Feed-in Tariffs - what are they and how do they work?
The Feed-in Tariff (FiT) is a government subsidy paid for renewable electricity generation and is a fixed payment per kilowatt-hour (kWh) of electricity generated. The rate paid varies by technology and also by size of project, with small- to medium-scale installations receiving higher rates.
The tariff levels reduce by gradual amounts each year (in line with expected technology cost reductions). This is called 'degression'.
However, a renewable energy project receives the FiT rate offered at the point of registration, index linked over the full term of the tariff — 20 years for almost all of the technologies, with the exception of micro-CHP (10 years).
A fixed export tariff per kWh is paid in addition to the generation tariff for any electricity exported to the grid (currently guaranteed at 4.64 p/kWh, but can be negotiated higher depending on amount exported).
FiTs were introduced on 1st April 2010 to encourage the adoption of small-scale renewable energy (less than 5 MW). The government monitors the scheme carefully, adjusting tariff levels when necessary to ensure take up remains on track. For instance, the tariff for large scale solar PV was cut in 2011 when there was evidence that planned large-scale projects might grab the lion’s share of the cash and threaten smaller projects and other technologies.
The idea is to support each of the renewable technologies appropriately until such time as they become independently sustainable within the marketplace. The 2009 Renewable Energy Directive sets a target for the UK to achieve 15% of its energy consumption from renewable sources by 2020. The UK's renewable energy consumption currently stands at just 3.8%, while the European average is 12%.
Details of the latest FiT reviews and tariff tables are on the Feed-in Tariff section of the Department of Energy and Climate Change website.
There is also a similar scheme for generating heat from renewable sources — the Renewable Heat Incentive (RHI).