Feed-in tariffs to tempt householders?

Installing solar panels was for long more a statement of your environmental credentials than a realistic financial proposition. This has changed with the introduction of feed-in tariffs (FITs), also called the 'Clean Energy Cashback' scheme. From April 2010 small-scale renewable energy installations of up to 5 megawatt (MW) capacity will benefit from support payments, or tariffs, from your electricity supplier. These payments currently apply to electricity generated by solar panels, wind turbines, anaerobic digestion, and hydro-power. However, different rates apply to the different technologies.

The feed-in tariff comprises two elements: a generation tariff, or fixed payment for every kilowatt hour (kWh) generated, and an export tariff, or an additional payment for every kWh exported to the grid. This system is similar to ones running in many other EU countries, and is designed to encourage the on-site use of electricity generated. This helps to reduce energy losses associated with electricity distribution via the national grid.

Secure financial returns

The FITs payments effectively guarantee a market and price for renewable electricity microgeneration, for 20-25 years, and the government hopes that this will provide the long-term financial security to make the initial investment more attractive. The householder will also gain greater energy independence, and some protection against future rises in energy prices.

Both the technology and installer selected must be certified under the Microgeneration Certification Scheme (MCS), which is intended to provide assurance and protection to consumers. The generator (i.e. householder) is then required to register the installation on the FIT database, with details of the site, technology and ownership, and receive accreditation. The householder receives a certificate, and presents this to the energy company, which will then make arrangements for payments of the tariff. When a property changes hands, the ownership rights, and corresponding FITs payments, will transfer to the new owners.

Tariff levels

The government aims to provide a return of 5-8%, so the initial FITs vary to match the divergent costs and outputs of the different types of microgeneration schemes. The rate of FIT for new installations on certain technologies will fall in subsequent years, a process called 'annual degression'. This is to reflect expected decreases in capital costs. This degression does not apply to existing contracts, hence the sooner you take up the scheme, the greater will be the payback. Tariffs will be paid for 20 years, or for 25 years in the case of solar PV, and will be adjusted in line with inflation. Full details of tariff levels are given on the DECC website; just click here.