Feed-In Tariffs (FITs)
As part of its commitment to the EU to source 15% of UK’s energy from renewable sources by 2020, the Government has confirmed its intention to introduce FITs effective from 1st April 2010.
The objective is to produce more than 30% of the UK’s electricity from renewables by 2020 – a stiff task given that output was only 1.8% in 2002 increasing to 5.5% in 2008. It is anticipated that 29% will come from large-scale projects with a further 2% from small-scale generation.
The Energy Act 2008 provided the enabling powers for the introduction of FITs and on 15th July 2009 the Government published a consultation paper on the subject inviting comments by 15th October 2009. FITs are a per-unit support payment specifically targeted at small-scale low-carbon electricity generation, up to a maximum limit of 5 megawatts (MW) capacity.
The Government published its response to the consultation on 1st February 2010 the key features of which are (relating to wind):
- A guaranteed payment from the electricity supplier for every kWh (unit) generated (the ‘generation tariff’)
- The FIT participation will have a 20 year limit – ie a generator will receive the FIT for a maximum period of 20 years
- A guaranteed minimum payment additional to the generation tariff for every unit exported (the ‘export tariff’) – a guide provided of 5p/unit but to be determined
- In addition to the generation tariff a generator may opt for a guaranteed minimum payment for every unit exported (the ‘export tariff’) at a fixed rate of 3p/unit (RPI linked). Alternatively, a generator may opt out of the export tariff and sell the electricity on the open market
- Generators will be able to off-set against power they would otherwise have had to buy
- The tariff will be reduced at a predetermined rate per year known as ‘degression’. The payments and level of degression for the next 5 years is set out in the table below. The level of payment will remain at the figure applicable when the turbine was installed. The degression is based on the concept that those investing in renewable technologies in the future will benefit from lower prices
- Generation & export tariffs will be linked to RPI
| Technology and scale | Tariff level for new installations in period (p/kWh) | ||||
|---|---|---|---|---|---|
1 |
2 |
3 |
4 |
5 |
|
| Wind - >1.5 – 15kW | 26.7 |
26.7 |
25.5 |
24.3 |
23.2 |
| Wind - >15 – 100kW | 24.1 |
24.1 |
23.0 |
21.9 |
20.9 |
- The payments will be made by the generator’s electricity supplier who (assuming they are not a small supplier) will be obliged to participate
- The scheme will be reviewed at intervals with the first major review planned for 2013
- Existing installations - Installations between 15th July 2009 and 1st April 2010 that are registered under the RO are eligible for FITs
- Pre 15th July 2009 installations that are registered under the RO will be eligible for the ‘transfer tariff’ of 9p/unit for the period up to 2027
- Off-grid installations will be eligible to FITs. Such generators will be administered and monitored through Ofgem
- The issue of grants and eligibility to FITs remains unclear. Whilst the level of grant payments received through the RDPE are unlikely to cause difficulty with state aid rules it is not clear whether a farmer/rural business may receive both. The response says that ‘this will be monitored on a case-by-case basis’. We (along with many others) are seeking clarity!
- Technologies must be accredited under the Microgeneration Certification Scheme (MCS) and must be installed by an MCS accredited installer
- Multi installation sites (ie more than one turbine) will be eligible but the capacity of the site will determine the banding for the FIT
- Income tax – Exemption for domestic installations where export not excessive
- Generators may assign FITs to a third party
