Last updated at 14:32, Tuesday, 29 March 2011

FEED-IN tariffs are payments to ordinary energy users for the renewable electricity they generate.

Feed-In tariffs (also known as FITs) are the electricity part of what some people call clean energy cashback, a scheme that pays people for creating their own “green electricity”.

The second part of the scheme is the Renewable heat Incentive, a similar measure for heat (see pages 4/5).

The tariffs have been introduced by the government to help increase the level of renewable energy in the UK towards our legally binding target of 15 per cent of total energy from renewables by 2020 (up from under two per cent in 2009).

People earn a fixed income for every kilowatt hour of electricity they generate and use in their property.

People earn an additional fixed income for every kilowatt hour of electricity generated and sell back to the grid.

When the property can’t generate enough electricity for owners’ needs (no wind or no sunshine) you still buy electricity from the utility company at the normal rates, but it’ll be much less electricity than you buy now.

If an average household, for example a three or four-bedroom house, installed solar PV panels that generate electricity, the feed-in tariffs would provide the following benefits:

The electricity generated would pay the homeowner £836 a year tax-free.

Remaining electricity costs would be reduced from £450 to £300: saving £150, therefore the total benefit would be £986 per year – this is based on an average use of 4,500kWh of electricity per year and the installation of 2.5kW of solar PV panels.

QUESTIONS AND ANSWERS

What are the FITs?

The tariffs are payments to anyone who owns a renewable electricity system, for every kilowatt hour they generate. They are applicable to households and businesses, in fact virtually any property owner.

How much is paid?

Up to 41.3p/kWhr, depending on the type and size of the system used to generate renewable energy.

Plus an additional 3p/kWh when you export any surplus back to the grid.

Also, you reduce costs on your electricity bill when you use your own energy.

For how long?

Tariffs are paid for 20 years, except solar systems which qualify for 25 years. Tariffs are index-linked to RPI.

Is that enough?

These tariffs should cover the initial capital cost of installation and, according to the government, earn a return up to eight per cent per annum. In practice that means you should earn back the capital cost at least two to three times over the duration of the tariffs.

When do they start?

Tariffs became payable in April last year. All qualifying systems installed now are eligible.

Are there any restrictions?

The tariffs apply to all the technologies shown in sizes up to five megawatts (plenty for most consumers and businesses). There are technical and accreditation requirements but our recommended suppliers will cover all this on your behalf.

However the government is now reviewing the scheme, so things may change.

How can I benefit?

Anyone who owns a property can benefit.

First published at 13:14, Tuesday, 29 March 2011
Published by http://www.nwemail.co.uk