Feed-in Tariffs

Feed-in Tariffs

Feed-in tariffs (FITs) were initially introduced into Europe by Germany. They were latterly adopted by the UK and became official policy as of April 2010. Development of renewable energy sources is necessary to allow the UK to fulfil legislative commitments to the reduction of carbon emissions and to ease dependence upon imports of increasingly expensive fossil fuels. Feed-in tariffs are designed to encourage the development of small scale (i.e. under 5MW) renewable energy generation.  A number of renewable technologies qualify for the scheme; including wind turbines, solar panels, and hydroelectricity.

In simple terms, feed-in tariffs work in the following way: The owner of such a small scale renewable generator is paid for every unit of electricity that they generate. This electricity can then be used by the owner. Any additional or excess electricity can then be sold on to the national grid.

There are three major benefits to the feed-in tariff scheme. Firstly, the Generation Tariff, a set rate paid by the energy supplier for every unit (or kWh, kilowatt hour) of electricity being generated. Secondly, the Export Tariff, a further rate (in this case 3p/kWh), again paid by the energy supplier for every unit of electricity that is exported into the National Grid. The third benefit is that the owner can expect their electricity bill to be reduced. This saving is, of course, dependent upon how much of the generated electricity is being used on site.

Current government policy is that the feed-in tariffs are to run for twenty years (twenty five for solar pv), that is to say, until 2030 at a guaranteed rate. However, the tariff rate is decreasing year on year for new developments. Once a development is up and running the rate will then be fixed at the level it was at for that year.

The cost of the feed-in tariff is borne by all British electricity consumers in proportion to their bill. This is to ensure that all consumers should only see a slight increase in their bill as a result of the feed-in tariff and energy providers purchasing renewable energy at above market prices.

If you have an opinion on the feed-in tariff please feel free to leave a comment.


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