RSP Consulting Engineers

The UK government has recently issued full details of the Feed-in Tariff (FIT) support which is scheduled to begin on 1^st April 2010.  The support scheme covers all renewable electricity generating technologies up to 5MW in rated output. 

Heat generating technologies will be supported through the Renewable Heat Incentive which is currently undergoing consultation and is due to be introduced in April 2011.

Eligibility

To be eligible for feed-in tariffs technologies must have been installed on or after 15^th July 2009 by installers on the microgeneration certification register, for technologies under 50kW.  For technologies greater than 50kW, generators will need to approach Ofgem and seek accreditation under a similar process as exists currently for the Renewables Obligation (RO).

Installations greater than 50kW that are in technologies eligible for feed-in tariffs and joined the Renewables Obligation after 15 July 2009 have a one-off opportunity of moving to feed-in tariffs support. Those that installed before 15 July 2009 will not be eligible for feed-in tariffs but will continue to be eligible for support through the Renewables Obligation. 

Technologies Supported

The feed-in tariff scheme will cover electricity generated by wind, hydro, photovoltaic (PV) panels and anaerobic digestion.  Additionally, it will also support a pilot programme of micro combined heat and power (mCHP) installations.  This will apply to the first 30,000 mCHP installations only, with an electrical capacity of 2 kilowatts (kW) or less. 

Payments for the feed-in tariffs will be made by electricity suppliers.  All types of consumer are eligible to claim feed-in tariffs including individuals, private companies and public authorities.

The feed-in tariffs for photovoltaic systems will have a lifetime of 25 years.  For all other electricity generating technologies, except the mCHP pilot, the tariffs will be paid for 20 years.  Projects within the micro CHP pilot will be paid for 10 years.

Those installations in place before 15 July 2009 and transferred to the feed-in tariff from the Renewables Obligation will receive feed-in tariff support until 31 March 2027 as they would have under the Renewables Obligation.

If more than one technology is installed on a single site (e.g. PV panels and a wind turbine) they will be classed as two different installations.  In order to determine the payments made under each tariff a generation meter will be required for each technology to measure the individual output of each.  If multiple installations of the same technology are installed on a site, they will be classed as a single installation when determining the tariff to be paid.

Tariff Levels

The generation tariff will be a fixed price per kilowatt hour, set at different levels for different technologies and installation sizes.  It will be paid for all electricity generated regardless of whether it is used on site or otherwise.  In addition to this an export tariff has also been proposed for all electricity generated that is not used on site.  This is to be set at 3p/kWh to reflect the actual benefits to electricity suppliers from this exported electricity.  Generators will have the chance to opt out of the export tariff if they wish to participate in the competitive energy market.

Tariff levels for certain technologies (PV and wind) will be lowered in future years for new projects.  But any individual installation, once starting to receive a tariff at a certain level, will continue to receive the same generation tariff level throughout its entire support period under the feed-in tariff scheme. Degression has been delayed until 2012 to allow installations in both years 1 and 2 to receive the maximum tariff. All feed-in tariffs will be increased annually for inflation.

All generation and export tariffs will be linked to the Retail Price Index (RPI), and feed-in tariffs income for domestic properties generating electricity mainly for their own use will not be taxable income for the purposes of income tax.

Tariff levels have been set to provide an expected rate of return, in real terms, of approximately 5-8% for well sited installations, taking into account the risks associated with deploying the different technologies and the likely effect those risks would have on investors' willingness to invest. As the tariffs are linked to inflation, in nominal terms this rate of return could then be considered to be approximately 7-10%.

The tariffs that have been set are shown in the table below.  This shows the applicable technologies and the scales for the feed-in tariffs.  The tariffs for years 1, 2 and 3 are shown.  Tariffs up to year eleven have been set and can be found in the document ‘Feed in Tariffs, Government Response to the summer 2009 consultation.

* Note the microCHP pilot will support up to 30,000 installations with a review to start when the 12,000th installation has occurred

** "Retrofit" means installed on a building which is already occupied; "New Build" means where installed on a new building before first occupation ; "Stand-alone" means not attached to a building and not wired to provide electricity to an occupied building

Table 1: Extract from ‘Feed-in Tariffs, Governments Response to the Summer 2009 Consultation'