What is a feed-in tariff?
Households that generate their own electricity from renewable or low carbon sources, such as solar or wind power, can earn money under the feed-in tariff (FIT) scheme. This is a government programme that pays you for energy you generate and export to the National Grid.
What types of energy generation are eligible for feed-in tariffs?
The FIT scheme covers the following technologies:
- Solar panels
- Wind turbines
- Hydro turbines
- Anaerobic digestion
- Micro-combined heat and power (micro-CHP).
The installation must have a peak output of no more than 5 megawatts, or 2 kilowatts for micro-CHP. It must also be certified under the snappily-named Microgeneration Certification Scheme, or the equally exciting-sounding ROO-FIT process for hydro and anaerobic digestion.
How do I apply for feed-in tariff payments?
For most people, simply apply for FIT payments with your energy supplier. The big energy companies are required by law to participate in the scheme, but many of the smaller firms have also signed up.
However, if you have solar panels and wind turbines with a declared net capacity greater than 50 kilowatts, or an anaerobic digestion or hydro system, you must apply to Ofgem E-Serve's ROO-FIT team.
When will I start to earn money?
You start to receive FIT payments from the 'eligibility date', which is usually the later of either
1) The date the supplier receives the application or
2) The start of the tariff period in which the installation falls.
Normally the tariff period is three months, so if you apply in the last quarter of the year your payments might not start until January. FIT payments typically continue for 20 years. The rate moves each year in line with inflation, as measured by the Retail Prices Index.
How much could I earn from feed-in tariffs?
You can earn money for energy generated in two different ways. The full detail for each is below - the Energy Saving Trust estimates the average home could earn £150/year. Visit its website for a personalised estimation. On top, you're also likely to benefit from savings on your electricity bills.
If you don't already have the kit to generate energy installed, you must factor in the cost of doing so when working out whether this is worth it.
The 'generation tariff'
Firstly you earn a fixed amount for every single unit of electricity you generate. The rate depends on a number of factors, including the type of technology you have installed, its capacity and the tariff period.
The higher rate tariff - for solar panels with a capacity of less than 10 kilowatts and an eligibility date between 1 July and 30 September 2016 - is 4.25p per kilowatt hour, or 8.39p for a wind turbine with a total capacity of less than 50 kilowatts. The generation tariffs drop to 4.18p and 8.33p for installations with an eligibility date between 1 October and 31 December 2016, unless there is a deployment cap (see below), in which case the rates fall to 3.76p and 7.50p. If you install solar panels you need to provide the property's Energy Performance Certificate rating when you apply for FIT payments. If the property is rated band A to D, you get the higher generation tariff. If it is band E or lower, a lower tariff rate applies.
The 'export tariff'
On top of the generation tariff, you will also earn money for every excess unit of energy you generate and export back to the National Grid. All installations with an eligibility date on or before 31 March 2017 will earn you earn 4.91p per kilowatt hour.
Energy suppliers estimate that you export 50% of the electricity you generate, or 75% for hydro installations. However, if you have a smart meter, the export tariff is based on the actual amount you export.
What are deployment caps?
In February 2016, the government introduced deployment caps, which effectively limit the amount of FIT payments in a given tariff period.
Let's say the tariff period runs from July to September. If a cap is reached in August, before the end of the tariff period, no more installations will qualify for FIT payments. If you install your solar panels in August, you would be placed in a queue for entry into the next tariff period.
Ofgem publishes information about deployment levels and whether a cap is reached on its website. It also publishes tariffs at the start of each calendar quarter.