Written by: Robert Costart
Updated on: 26 October 2024
Written by: Robert Costart
Updated on: 26 October 2024
Feed-in Tariff: Understanding the UK's Former Renewable Energy Incentive
Feed-in Tariff: Understanding the UK's Former Renewable Energy Incentive
What Was the Feed-in Tariff?
The Feed-in Tariff (FIT) was a UK government scheme launched in April 2010 to encourage the adoption of small-scale renewable and low-carbon electricity generation technologies, such as solar photovoltaic (PV) panels, wind turbines, and micro combined heat and power (CHP) systems (Department for Business, Energy & Industrial Strategy, 2019). Under the FIT, homeowners and businesses received payments for both the electricity they generated and the surplus electricity exported back to the national grid.
The scheme offered two types of payments:
1. **Generation Tariff:** A set rate paid for each kilowatt-hour (kWh) of electricity generated, guaranteed for up to 20 years.
2. **Export Tariff:** An additional payment for surplus electricity exported to the grid, typically at a rate of 4.77p per kWh (Ofgem, 2019).
These payments provided a financial incentive that reduced the payback period for renewable energy investments, making them more attractive to consumers. By the end of its operation, the FIT had supported over 800,000 installations across the UK (Ofgem, 2019), significantly boosting the country's renewable energy capacity.
On 31 March 2019, the Feed-in Tariff scheme closed to new applicants (Department for Business, Energy & Industrial Strategy, 2019). The closure was part of the government's strategy to control energy costs for consumers and transition to more market-based mechanisms for supporting renewable energy.
The decision followed a consultation process where concerns were raised about the long-term financial sustainability of the scheme and its impact on energy bills (Department for Business, Energy & Industrial Strategy, 2018). The closure meant that homeowners installing new renewable energy systems after this date were no longer eligible for FIT payments.
However, existing participants continue to receive payments under the terms agreed upon at the time of their registration. The closure only affected new installations seeking to join the scheme after the cutoff date.
Closure of the Feed-in Tariff to New Applicants
The Introduction of the Smart Export Guarantee (SEG)
To replace the FIT, the UK government introduced the Smart Export Guarantee (SEG) on 1 January 2020 (Ofgem, 2020). The SEG mandates that licensed electricity suppliers with over 150,000 customers must offer tariffs to purchase excess electricity exported to the grid from small-scale renewable energy generators.
Key features of the SEG include:
- **Export Payments Only:** Unlike the FIT, the SEG does not provide a generation tariff; it only pays for surplus electricity exported.
- **Market-Driven Rates:** Energy suppliers set their own rates, which must be greater than zero, encouraging competition (Energy Saving Trust, 2023).
- **Eligibility:** Technologies supported include solar PV, wind turbines, hydro, anaerobic digestion, and micro-CHP up to 5MW capacity.
To participate, homeowners must have a smart meter capable of recording exported electricity half-hourly. The SEG aims to create a more sustainable and cost-effective framework for supporting renewable energy growth.
What Does This Mean for Renewable Energy Investments Today?
If you installed a renewable energy system and joined the FIT before its closure, you will continue to receive payments as per your agreement, typically for up to 20 years from the installation date (Ofgem, 2019).
For those considering new installations, the SEG provides an opportunity to earn money from surplus electricity exported to the grid. While the SEG generally offers lower financial returns compared to the FIT, declining installation costs and improved technology efficiency help offset this difference (Energy Saving Trust, 2023).
Investing in renewable energy still offers benefits such as:
- **Reduced Energy Bills:** Generate your own electricity and decrease reliance on the grid.
- **Environmental Impact:** Lower your carbon footprint by using clean energy (Carbon Trust, 2023).
- **Energy Independence:** Protect yourself from rising energy prices.
It's advisable to shop around for the best SEG rates and consult with accredited installers to maximize your investment. Additionally, some local authorities and organizations offer grants or incentives to support renewable energy projects.
Feed-in Tariff: Understanding the UK's Former Renewable Energy Incentive
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