Feed In Tariffs (Clean Energy Cashback Scheme)

The Government’s new feed-in tariff (FIT)  comes into effect in April 2010.  This cashback scheme will pay a premium rate for electricity generated from renewable sources such as solar PV – fixed for up to 20 years.  The feed-in tariff means that the payback period for solar PV systems will drop significantly and net income can now be reliably predicted.

The full details of the Feed In Tariffs (Clean Energy Cashback  Scheme) were published on 1st February 2010 and set out the conditions, eligibility criteria and payment levels that will be applicable to different types and sizes of installations. Owners of elegible solar PV and wind energy systems of up to 5MW will be paid a fixed rate payment for every unit or kilowatt hour (kWh) of electricity that they generate.  This generation rate will be paid on all electricity generated by the system even if it is used at the site.   An additional export rate will be paid for any surplus electricity that is exported to the national grid.   Feed-in tariff payments for domestic properties will be exempt from income tax. Owners will also benefit from savings on their electricity bill as a result of the electricity they no longer need to buy.

As of 31 Dec 3012, the rates take into account rise in Retail Price Index (RPI) which was 4.8%.

The tariff rates that apply to solar PV installed systems between 1 February and 30 June systems are detailed here. These tariff levels have been calculated to offer between 5-8% return on initial investment in the technology.

Once entered into the scheme, each installation will receive the same level of payment for electricity generated throughout the lifetime of the tariff (subject to retail price index- linked inflation).  In the case of solar PV systems, the tariff lifetime is 20 years. It should be noted that the tariff level does not change for installations that enter the scheme in the first and second years of its operation but from 1st April 2012 there will be an annual reduction (degression) in the payment rate for which new installations entering the scheme will be eligible.

The feed-in tariff payments will be made to the owner of the system by licensed electricity suppliers.    From 1 April 2010 FITs will be the only support available for installations with an installed capacity of 50kW and below that are eligible for FITs.   Installations that were completed before 15 July 2009 will not be eligible for FITs unless they had applied for accreditation under the Renewables Obligation before 31 March 2010.

Example of a typical Feed In Tariff, for a 4KWp system

FIT Payment £721.00 per year index linked and tax free
Export Payment £21.00 per year tax free and index linked
Electricity Saving £331.00 per year
Carbon Footprint saving an estimated 1.82T
Total Benefit £1073.00

With the price of electricity set to rocket the benefits could be even greater.

 In considering the benefits of the feed-in tariff, it is also worth noting that;

1. Lifespan
The expected life of a PV system is around 50 years – so system owners will continue to benefit from their solar generated electricity for many years, long after the system has been fully paid for by the FIT payments.

2. Added Value
Is it hard to state an exact figure, due to the property market at present, but a Solar PV system will add significantly to the value of your property.

For a full list of tariffs, please visit FITs table from Ofgem taking into account the Retail Price Index.

The feed-in tariff  has revolutionised  the market for Solar PV systems – if you wish to discuss a project or to learn more about the potential benefits – contact us.