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Guide to Feed-In Tariffs – What You Need to Know

As part of the Energy Act 2008 the government introduced a new incentive to encourage energy consumers to generate some of their own energy from renewable energy sources such as solar power or wind power. This is known as the feed-in tariff. A consumer is paid a subsidy for any energy produced which is from renewable energy sources. The feed-in tariff came into effect from 01 April 2010.

The aim of this article is to give an overview of the scheme and how it can benefit the consumer.

How Much Might I Receive From the Feed-In Tariffs Scheme?

Anyone who subscribes to the feed-in tariff scheme will receive a subsidy for each kilowatt hour (kWh) of renewable energy produced. The level of subsidy depends on the type of renewable energy producing system used and its production capacity, but for example a solar pv system producing 4kw or less, fitted to an existing (not new-build) property the rate is 41.3 pence per kWh.

A typical 4 bedroom house will use 9,800 kWh annually and will be able to generate on average 65% of that from renewable energy. This would equate to an annual payment to the consumer of around £2,630. This is of course in addition to the money saved as a result of not having to purchase that energy from an energy supplier.

Technology Size Tariff (p/kWh generated)
Solar photovoltaic (PV) <4kW (new build) 36.1
Solar photovoltaic (PV) <4kW (retrofit) 41.3
Solar photovoltaic (PV) 4-10kW 36.1
Technology Size Tariff (p/kWh generated)
Wind <1.5kW 34.5
Wind 1.5-15kW 26.7

It is also possible to sell any excess energy you produce back to the National Grid.

How Much Does a Renewable Energy System Cost to Install?

The cost of installing a renewable energy system varies greatly according to the type of system chosen and the property to which it is being installed, however a solar power system producing 2kw and installed to a residential property might cost around £15,000. Of course this is a large investment but given the potential feed-in tariff payment of circa £2,600 per year the system could pay for itself in around 6 years.

Are There Any Grants Available for the Installation Costs?

A grant system was in place, managed by the Department of Energy and Climate Change, but as of 26 May 2010 the new government brought this to an end as part of its spending cuts and no new applications are now being taken.

Are There any Loans Available for the Installation Costs?

It is possible to obtain a loan, though not currently for the entire cost. It could of course be financed via a remortgage. Many private companies are optimistic that they will be able to secure loans for 100% of the cost in the near future. If a loan (not a remortgage) is obtained the tariff payments would be paid directly to the finance provider until the loan is paid in full. Theoretically, the feed-in tariff should be enough to cover the loan payments meaning the consumer doesn’t need to spend any of their own money on the installation.

Who Pays for the Feed-In Tariff?

Ofgem, the regulator for the energy industry, charges energy companies a levy and it is from this that the tariff payments are made. The cost of the levy is passed on to energy consumers by the energy companies so in effect, everyone who purchases energy pays the tariff.

If There is a Change in Policy Could the Feed-In Tariff be Cancelled?

No, the feed-in tariff payment is guaranteed for 20 years (25 for solar powered systems) and the rate will only change in line with inflation. This is what makes the scheme such a worthwhile investment as you can calculate pretty accurately what the return will be at the outset and there is no risk of it being withdrawn from people who are accepted onto the scheme.

Do I Need Planning Permission to Install a Renewable Energy System?

That depends on the system but as a rule, if you live in England and your property is not a listed building or in a conservation area then solar panels would be “permitted development” and would not need permission. However, you should always check with the local planning department and try to get any advice you are given in writing.

For those who can afford the initial installation costs, the feed-in tariff scheme appears to be a very sound investment, as well as being good news for the environment. One of the questions that remain is, if you install a system and then sell your property is it the purchaser that will potentially benefit and the seller that will lose. Will the original home owner / installer recoup their investment in an increased selling price of the house?

4 Comments to Guide to Feed-In Tariffs – What You Need to Know

  1. February 11, 2011 at 9:53 am | Permalink

    I am leaning towards a company offering the free installation of solar PV panels. I know I am missing out on the tarrif, but the installation cost is too much of a stretch, and I think more of a risk than the free installation to me. Has anyone got any experience of this service and whether they think it worthwhile? My thoughts are that as it doesn’t cost me anything, I have nothing to lose by going greener, and I can make modest savings on my electricty bill. (I have just moved into what I hope will be my ‘forever home’, and I am reasonably relaxed about any issues that may arise should I wish to sell, albeit I don’t plan to – I just can’t see it as a problem that someone else owns and maintains at their expense, for there own benefit also, the PV panels and the homeowner benefits from lower bills. Why would this put someone off buying a property? Is it just solicitors (extra fees), and PV installers who don’t do the free installation with alterior motives driving this ‘be wary’ philosphy around the free installations?).

  2. Tom's Gravatar Tom
    February 11, 2011 at 6:49 pm | Permalink

    I have been approached by a company who wants to install a small Hydro plant in my river and give me the FIT, does anybody know what the FIT is for Hydro?



  3. March 13, 2011 at 6:39 pm | Permalink

    We are just about at the point where we are ready to have solar panels installed on our roof, but I heard that there may be some kind of review of the FiT earlier than expected, possibly April 2011.

    Do you have any info on this as it would obviously be bad timing on our part if we were to go ahead now, only to find that the tariff is set to change before we realised any benefits as such.

    You help is much appreciated


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