Since rates were confirmed in April the UK Government Feed-in-Tariff scheme (FIT) has provided a viable incentive for homes, communities and businesses to go green with cheaper bills and cash paid for all electricity generated.

What is a FIT?

A FIT is a rate paid to property owners including householders and local businesses for excess electricity generated via a renewable source, such as PV panels or wind turbines and fed into the grid. The premium rate paid is now 41.3p per kilowatt hour (kWh) which is up to five times the market rate and has been guaranteed for 25 years by legislation. Payments come from your existing energy supplier, overseen by Ofgem, with reimbursements in the form of either credit on your bills or cash.

How it works

The most popular method is with PV (photovoltaic) solar panels on the roof of your building. After buying the system outright you are then paid through the FIT for every unit of electricity made. You can even earn more for any excess you put into the national grid system, and solar panels are low maintenance. Wired into a meter in your building it records the electricity made, used and exported.

What are the likely costs?

The initial outlay to buy and install PV panels is £9,000-£12,500 which is typically made back within ten years via the FIT. Wind turbines cost between £11,000-£19,000 for larger designs. Once paid off the system then becomes an income generator. A system can earn around £1,000 a year net and don’t forget you’ll be getting your own free power. Energy bills are constantly increasing so this is a viable way of preventing this inevitable cost concern.

FIT schemes worldwide now give property owners and managers a genuine financial incentive for long-term savings.

Germany is sunnier than Australia!

FIT schemes now exist in more than 40 countries worldwide with an increase in property owners using greener energy sources. For example, in Germany where the solar energy industry has experienced a huge uptake since their FIT was introduced in 1991, although it has less sunshine, because of its FIT, it now generates 33 times more solar energy than Australia.

The knock-on effect of a greater uptake in these schemes boosts the whole renewable energy industry, creating jobs at every turn.

Summary

  • Available to anyone generating electricity
  • Eligible if producing up to 5 megawatts
  • Payments for 25 years after installation
  • Earn from generating, exporting and saving electricity
  • Expected 8% return on your investment

Case Study

A typical house in Surbiton, Surrey had PV panels fitted in Winter 2009-10 ready for the FIT rates announcement in April.

System Size: 3.25Kw-peak per 25m2

Cost (including installation): £12,500

Annual Output: 2,700kWh

Annual FIT income: £1,123

Annual CO2 savings: 1533.6kg

Set against a £400 per year electricity consumption, that makes a sizeable additional income year on year.

Installation time: 4 days

Rather than pay outright for the PV panel system, consider adding the cost to your existing borrowing. For example, in this instance the householder had a £250,000 25 year repayment mortgage on a fixed rate of 4%, with existing repayments being £1,300 per month. He added the cost of the panels by re-mortgaging which increased the payments by just under £70 per month but he stands to earn over £1,000 each year from the FIT income and electricity savings offset against normal bills from day one. This gives a profit per year on investment without paying upfront, with the system turning into a net profit after around ten years.

Go to www.solarguide.co.uk to calculate Feed-In Profit

What’s next?

The Department of Energy and Climate Change has now published a blueprint for low carbon heating technologies to be introduced in 2011 – a supposed world first. It will guarantee payments for technologies such as ground source heat pumps, biomass boilers and air source heat pumps. Watch this space…