A feed-in tariff (FIT) is paid by energy suppliers in the United Kingdom if a property or organisation generates their own electricity using technology such as solar panels or wind turbines and feeds any surplus back to the grid. The FIT scheme entered into law by the Energy Act 2008 and took effect from April 2010. The scheme closed to new applicants on 31 March 2019.
Scope
The Feed-In Tariff applies to small-scale generation of electricity using eligible renewable technologies. To encourage development of these technologies, feed-in tariffs pay the generator a certain amount even for energy which the generator themselves consumes. Electricity fed into the grid receives an additional export tariff, currently (May 2020) 5.24p per kWh. Costs for the programme are borne by all British electricity consumers proportionally: all consumers will bear a slight increase in their annual bill, thus allowing electricity utilities to pay the FIT for renewable electricity generated at the rates set by the government. Payments through the mechanism are intended to replace the ROCs available through the Renewables Obligation for small-scale renewable energy generators and is based on a few key elements:
The tariff is available only to renewable sources producing up to 5 MW power. Specific rates are set for different technologies and at different scales of installation for those technologies. Generators of renewable electricity larger than 5MW remain eligible to earn Renewables Obligation Certificates within the existing Renewables Obligation quota mechanism. To prevent companies from moving large scale (for example big wind) projects from the ROCs to the Feed-in Tariff programme, a number of anti-gaming provisions have been inserted in the policy design; this should avoid the breaking up of bigger projects into several small ones, to fit within the 5 MW energy size cap. There are several other qualification requirements including: certification under the Microgeneration Certification Scheme and the REAL Code for systems up to 50 kW; the use of specific metering standards; and systems being installed no earlier than July 2009. From 1 April 2012, homeowners applying for FIT for solar generation had to provide an energy performance certificate with at least a Band D rating to qualify for the highest rate of payment. The contract term is 20 years, or 25 years for solar photovoltaic projects: this means that, starting from 2010, British providers of wind energy, hydropower, energy from biomass and anaerobic digestion eligible for the FIT scheme will be rewarded with a tariff rate guaranteed for the next 20 or 25 years. The tariff made available to generators will be subject to degression. That is, the tariff level available for new generators will decrease annually. The rate of degression will vary by renewable energy technology. The price for individual renewable energy generating plants is fixed once the plant becomes operational. Costs for the programme will be paid by the energy suppliers. It should be expected that the suppliers will pass on the cost to their electricity customers: consumers will bear an increase in their annual bill, thus allowing electricity utilities to pay the "Feed-in" Tariff to renewable energy generators at the rates set by the government.
The government estimated that feed-in tariffs to support small-scale low-carbon generation would cost £8.6 billion up to 2030 and produce monetised carbon savings worth £0.42 billion.
Feed-in-Tariff payments are tax-free in the UK.
Year one feedback
A study from the University of London assessed the first year of the UK FIT scheme through interviews with both users of the scheme and government figures. The key findings were that users have had a wide variety of experiences, depending on the technology they are working with, and that the government had very limited ambitions on small-scale renewable energy generation.
Domestic solar performed well in the first year, with 28,028 of the 28,614 total solar installations (totalling nearly 78MW). Wind power was the next highest installation level with 1,348 (20.4MW). Small hydro had 206 (12.1MW), although many were not new installations, but had been transferred from the Renewable Obligation scheme. Micro-CHP had 98 installations (0.09MW), and Anaerobic Digestion (AD) had just 2 (0.66MW). AD came under scrutiny in 2011 to determine why development was so poor.