Feed-in tariffs in the United Kingdom were announced in October 2008 and took effect from April 2010.[1] They were entered into law by the Energy Act of 2008.[2]
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The Feed-In Tariff applies to small-scale generation of electricity, paying a fixed sum for eligible technologies. Payments through the mechanism are intended to replace the ROCs available through the Renewables Obligation for small-scale renewable energy generators and is based on a few key elements:
The government estimated that feed-in tariffs to support small-scale low-carbon generation would cost £8.6 billion up to 2030 and produce monetised carbon savings worth £0.42 billion.[3]
A new study from the University of London has assessed the first year of the UK FIT scheme through interviews with both users of the scheme and government figures. The key findings are that users have had a wide variety of experiences, depending on the technology they are working with, and that the government has very limited ambitions on small-scale renewable energy generation.
Domestic solar has performed well in the first year, with 28,028 of the 28,614 total solar installations (totalling nearly 78MW). Wind power has the next highest installation level with 1,348 (20.4MW). Small hydro had 206 (12.1MW), although many were not new installations, but had been transferred from the Renewable Obligation scheme. Micro-CHP had 98 installations (0.09MW), and Anaerobic Digestion (AD) had just 2 (0.66MW). AD is under scrutiny at present (April 2011) to determine why development has been so poor.
The study suggests that technologies have a variety of factors affecting their performance in terms of installation levels. The factors include cost, size, availability, standardisation of the technology, planning issues, ease of installation, perceived sensory impact (sight, sound and smell) and administrative complexity. Domestic PV scores very positively on all these factors, while small hydro and AD do far less well.
The proposed changes to the tariff levels for PV have been met with anger by many in the solar industry, but the FIT policy, along with the Green Investment Bank and now carbon reduction targets, are widely understood to be threatened by the Treasury department. This is due to the schemes being considered as liabilities on the national balance sheet.[4]
Less than a year into the scheme, in March 2011 the new coalition Government announced that support for large-scale photovoltaic installations (greater than 50kW) would be cut.[5] From August 1, 2011 the rate for installations over 50kW will range from 19p/kWh up to 8.5p/kWh for the largest qualifying installations (5MW), with the Government claiming that this would prevent the scheme from becoming 'overwhelmed'.[6]
A feed-in tariff for farm-scale anaerobic digestion of either 14p/kWh or 13p/kWh is being introduced from August 1, 2011, depending on the installation size.[6]
On 31 October 2011 a second review of the Feed in Tariffs for low carbon electricity generation was announced which is likely to take effect from 12 December 2011. The rates for small photovoltaic installations have been reduced from 43.3p/kWhr to 21 pence/kWhr. The reason for the second review is that FITs for PV were being taken up too quickly and that the DECC funding allocation for FITs was in danger of being exceeded. A further reason is that the cost of installing PV panels has reduced by around 50% and therefore the FITs had become less of an encouragement to install PV panels and more of an incitement to profit from excessive subsidies. See revised tariff tables for FITs.[7]
In addition to the feed-in tariff, a similar incentive - the Renewable Heat Incentive for renewable heat is being introduced in November 2011.
The scheme has created a large number of start up companies providing free electricity [8] in return for installing solar panels on the home owners roof. However if the home owner can afford the capital outlay it is more cost effective to purchase the solar equipment[9] directly. If the homeowner can not afford the capital outlay, the free solar companies offer a capital free way of getting the benefits of solar and free electricity and the main free solar providers can be compared at CompareFreeEnergy.Co.Uk
There has been much criticism of the tariffs as being unequal. Those people who installed equipment before the FIT started, are given a fixed tariff of 9p per unit (9.4p from April 2011). Both the Conservatives and the Liberal Democrats pledged to reverse this in the 2010 General Election, but then reneged on this decision afterwards. The pioneers are now on a lower rate than that before FITs started, despite generating the same electricity.
There has also been criticism of the high rates for FITs compared to those for the Renewable Heat Incentive: the renewable heat technologies are more economic than renewable electricity generation so the government could save carbon much less expensively by increasing the RHI on ground source heat pumps (at 4.5 pence/kWhr) compared to up to 21 pence/kWhr for photovoltaic or up to 36 pence/kWh for wind turbines.