Feed-in Tariffs (FiT)

Introduced through and protected by the Energy Act, the standard generation Feed-in Tariff (FiT) is a government-backed payment scheme designed to encourage homeowners to generate their own green energy from renewable sources like solar power - it is also known as the Clean Energy Cashback Scheme. Under Primary Legislation the government proposed that from 1st April 2010, anyone generating renewable energy (under 5MW) would be paid for every kW they produce, including the units they use themselves.

The payments are TAX-FREE*, increase in line with inflation and are guaranteed for 20 years. An average system can provide an approximate return of 11%, making investing in solar a very attractive proposition.

As the government is legally obliged to meet the EUís 15% renewable energy commitment by 2020, the tariffs are an important incentive towards achieving that. PV systems registering with the scheme are eligible for FITs at the time off installation. Current rates can be found at the Energy Saving trust website.

How it works

You get paid by your energy supplier for ALL the electricity that you produce.

This is called the Generation Tariff. You are paid for all the electricity that your PV system generates even if you consume it in your home. Your energy supplier will pay you a set rate for each unit (or kWh), whether you use it or not.

Once you sign up to generate your own energy, you lock in to a Feed-In Tariff (index linked) for 20 years. So for the next 20 years - you will get paid for every kWh you generate. However these rates are likely to decrease with every review.

You receive ADDITIONAL payment for power that is exported back to the grid.

As you may not be using all the energy that you generate through your PV system, the Export Tariff enables your energy supplier to pay you an extra 4.5p per unit (kW) for any surplus electricity that goes back into the National Grid. Which is agreed at 50% of the total you generate.

You SAVE money on your bills now and in the future.

The average household will use approximately 40-50% of the energy produced by PV. As you are generating your own electricity, then the amount you need to use from the grid will be reduced, meaning you will be paying much less from your energy supplier. The more you use your free electricity, the greater the reductions on your energy bills.

Both the generation tariff and the FIT export tariff are index-linked to the Retail Price Index (RPI) so that they rise with inflation. The value of the energy used is also likely to increase as electricity prices rise. This means that your income will increase over the life of the scheme.

Feed-In Tariffs will be exempt from income tax for domestic users.

Companies will be subject to Corporation Tax on the income from the Tariff, profit dependent.



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Did you know?

Manchesterís CIS Tower is clad entirely in solar panels and is the UKís largest solar power project to date. In 2005 it began feeding energy into the national grid, generating 180,000 kWh per year. (Electricity usage per capita in the UK is about 5,000 kWh per year.)