Feed-in Tariffs – taking control of our energy use
The final proposals for the Feed-in Tariffs for Renewable Electricity were launched on 1st February 2010. The Feed-in Tariffs (Specified Maximum Capacity and Functions) Order 2010 was laid before Parliament on the 10th March with a scheduled start of 1st April 2010.
FITs will pay the everyday electricity consumer, including households, businesses, farmers, local authorities, schools, hospitals and others, for every kilowatt hour (i.e. “unit”) of renewable electricity they generate themselves. This payment will continue for up to 25 years.
In addition, each sur plus kilowatt hour of electricity exported back to the grid will receive a minimum payment of 3p kWh. The maximum size of renewable electricity installation allowed will be 5MW (5 megawatts), allowing community schemes, or industrial users to benefit from the tariff scheme.
Investors will be paid for their renewable generation by their normal electricity supplier, from whom they will still purchase any “top up” and to whom they can sell any surplus exported power, unless they find an alternative buyer.
Payments to any project remain fixed throughout the duration of the tariff. However those joining the scheme in the first 2-3 years will be paid a higher tariff rate. The rates will de crease for those starting
later for some technologies. This is because technology costs are expected to fall over time.
The aim of FITs is to kick-start the mass deployment of renewables to help meet our renewable targets and ultimately to bring technology costs down to “grid parity” where public support will no longer be needed. The REA believes that with the right support, technologies like PV solar panels will reach grid parity around 2020. Experience overseas has shown that costs typically fall by 20 per cent every time the number of installations doubles. Feed-in tariffs have halved the price of electricity from solar photovoltaics (PV) in Germany within a decade.
FITs are already in use in more than 40 countries around the world. They have successfully helped to boost renewables deployment, drive down the costs of renewable energy, increase energy security (i.e. reduce dependence on imports) and reduce carbon emissions. Many of the countries that have adopted feed in tariffs now benefit from strong renewable manufacturing industries, which create employment and export revenue.
FITs will also bring investment and participation in energy from far beyond the traditional energy sector. International experience shows FITs are extremely effective at attracting investment from homeowners, farmers, community-schemes and the public sector, as well as the commercial sector.
From April, anyone or any organisation that invests in renewable power schemes up to 5MW can benefit from FITs. At the smallest end, a typical home might have a 2kW system fitted; at the largest end a community might install three large wind turbines totalling 5MW, to power thousands of homes. In between will be all types of technology and investor from community micro-hydro schemes, to district heating schemes, to schools generating their own electricity through solar PV panels. All technologies for homeowners will be performance-approved under the Microgeneration Certification Scheme. This scheme also approves installers of renewable technologies. The REA recommends looking for companies approved by the REAL Assurance scheme which denotes a high level of consumer care and protection.
The cumulative subsidy cost of the scheme to 2030 is estimated by DECC at £6.4bn and this cost is shared among all users of electricity, including the public, business and commercial sectors. The payments are made through a levy on the bills of all electricity consumers.
The Government is currently looking at ways for Local Authorities to use projected, future tariff income to raise capital for the initial installation of renewable technologies.
The REA campaigned for this measure alongside Friends of the Earth and other organizations as part of the Tariff Coalition. We cam paigned for FITs because it is more straightforward for electricity consumers than the Renewables Obligation.
The Renewables Obligation is designed for larger power projects, and this continues to be UK’s main policy for boosting renewable electricity generation. It is appropriate for those in the business of power project development, but less suitable for ordinary electricity consumers with a renewable energy installation.
Consumers require long-term, stable frameworks that enable them to plan and invest. The steady nature of the FIT scheme helps deliver at tractive rates of finance. FITs will put people in charge of their own energy use, revolutionising UK energy generation.
