Feed in Tariffs

The UK Department of Energy & Climate Change (DECC) published its consultation on renewable electricity financial incentives on 15 July 2009. The paper focuses on structural changes to the Renewables Obligation (RO) required to meet the 2020 targets, and the introduction of Feed-In Tariffs (FITs) under the Energy Act 2008 that will benefit generators who are "non-energy sector". The consultation paper also addresses the way in which the two schemes under the RO and FITs will interact with one another. The closing date for responses for the consultation is 15 October 2009.

DECC proposes that FITs will be implemented from April 2010 to support small low-carbon generators with the aim of opening up renewable electricity generation to communities and householders. The scheme will be designed as a simple and user friendly system to encourage micro-generators to use it.

From 1 April 2010 installations under 50kW installed capacity will only have the option of receiving FITs. Larger installations with an installed capacity of between 50kW and 5MW will have the right to choose between RO and FITs.

The following technologies are to be supported from 2010 – wind, solar photo-voltaic (PV), hydro, anaerobic digestion, biomass and biomass combined heat and power (CHP), and non-renewable micro CHP.

Summary of key aspects of FITs proposal

  • A fixed payment from the electricity supplier for every kWh generated (the "generation tariff"). This will be set at different levels for different technologies and installation sizes. DECC propose that tariffs will be paid for 20 years for new projects (25 years for solar PV).
  • A long term guaranteed minimum payment additional to the generation tariff for every kWh exported to the wider electricity market (the "export tariff"). As with the generation tariff, DECC propose that the export tariff will be fixed for any individual project. Various options exist for considering what the fixed export price will be, but the range is considered to be between the minimum price paid for unplanned exports and the retail price.
  • Generators will be able to offset electricity generated and used on site against the electricity they would otherwise have had to buy.
  • Tariff levels should ensure that investors recover cost of installation as well as receiving a rate of return. The proposed tariff levels for new projects will decrease by predetermined rates each year.
  • All licensed electricity suppliers over a given threshold (50,000 domestic customers) will be required to offer FITs.
  • A generator may transfer rights to the FITs payments to a third party through a bilateral agreement, for example, an installer of equipment offers a householder a guaranteed income under an arrangement whereby the installer rather than the householder claims FITs payments from the supplier.
  • There will be a central accreditation and registration system for FITs generators.
  • The FITs scheme will be implemented by amendments to standard conditions of supply and distribution licences under the Electricity Act 1989.
  • Single installation will be defined as a single technology per single site – avoids potential for under-sizing plants or splitting one installation artificially.

Changes to the Renewables Obligation (Scotland ) Order 2009

The Scottish Government are also currently consulting on changes to the Renewables Obligation (Scotland) Order 2009 (ROS) in parallel with DECC's consultation. The Scottish Government states in its consultation paper that it understands the "importance of consistency between and across the UK ROs" and that they "propose, subject to this consultation, to implement the same changes to the ROS". They are of course keen to hear stakeholders' views in relation to these proposals as to whether or not there are any issues from a Scottish perspective. The deadline for responses to the Scottish consultation is 29 October 2009.