Solar Panels

What are feed-in tariffs?


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Feed-in tariffs (FITs) are payments made to households or businesses who generate their own energy through renewable sources, such as solar or wind produced electricity.

First introduced in 2010, the feed-in tariff scheme is a government incentive that enables homeowners and businesses to make money by generating their own power and selling any excess back into the National Grid.

How does the feed-in tariff scheme work?

The feed-in tariff scheme pays people who create their own energy, and is designed to encourage people to supply their own energy with renewable and low-carbon sources.

If you’re accepted for a feed-in tariff, you have the opportunity to be paid for the energy you create, as well as for surplus supply you can sell back to the National Grid, via your supplier. The money you earn in the long run could offset a solar panel cost, so it’s definitely worth looking into.

What types of energy qualify for a feed-in tariff?

There are a few different types of energy sources that quality for the tariff. Because you have to create the energy on your own property, these technologies are going to be small. The following types qualify:

  • Solar panels
  • Wind turbines
  • Hydro turbines
  • Anaerobic digestion
  • Micro-combined heat and power

How to apply for feed-in tariff payments

If you feel you’re in a position to apply for feed-in tariff payments, you should contact your current energy supplier for an assessment - all of the Big Six are required by law to offer a feed-in tariff. Once you have done this, you can start earning money from creating your own energy and contributing to sustainability on a local and national scale.

How quickly can you earn money from feed-in tariffs?

Earning money from the scheme is one of the biggest bonuses from creating your own energy, and the good news is that you can, in most cases, start earning money from as soon as you apply for the tariff.

Feed-in tariffs works in quarters, so once you apply and are confirmed on the plan, you will not actually receive payment until the end of said quarter.

How much could you earn from feed-in tariffs?

What you earn from your tariff is based entirely on the amount of energy you create. Put simply, you earn money by generating energy for yourself through a generation tariff, then again by generating and exporting and surplus energy to the National Grid, via an export tariff. The Energy Saving Trust estimates that each household within the scheme could earn around £150 a year.

If you’re planning to install a photo-voltaic system (solar panel), the cost will be high. If you plan on buying PV panels, the cost would be around £12,000, which would take around 11 years to for payback. Overall profit is a long-term goal, but the short-term goals are the creation of sustainable energy.

What is the generation tariff?

The generation tariff is the amount of money you will receive for creating - or generating - your own energy for your home. The amount can be £4.25 p/kWh for solar panels and £8.39 for wind turbines, although this fee does differ depending on the age of your equipment and your homes EPC rating.

What is the export tariff?

The export tariff is the second part of the scheme, and this relates to the creation of energy that you export to the National Grid. Because this automatically happens, it’s almost like a little bonus. The rate for export energy is £4.91 p/kWh.

What are deployment caps?

The feed-in scheme was created in 2010 by the Government, but by February 2016, they had introduced deployment caps. These are levels for each household within each tariff period (3 months) that cap how much can be earned by creating energy.

What should you consider before installing renewable?

There are a number of things to consider before you install renewable systems. One point of discussion is solar panel price. Because the price is quite high, you need to understand that payoff and profit will only appear across the next 10 years. This also means you need to be sure you will be in your property for that length of time, or more. Solar panels for your home are a great way to make money but they’re better for planning for sustainable living.

If you generate less than 50 kW, you’ll also need to apply to the Microgeneration Certification Scheme (MCS) and ensure your system is fitted by an MCS approved installer.

If you generate between 50 kW and 5MW, these higher amounts mean you’ll need to apply for ROO-FIT accreditation, which involves sending details of your project and FIT eligibility to Ofgem.

Full details on the feed-in tariff scheme application process can be found at the Ofgem website.

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