The UK Government is to support a new era of small-scale renewable electricity with the announcement on Monday of the final structure of Feed-in Tariffs (FiT) for small-scale generators.
The unveiling of details of the programme follows seven months of consultation and sets out how households and small generators can cash in on the renewable energy they could produce.
FiTs are a per-unit support payment (p/kWh) for electricity generation and are already widely in operation in other EU Member States to support renewables.
The Government claims the introduction of FiTs on April 1 will signify a major departure from how small low-carbon generators in the UK are currently rewarded.
Under existing arrangements, renewable generators are awarded Renewable Obligation Certificates (ROCs), and are paid for their electricity by suppliers through tariffs, in the case of domestic-scale microgeneration, or through power purchase agreements (PPAs).
The existing tariff schemes vary between suppliers as some pay for all electricity that small generators produce, while others only for the electricity exported. There are different approaches to how the value of the ROCs is treated as part of the price paid to the generators
The new FiT scheme, to be unveiled on Monday morning by Energy Minister Ed Miliband is designed to “provide the right level of simplicity” to encourage non-energy professionals to invest in small-scale generation.
It will provide non-taxable, cash-linked incentives to encourage those generators to consume the electricity they generate and become more energy efficient while they do so.
The scheme will operate on two levels and allows fixed payment from the electricity supplier for every kilowatt hour (kWh) generated, known as the “generation tariff”.
Another payment will be made additional to the generation tariff for every kWh exported to the wider energy market, to be called the “export tariff”.
The renewable technologies that will qualify for FITs payments are anaerobic digestion, biomass, hydro, PV and wind.
Only small-scale generators with a capacity of up to 5 megawatt can be considered for inclusion and both the installer and the equipment must be accredited by the Microgeneration Certification Scheme (MCS).
According to the proposals, generators will be guaranteed a market for their exports at a long-term guaranteed price. The generator may choose whether to sell exported electricity to the supplier at this guaranteed export tariff, or negotiate a price for exported electricity in the open market.
In addition, generators will benefit because they will have the opportunity to use that electricity on-site to offset some or all of the electricity they would otherwise have had to buy.
The consultation report, stated: “Although the name ‘feed-in tariff’ suggests payment for electricity fed into the grid for use in the broader energy market, we believe FiTs payments should include consideration of all electricity generated, not just that which is exported. This will help to encourage use of electricity directly at the location where it is generated.
“The most likely alternative, a tariff paid only for exported electricity, would encourage all the electricity generated to be exported straight onto the electricity network, thereby reducing some of the wider benefits of using that electricity directly on-site. Exporting all the electricity provides no incentive to smooth out intermittent load on the local distribution network which may increase the costs to that network.
“We intend to set tariffs at a level to encourage investment in small scale low-carbon generation that will make a contribution to meeting our renewable and carbon targets. However, is important to ensure value for money for the scheme as a whole, bearing in mind that the costs of support are shared by all electricity consumers. We also need to ensure compatibility with other policies, so we do”
Cabinet minister Ed Miliband will officially launch the programme during a visit to a social housing project near London, which is receiving free solar panels through eaga's clean energy scheme.
He will also reveal details of a renewable heat scheme (RHI), which will be launched following a similar FiT-style consultation next year.
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