WHAT ARE SOLAR FEED-IN TARIFFS?
Solar feed-in tariffs are an incentivisation mechanism introduced by the government to promote small scale private investment in renewable technologies. The legislation obligates utility companies to pay people a set amount of money for each unit (kWh) of renewable electricity that they produce. This means the initial capital outlay of purchasing a solar PV system is reclaimed much quicker. The feed-in tariff only pays this increased rate for a set number of years, which for photovoltaics (PV) has been set at 25 years.
WHEN IS THE UK INTRODUCING A SOLAR FEED-IN TARIFF?
The Department for Energy and Climate Change (DECC) released a formal consultation paper (July 2009) detailing how Britain is planning to meet it's carbon reduction targets. This included an announcement on the proposed feed in tariffs. The confirmed tariff rates were announced on 1st February 2010 and will come into force on 1st April 2010.
WHAT IS THE CONFIRMED RATE FOR SOLAR PV FEED-IN TARIFF?
The feed in tariff will begin in April 2010, and will last 25 years. Over these 25 years the p/kWh received for generation for new systems will decrease at a rate of 8.5%. This is to discourage people from waiting to invest due to a belief that the price for the technology will come down: the later you invest, the less you will receive from the feed-in tariff for your generation. It has been propsed in this manner to encourage investment now. It has been aimed that the return on solar PV investment should fall between 5-8%. The confirmed tariffs depend on system size and can be seen below:
SIZE OF PV SYSTEM
|
Feed in Tariff (p/kWh)
|
|
<4kW (new build)
|
36.1
|
|
<4kW (retrofit)
|
41.3
|
|
4 - 10kW
|
36.1
|
|
10 - 100kW
|
31.4
|
|
100kW - 5MW
|
29.3
|
|
Off Grid Systems
|
29.3
|
These feed-in tariff rates will be paid for each unit of electricity generated even if you use it in your own house/building. As well as this if you have any excess electricity it can be exported back to the grid and you will get an extra 3p/kWh.
For example: 2.52kWp solar PV system producing 2100kWh/year (smaller than 4kWp on an existing building) using half of the electricity the system produces in the buidling and exporting half of the electricity back to the grid would earn/save:
Earn ((Half the electricity generated 2100/2 kWh x £0.413) + (Half the electricity generated 2100/2 kWh x £0.443)) + Save (Save buying half the electricity generated 2100/2 kWh x £0.13/kWh)
= £1,035/year!
This is a return of an astounding 7.96%.
DO OTHER COUNTRIES USE SOLAR FEED-IN TARIFFS?
The majority of the developed World now seems to have them: Germany, France, Italy, Spain, Portugal, Poland, Czech Republic, Switzerland, Netherlands, Slovenia, Belgium, Slovak Republic, Latvia, Lithuania, Belgium, Greece, Bulgaria and Hungary. Australia, Western Australia and ACT have state tariffs, aswell as Ontario in Canada. It is expected that Obama will allow California and other States to have their own systems.
WHY ARE SOLAR FEED-IN TARIFFS GOOD?
Feed-in tariffs makes microgeneration tecnology a great financial investment, rather than a steady one. As a result of microgeneration they can gain energy independence from rising fuel prices, which has been described as 'Empowering the People'. This makes the take-up of renewable energy much faster, it creates a 'tipping point'.
With people investing their own money in the initial capital outlay, feed-in tariffs avoid inefficient government taxation measures. Private money supplements what would otherwise be funded through either direct taxation or large scale public private partnerships (PPP's), the very same PPP's that caused the demise of Metronet and the billions of pounds of public money being squandered.
They allow the country to build their industrial base in a proven and long-lasting economy through quickly upping the level of demand. As mass production of silicon wafers, solar cells and solar panels moves to these shores so will the price drop for future users of the technology. Rather than the 'trail-blazers' having to pay extra, they are rewarded for contributing towards the overall decrease in cost.
WHAT'S THE CATCH with FEED-IN TARIFFS ?
Feed-in tariffs have to be paid for somehow. This is through an increase in the general cost of electricity prices to standard consumers. This would be similar to the climate change levy (CCL) currently added to UK energy bills. Therefore feed-in tariffs are not sustainable in the very long term, and it is therefore an advantage to those who move quickly to install their photovoltaic, wind or hydro microgeneration systems.
ARE FEED-IN TARIFFS BENEFICIAL TO THE WIDER ECONOMY?
The German renewable sector employs over a quarter of a million people, whilst the UK sector is around 10,000. Renewable energy isn't going away, and it is a sector that will inevitably grow as fossil fuel prices increase and reserves inexorably decrease. The UK's balance of trade is already way into the red and without the introduction of future technologies and industries this can only get worse.
The renewable sector doesn't just provide jobs, but also the taxes that profits generate. The initial investment is exactly the sort of fiscal stimulus the government keeps talking about to help Britain work its way out of the worst recession since the 1930's.
In 2014, with the closing of several older coal and nuclear power stations there is quite a serious gap between the amount of electricity the UK will want to use and the amount that it will be able to produce. The promotion of renewable energy through feed-in tariffs will help plug this gap. Brown-outs and black-outs are a significant risk to businesses wishing to set up in an area or country and can cost billions of pounds.
