Financial Incentives

Feed-In Tariffs

The Feed-in Tariffs (FITs) scheme was introduced by the government on 1 April 2010, to encourage deployment of additional small-scale (less than 5MW) low-carbon electricity generation, particularly by organisations, businesses, communities and individuals that have not traditionally engaged in the electricity market.  This will allow many people to invest in solar power generation schemes in return for a guaranteed payment from an electricity supplier of their choice for the electricity they generate and use as well as a guaranteed payment for unused surplus electricity they export back to the grid.

What are the benefits of FITs?

There are three financial benefits from FITs:

1. Generation tariff – the electricity supplier of your choice will pay you for each unit (kilowatt) of electricity you generate. A table of tariffs has been published by government
2. Export tariff – if you generate electricity that you don’t use yourself, you can export it back to the grid. You will be paid for exporting electricity as an additional payment (on top of the generation tariff)
3. Energy bill savings – you won’t have to import as much electricity from your supplier because a proportion of what you use you will have generated yourself

Latest developments

The government has announced further measures to reduce the Feed In Tariffs (FITs), with increasingly large cuts depending on the growth of the industry over the coming months.  The government says this is intended to remove the need for emergency reviews, and provide a stable, predictable future for solar PV and for the whole FITs scheme.  The consultation will be open for 8 weeks from 9 February and closed on 3 April 2012.

The above table shows how the tariffs could drop from 1st July 2012.  There are three options proposed, with the overall intention of providing project returns on investment of 5-8%.  Option A if deployment (i.e. new capacity installed and with an eligibility date between March and end-April 2012) exceeds 200MW.  Option B if deployment during March and April 2012 is between 150 and 200MW.  Option C if deployment during March and April 2012 is less than 150MW. 

The consultation also reviews export tariffs, and potentially reducing the period for which solar PV tariffs should be applied, from 25 to 20 years.