Feed-in tariffs for solar PV and small wind systems
The Government’s new feed-in tariff (FIT) comes into effect in April 2010. This cashback scheme will pay a premium rate for electricity generated from renewable sources such as solar PV – fixed for up to 25 years. The feed-in tariff means that the payback period for solar PV systems and small wind turbines will drop significantly and net income can now be reliably predicted.
The full details of the Clean Energy Cashback scheme were published on 1st February 2010 and set out the conditions, eligibility criteria and payment levels that will be applicable to different types and sizes of installations. Owners of elegible solar PV and wind energy systems of up to 5MW will be paid a fixed rate payment for every unit or kilowatt hour (kWh) of electricity that they generate. This generation rate will be paid on all electricity generated by the system even if it is used at the site. An additional export rate will be paid for any surplus electricity that is exported to the national grid. Feed-in tariff payments for domestic properties will be exempt from income tax. Owners will also benefit from savings on their electricity bill as a result of the electricity they no longer need to buy.
The tariff rates that apply to solar PV and wind energy systems are detailed here.
Type/size |
Installed between 15 July 2009 and 31 March 2012 |
Installed between 1 April 2012 and 31 March 2013 |
|---|---|---|
| PV<4kW (retrofit) | 41.3p | 37.8p |
| PV<4kW (new build) | 36.1p | 33.0p |
| PV 4-10kW | 36.1p | 33.0p |
| PV 10–100kW | 31.4p | 28.7p |
| PV 100kW–5MW |
29.3p | 26.8p |
| PV Stand-alone system | 29.3p | 26.8p |
| Wind < 1.5kW | 34.5p | 32.6p |
| Wind 1.5–15kW | 26.7p | 25.5p |
| Wind 15–100kW | 24.1p | 23.0p |
| Wind 100-500kW | 18.8p | 18.8p |
| Wind 500kW-1.5MW | 9.4p | 9.4p |
| Wind 1.5- 5MW | 4.5p | 4.5p |
| Export rate PV & Wind | 3p | 3p |
These tariff levels have been calculated to offer between 5-8% return on initial investment in the technology.
Once entered into the scheme, each installation will receive the same level of payment for electricity generated throughout the lifetime of the tariff (subject to retail price index- linked inflation). In the case of solar PV systems, the tariff lifetime is 25 years. For wind energy systems, the tariff lifetime is 20 years. It should be noted that for both solar PV and wind energy systems, the tariff level does not change for installations that enter the scheme in the first and second years of its operation but from 1st April 2012 there will be an annual reduction (degression) in the payment rate for which new installations entering the scheme will be eligible.
The feed-in tariff payments will be made to the owner of the system by licensed electricity suppliers. From 1 April 2010 FITs will be the only support available for installations with an installed capacity of 50kW and below that are eligible for FITs. Installations that were completed before 15 July 2009 will not be eligible for FITs unless they had applied for accreditation under the Renewables Obligation before 31 March 2010.
Example FIT payments
If a property owner has a solar PV system retrofitted before April 2012 that generates 2,000 kWh per year, of which 1,500 units are used on site and 500 units are exported, and she pays 13p per unit for mains electricity, the payments and savings she would make would be calculated as follows:
Generation tariff: 2,000 x 0.413 = £826
Export tariff: 500 x 0.03 = £15
Value of electricity used on site: 1,500 x 0.13 = £195 (realised through reduced electricity bills)
TOTAL VALUE = £1,036 per year
In considering the benefits of the feed-in tariff, it is also worth noting that the expected life of a PV system is around 50 years - so system owners will continue to benefit from their solar generated electricity for many years, long after the system has been fully paid for by the FIT payments.
For full details of the Clean Energy Cashback scheme see FITs - consultation response and Gov decisions at: www.decc.gov.uk/en/content/cms/consultations/elec_financial/elec_financial.aspx
The feed-in tariff is set to revolutionise the market for solar PV systems and small wind turbines - if you wish to discuss a project or to learn more about the potential benefits – contact us.
