Feed-In Tariffs (“FiTs”) are the government’s second-tier mechanism to stimulate domestic/small commercial renewable electricity generation. Since its introduction on 1 April 2010, 285,000 installations have been registered of which 91% are Photovoltaic (“PV”) and overwhelmingly domestic (70%) – (the period April-June 2012 saw PV comprise 99% of new registrations). Wind, PV, biogas and hydro energy generation plants are potentially eligible provided their specified maximum capacity does not exceed 5MW (plus a pilot scheme for domestic scale microCHP). All installations must be accredited in order to qualify for FiTs – most sub 50kWh installations can receive automatic certification under the Microgeneration Certification Scheme (MCS) provided approved suppliers/equipment has been employed. Anaerobic digestion installations of any capacity, hydro installations up to 5MW and other installations between 50kW and 5MW must apply for ROO-FIT accreditation. Plants with outputs between 50 kW and 5 MW can elect instead to join the RO scheme.
FiT tariffs vary according to the plant’s eligibility date and, for solar PV, the host property’s Energy Performance Certificate (EPC) rating. Generators are permitted to sell their output to a FiT licencee (usually an electricity supplier) at rates set annually by the Gas and Electricity Markets Authority. Major energy suppliers are legally bound to pay FiTs and most smaller suppliers have followed suit. Generators receive two FiT payments:
a) for power generated and consumed, at set rate per kWh of electricity, guaranteed for the period of the tariff (up to 20 years) and index-linked (current tariffs range from 7.1p/kWh to 35.8p/kWh)
b) for power generated but exported to the grid, (currently 4.5p/kWh)
Most domestic installations lack the “smart” metering required to monitor exported power so an export percentage of 50% is assumed – for systems above 30kW an export meter is obligatory. FiTs are taxable, however in the case of domestic systems where generation does not greatly exceed consumption some concessions are available.
Licensed Electricity Suppliers make FiT payments to renewable generators from whom they purchase power, and contribute to Ofgem E-Serve’s Levelisation Fund in proportion to their market share. Ofgem administers periodic levelisations to correct imbalances between market share, fund contributions, and FiT payments already made. Suppliers then recover their costs by surcharging business and domestic energy bills – current levels are in the order of 0.118p/kWh.