Renewable home electricity generation incentive from April 2010

The UK government is introducing a new scheme from April 2010 that will reward people for generating electricity at home from certain technologies. It is commonly known as "Feed In Tariffs" or FITs - although the bulk of the reward in fact comes from the amount generated regardless of how much is actually fed into the local electricity network.

This is my summary of what I think are the key relevant points in the scheme published in February 2010 by the Department for Energy & Climate Change (DECC) at

www.decc.gov.uk/en/content/cms/consultations/elec_financial/elec_financial.aspx

Example

Suppose you installed solar photovoltaic (PV) panels with a capacity to produce a maximum of 4kW to an existing south facing roof on your home sometime in the year April 2010 - March 2011. Under the proposal an electricity supplier would pay you 41.3 p for every kiloWatthour (unit) of electricity you generated and 3.0p for every unit you exported to the local network. Once your installation is completed, the scheme guarantees the generation tariff for the expected lifetime of the technology (25 years for solar PV) and will protect this tariff against inflation by revising its value in line with changes in the Retail Prices Index. The export tariff will also get this inflation protection but its value may be adjusted at formal reviews of the scheme (first due 2013). However, on an annual basis, generators may opt out of the export tariff if they can get a better price from another source.

You would continue to pay for any units you imported from the electricity network (for example at night or in mid-winter). If you generate some of the units that you would have imported before you installed your solar PV, then you would save the cost of the imported electricity, of course.

The generation tariff you start on depends on : (i) when your installation is completed, (ii) its generation capacity and (iii) the technology. A full table is given on page 47 at the link quoted above.

Both the product installed and the installer must be accredited under the Microgeneration Certification Scheme for installations under 50kW capacity. This is intended to deter poor products & installers from giving microgeneration a poor reputation. Remember you only get paid for electricity you actually generate. So, the equipment has to be suitable for your property & its situation and properly installed & maintained !! I've seen solar technology fitted to north facing roofs in Sheffield !

A few other points :

1.In the original proposals, home generators had the right to switch electricity supplier.

2. The tariff income is expected to be free of income tax if the electricity is mainly used on site, so the final tax rules should be taken into account when deciding on what generation capacity to install.

3.DECC states its modelling suggests that the market will provide sufficient financing to pay for the up-front cost of installation without state funding. (Funding has been progressively cut and conditions tightened in the current, state funded Low Carbon Buildings Programme.) Local authorities may also get involved. It is also proposed that the FIT income stream may, optionally, be assigned to a third party. So, a home owner could allow a third party to install solar PV (say) on a suitable roof and receive a rent for the use of the space. In the Sheffield area www.ashadegreener.co.uk are looking for suitable properties.

4.This scheme will be the only option for installations under 50kW capacity from April 2010.

5.If a home with generating equipment is sold, it is expected that the equipment will be sold with the home and its value plus that of the remaining FIT payments will be part of the sale price negotiated.

6. Centrica (British Gas), EdF, Eon, RWE npower, Scottish & Southern and Scottish Power will be obliged to offer Feed In Tariffs. Suppliers with less than 50,000 domestic customers such as Good Energy and Ecotricity may participate if they wish.

This is only my summary of what I think are the most important points. Read the full document to check details or if you want to know more. The final scheme may differ in some respects e.g. on arrangements for metering of exported electricity from home generators.

Please bear in mind that home electricity generation should be considered in the context of your overall domestic energy use and finances. Heating & hot water are likely to be a bigger source of CO2 and expense for most households and I recommend you consider the following.

The government has published proposals for a Renewable Heating Incentive (RHI) payable from April 2011. These proposals are open for public comment until 26 April 2010 and, until then, can be found under Open Consultations at

http://www.decc.gov.uk/en/content/cms/consultations/consultations.aspx

and under Closed Consultations after that date. The rate of return in these proposals appears to be more generous than in the FIT scheme (except for solar hot water systems). If you have limited resources, you may wish to compare possible measures under the FIT scheme with those under the RHI proposals and other appropriate measures such as solid wall insulation. For example, if reducing your CO2 is your priority, you could rank possible measures by cost per kilogramme of CO2 emissions saved. A qualified Home Energy Adviser may be able to help you do this.

Government has also published a strategy for Household Energy Management at http://www.decc.gov.uk/en/content/cms/what_we_do/consumers/saving_energy/hem/hem.aspx
which proposes new ways of helping people with the upfront cost of insulation aswell as renewable heating system technologies.

Rick M