In line with a policy first anounced in 2008, households and communities that install generating technologies such as small wind turbines and solar panels will from April 2010 be entitled to claim payments for the low carbon electricity they produce. UK energy and climate change secretary Ed Miliband announced the Feed-in Tariff (FIT) levels on 1 February and also published a blueprint for a similar scheme – the Renewable Heat Incentive, a world first – to be introduced in April 2011 to incentivise low carbon heating technologies. Power industry watchdog Ofgem will administer the FIT scheme and suppliers will be responsible fo paying the reward to their customers.
Ed Miliband said: ‘The guarantee of getting an income on top of saving on energy bills will be an incentive to householders and communities wanting to make the move to low carbon living. The feed-in tariff will change the way householders and communities think about their future energy needs, making the payback for investment far shorter than in the past. It will also change the outlook for a range of industries, in particular those in the business of producing and installing small scale low carbon technology.’
From 1 April the owners of renewables generators up to 5 MW in capacity will be paid for the electricity they generate, even if they use it themselves. The level of payment depends on the technology and is linked to inflation. They will get a further payment for any electricity they feed into the grid. The scheme will also apply to installations commissioned since July 2008 when the policy was announced. It will also apply to micro-CHP units up to 2 kWe.
Typically a 2.5 kW, well sited, solar pv installation could offer a homeowner a reward of up to £900 as well as saving £140 a year in electricity charges, says the Department of Energy and Climate Change.
Both parts of the scheme guarantee a fixed payment to the user for every unit of renewable energy generated over a period of 10-25 years. For wind this varies from 4.5 to 34.5 p/kWh. The British Wind Energy Association has highlighted two examples – an 11kW device with an installation cost of around £44 000 at a site with a wind speed of around 5 m/s that could yield a total income of £10 026 per annum, and a 6kW device costing in the region of £22 000 under the same conditions could return £3420 per annum. These examples are said to be typical of the expected 5-10 year payback for well-located small wind systems.
The Renewable Energy Association estimates that the proposals will mean that a 2kW PV solar system will generate £702 income per annum. Savings from avoiding the import of grid electricity should bring that to £831 per annum.
Under the scheme, from 1 April 2010, microCHP units with a capacity below 2kW will receive 10p per kW hour generated, for a period of ten years. This tariff is available for the first 30 000 such installations. The situation will be reveiwed when 12 000 units have been installed.
Graham Meeks, director of the Combined Heat and Power Association commented: ‘Support under the Feed-In Tariff is vital in the early stages of commercialisation for microCHP, and [this]announcement is a step in the right direction. It will help secure the UK’s world-leading position in this exciting low-carbon technology, whilst giving householders a cost-effective choice in cutting their carbon footprint.’
DECC has also published plans for a scheme to incentivise renewable heat generation at all scales. This will come into effect in April 2011 and guarantee payments for those who install technologies such as ground source heat pumps, biomass boilers and air source heat pumps. Under the proposed tariffs the installation of a ground source heat pump in an average semi-detached house with adequate insulation levels could reward its owner with £1000 a year, and savings of £200 per year if used instead of heating oil, a move that would help those many consumers who are not on the gas network. Details of funding for the scheme will be published in the UK chancellor’s 2010 Budget statement.
The announcement has produced an instant reaction from various interested parties and ginger groups. Stephen Hill, a partner at international law firm Eversheds, a specialist in energy issues, commented: ‘The level of Feed in Tariff for solar panels is higher than expected and should reduce pay-back time for householders, an important barrier to take up. It is encouraging to see micro-generation at the heart of public policy, however it is unfortunate that at the same time DECC is creating uncertainty for larger projects. The subsidy system for such projects, by way of the Renewables Obligation (or ‘Green Certificates’) is currently subject to uncertainty owing to an announcement by DECC in December last year. The biomass industry has raised concerns that projects which originally were going to receive a set number of Green Certificates for the life of the projects, could now be subject to significant decreases in the number of Certificates. In a credit market that is still fragile, this lack of certainty could have a detrimental impact on the number of projects being built.’
John Sauven, executive director of Greenpeace UK, said ‘For many families, generating their own clean electricity will be an attractive investment. Feed-in Tariffs turn being green into an economic opportunity for households, and create skilled jobs building and installing the new technologies. ‘The government is starting to emulate best practice from countries which have been much more successful than Britain in encouraging renewable energy. However, the level of ambition set by [this measure] is still far too low if we are to reach the full potential of small scale renewables.’
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