay roughly an extra £10 on their annual bills to cover this. Once a year the LESs will settle the amount they have paid between them to ensure consumers are all charged the same surcharge on their bill.
You do not have to register with your existing electricity supplier, but can choose another one, as long as you choose one of the Big Six (EDF, ScottishPower, British Gas, Scottish and Southern, E.on, Npower) but you do not have to switch. If you choose a smaller Electricity Supplier they may insist you switch your supply to them. For a full list of the Licensed Electricity Suppliers visit the Ofgem website:
http://www.ofgem.gov.uk/SUSTAINABILITY/ENVIRONMENT/FITS/RFITLS/Pages/rfitls.aspx
The scheme is not funded by tax-payers -
It is paid for by all electricity consumers
10. Grants
Previously there were grants available for renewable electricity and heat generators under the Clear Skies Scheme and then later the Low Carbon Buildings Programme. These have now finished. Generally, systems that were installed using these funds will not be eligible for FITs. If you have received a grant you may be able to return it so that your system becomes eligible for FITs instead. There are circumstances where some grants will not affect your eligibility to claim the FITs, particularly in Scotland. For more information on grants see the Energy Saving Trust website.
For England and Wales
http://www.energysavingtrust.org.uk/Generate-your-own-energy/Grants-offers-UK
For Scotland
http://www.energysavingtrust.org.uk/Generate-your-own-energy/Grants-offers-Scotland
For Northern Ireland
http://www.energysavingtrust.org.uk/Easy-ways-to-stop-wasting-energy/Energy-saving-grants-and-offers
10. Further reading
Download the Governments consultation on renewable electricity financial incentives (2009)
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Proposed changes to Feed-In Tariffs
How does this affect me?
This guide has been written with a householder in mind to provide an overview of proposed changes to the Feed-in Tariffs (FITs) scheme. It focuses on the proposed tariff changes for solar photovoltaic (PV) installations with a capacity of 4 kW or less.
The Energy Saving Trust website provides a wealth of information about your options:
www.energysavingtrust.org.uk/FITSreview their helpline number is 0800 512 012.
For complete details of the proposals, including the proposed tariffs for larger PV installations, please visit: www.decc.gov.uk/FITS
On 31 October, the Government announced proposed changes to the FITs Scheme for small scale low-carbon electricity generation. These proposals could have an effect on the rate of FITs payments you will receive if you install solar PV. If the proposals are agreed following consultation, you will be affected as follows.
If you already have an eligible solar PV installation with a complete and valid Microgeneration Certification Scheme (“MCS”) certificate, and your FIT licensee (an electricity supplier) has received your application form and MCS certificate, there will be no change. You will continue to be eligible, for 25 years from the eligibility date of your installation, to receive the current rate which is 43.3p for each kWh of electricity you generate.
If you are in the process of installing, or are about to start doing so, and your installation is completed and your FIT licensee (an electricity supplier) receives your application for FITs together with a complete and valid MCS certificate before midnight on 11 December 2011, you will be eligible to receive the current rate for each kWh of electricity you generate.
If you are in the process of installing, or considering installing PV, but do not both complete the installation and ensure that your FIT licensee (an electricity supplier) receives your application for FITs together with a complete and valid MCS certificate before midnight on 11 December 2011, you will receive 43.3p for each kWh of electricity you generate between the date your application is received by your FIT Licensee and 31 March 2012. From 1 April 2012 you will receive a lower rate of 21p per kWh generated for the remainder of the 25 years eligibility period.
In addition, if you complete the installation and your FIT licensee (an electricity supplier) receives your application for FITs together with a complete and valid MCS certificate on or after 1 April 2012, you will be required to demonstrate that the building to which your installation is attached or wired meets specified energy efficiency requirements in order to be eligible for the new 21p tariff.
The consultation paper contains more details of the proposed requirements. If you do not meet these requirements at the time you apply for FITs (or, for a transitional period, within 12 months afterwards), you would receive a lower tariff of 9p per kWh. The installer you choose needs to be accredited by the REAL assurance scheme which will protect you from bad practice.
More information is available via the REAL website www.realassurance.org.uk.
Why is the Government proposing these changes?
The FITs scheme was designed to promote the take-up of small-scale low carbon electricity generation – largely through the installation of solar PV installations - by domestic consumers and others. Take-up has been much higher than envisaged, and the costs of installing PV have fallen by around 30% since the scheme started. The returns available to customers installing PV are therefore much higher than originally envisaged and are unsustainable without imposing a significant increase on the average electricity customer’s bill.
The proposed changes will not affect those who have already installed PV and are registered for FITs, but are designed to reduce the tariffs for new installations in the light of developments such as the falling costs of installing PV. The proposed changes also aim to link FITs in future with improvements in energy efficiency which is one of the most cost-effective ways of reducing carbon emissions. The average rate of return for people receiving the proposed new rate of 21p per kWh is expected to be around 4.5%.
Why has the Government chosen 12 December as the cut-off date?
12 December is 6 weeks from the launch of the consultation on 31 October. This is to allow those who have already paid a deposit a reasonable period to complete their installation and apply for FITs.
What you have to do to ensure you have a valid application in time?
The important deadline is 12 December. Before this date, i.e. by midnight on 11 December, your FIT licensee (normally your electricity supplier) must have received your application for FITs and a valid MCS certificate for your installation. You should check in advance with your FIT licensee about the application process for FITs (noting in particular that 11 December is a Sunday), and obtain a copy of their application form. For maximum certainty, we suggest you consider using Royal Mail Special Delivery or a similar alternative from another delivery company which provides proof that the application has been received.
How certain are these changes?
The Government is currently consulting on these proposals. This consultation will continue until 23 December. The Government may, following receipt and analysis of these consultation responses, change some or all of the detail of the proposals. But it will not bring forward the cut-off date any earlier than 12 December, or the date for reduction of tariffs to before 1 April 2012. To take part in the consultation please visit www.decc.gov.uk/FITS
Discover how Solar Essence can still offer you exceptional returns under the new tariff rate of 21p!
