Tag Archive: Feed In Tariff

Rising energy prices

Whilst the abundance of shale gas in the US has caused energy prices to plummet, in the UK British Gas has announced an expected price increase in the next two months – it raised residential gas prices by 6% last November.  If it does, the other “Big 5” will follow suit blaming the cost of implementing the Government “Energy Company Obligation” scheme to help the lower paid insulate their homes.   In addition, prospective increases in “Green” surcharges such as Renewables Obligation and Feed In Tariffs mean that energy is going to become increasingly expensive.   Whereas previously “best advice” was to opt for short-term contracts to enable switching if one supplier became uncompetitive, it now worth considering locking in to a longer contract to give certainty over future costs.

Rising energy prices

Before you fit a new boiler…

Education Item:

The UK government wishes to encourage the use of renewable energy sources in the home.  It subsidises renewable electricity production via Feed In Tariffs (FiTs).  The Treasury will subsidise certain types of heating from renewable sources.  These subsidies are called Renewable Heat Incentive (RHI) payments.  Unlike FiTs, RHI payments will be paid for by the government – FiT payments are recouped from energy customers.  RHI payments  for commercial installations are already available, but domestic RHI payments have been postponed with an anticipated start of spring 2014.  However, households who have installed eligible technology after 15th July 2009 will be eligible for domestic RHI payments when available.

Although yet to be finally decided, eligible technologies are likely to include ground source heat pumps, air source heat pumps (that heat water), biomass boilers and solar thermal systems.  The equipment and the installer must be accredited under the Microgeneration Certification Scheme (MCS).  Householders face two further hurdles to qualify:

a)      They must obtain an Energy Performance Certificate including a Green Deal assessment.

b)      They must install any insulation measures (excluding solid wall insulation) identified by ‘green ticks’ under the Green Deal assessment.  ‘Green Tick’ measures are those which would pay for themselves within 20 years and therefore qualify for Green Deal funding.

The Energy Saving Trust website describes the extent of the domestic RHI payments as follows:

“Payments for householders over seven years for each kWh of heat produced for the expected lifetime of the renewable technology and based on deemed heat usage.”

Until 31st March 2014 a “one off” government voucher of between £300 and £1250 is available towards the cost of installation, called the Renewable Heat Premium Payment (RHPP).  Recipients of RHPP can also claim RHI payments.  Further details can be found here.

Before you fit a new boiler…

FiTs

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.

FiTs