Feed-in tariffs encourage micro-energy generation
Posted by DavidM in Electricity, Solar, Wind | 8 September 2010
The Feed In Tariff (FIT) was introduced in April this year as an incentive for households to reduce their carbon footprint by generating more of their own electricity.
It is estimated that 27% of the UK's carbon footprint is generated by our homes so reducing energy use of households is a key part of any attempt to reduce our environmental impact.
FIT essentially means that if you generate your own energy - whether by solar panels, wind turbines, hydro or anaerobic digestion - the energy companies will pay you for all energy that you generate, whether you use it or feed it into the grid. By setting the payments high initially and guaranteeing rates upfront to 2020, it makes the decision to install your own power more certain and attractive.
An average solar power installation costs £10,000 to £14,000 and with the fixed tariffs and estimated annual energy production wil pay back in around 10 years. After that you could be earning over £650 a year.
So how does it work?
You need to have an installation carried out by a Microgeneration Scheme Accredited (MSA) supplier. This will include both the energy generating system (e.g. solar or wind) as well as an export meter that allows electricity to flow back into the grid.
Once installed, energy generated will be used to meet your own electricity needs first, for which you'll be paid the Generation Tariff, currently set at 41.3p/KWp for solar. If you generate more than you use the remainder will be fed into the grid for which you receive the Export tariff (3p/KWp). If you use more electricity than you generate then you pay for this from your normal supplier.
These fees decline on a sliding scale until 2020 and apply to households generating less than 4KWp with an installation between April 2010 and April 2012. Other rates apply for other energy types and sizes.
While this is a big step forward and will persuade more people to invest in cleaner microgeneration, £10,000 is still a significant investment for most homeowners.
The good news is that FIT has led to a number of energy suppliers offering a rental option. In this case, they effectively rent your roof space for free - usually for 25 years - and install solar power. All electricity it generates that you use is free, saving you money against your energy bills without any outlay. The energy provider pays for the install and takes the gerneation and export tariff payments to cover costs and make a profit.
The only downside is that the agreement is for 25 years so you have to be prepared to make the commitment. If you are considering getting solar panels anyway it's the less attractive option, but if you won't consider the upfront payment it's an easy, free way to reduce bills.
Suppliers currently offering the rental option include British Gas, ISIS and A Shade Greener (ASG). From the review on Solar Power Portal it seems like the last two at least are struggling to cope with huge demand for the service.
Comments
The free solar panel option is a good idea if you are planning to stay in your home over the long term and you cannot afford to pay for the panels yourself.
As this idea is still pretty new it does still seem quite vague as to exactly what happens if you do decide to move as the contract seems to be with the home owner rather than based on the home.
