Renewable Energy Solar Panels and Wind Turbines
LEADING THE WAY WITH RENEWABLE ENERGY
Feed–In Tariffs
The long awaited “feed-in tariff” for renewable electricity was introduced in April 2010. This will be followed by a “Renewable Heat Incentive” for solar water heating and other heat producing renewable energy technologies in April 2011.
How will the feed-in-tariff work?
There are three elements to the new feed-in-tariff:
- A Generation tariff: a payment for every unit of electricity (kWh) generated by the system
- An Export tariff: an additional payment for every kWh exported to the grid
- Free on-site use of any electricity generated by the system which will reduce electricity bills
The generation tariff levels are given below:
| Technology | Scale |
Year 1 |
Year 2 |
Year 3 |
PV |
< 4 kW - new build |
36.1 |
37.8 |
37.8 |
PV |
< 4 kW - retrofit |
41.3 |
43.3 |
43.3 |
PV |
4-10 kW |
36.1 |
37.8 |
37.8 |
PV |
10-100 kW |
31.4 |
32.9 |
32.9 |
PV |
100 kW-5 MW |
29.3 |
30.7 |
30.7 |
PV |
Stand alone system |
29.3 |
30.7 |
30.7 |
Wind |
<1.5 kW |
34.5 |
36.2 |
36.2 |
Wind |
1.5-15kW |
26.7 |
28.0 |
28.0 |
Wind |
15-50kW |
24.1 |
25.3 |
25.3 |
Wind |
50-250kW |
18.8 |
25.3 |
25.3 |
Wind |
250-500kW |
9.4 |
9.9 |
9.9 |
Wind |
500kW-5MW |
4.5 |
4.7 |
4.7 |
Existing micro-generators transferred from the RO |
9.0 |
9.4 |
9.4 |
|
The export tariff will be set at a minimum of 3.1p / kWh, although users can sell their exported electricity to other suppliers who may be willing to pay a higher price.
Both the export tariff and the generation tariff are index linked and so rise with inflation.
The tariffs will be paid for 20 years for new projects (25 years for solar PV) and the scheme will be reviewed after 3 years. Payments will be made on a quarterly basis by the electricity suppliers.
On the 1st April 2012, the tariffs payable for new installations will decrease, and further reductions will take place on an annual basis. Payments for systems installed before that date will continue to receive the higher tariffs for the full 25 years. The decrease is to take into account the expected reduction in system prices over time.
Please note that tariff levels for systems larger than 50kW are being reviewed and are likely to be subject to substantial reductions. Any changes will take place from 1st August 2011 and will not be retrospective.
Eligibility
UK Tariffs will be available for eligible technologies up to 5MW in size. The tariffs will not apply to systems above 5MW, as these will continue to be supported by the Renewables Obligation (RO). Electricity generating projects can be supported by the tariffs or the RO, but not both. Off-grid systems and private wire schemes are eligible for FITs.
Installations which are smaller than 50 kW and which are completed after mid-July 2009 will be eligible for FITs.
Installations between 50kW – 5 MW and which are completed after mid-July 2009 can choose between the Renewables Obligation or FITs.
What’s the payback period?
We estimate that for a solar PV system of 100 kWp, payback periods can be as low as
7 years, whilst for a small 2 kWp domestic solar PV system, the payback is around 10 years.
For a wind turbine on a good site, payback periods can be less than 5 years.
However it is important to realise that many assumptions go into calculating payback periods and they can be easily manipulated. For large systems, it is more useful to consider accepted financial parameters such as Internal Rates of Return and Net Present Values.
Who pays the costs?
The government estimates that the scheme will add £6.50 to electricity bills by 2015.
Assigning rights
The government proposes that a generator may assign the rights to the FITs payments to someone else through a bilateral agreement. For example, a housing association may finance the installation of solar PV systems on their houses and assign the rights to the income to their tenants (to alleviate fuel poverty) so that the tenant can claim the FITs from the electricity supplier.
