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Feed-in-Tariff

 

 ”Feed-in-Tariffs are payments to ordinary energy users for the renewable electricity they generate” (fitariffs.co.uk)

 

The Feed-in-Tariff (FiT) scheme for solar PV gives a significant advantage to the long-term running costs of a property, building or business. It provides a sound investment whilst adding real value created through the revenue generation stream.

 

Get paid for ALL electricity generated, guaranteed for 20 years, RPI Linked and tax-free for domestic installations

 

By becoming a ‘microgenerator’ – creating renewable energy on a small scale – you are able to benefit in a number of ways.

 

There are three separate financial benefits:

 

Primary Financial Benefits:

  • The ‘Generation Tariff’ – payment for all the electricity you generate.
  • The ‘Export Tariff’ – payment for surplus electricity that you do not use but export to the national grid.
  • Reduced electricity bills – by using the free electricity you generate on-site you are able to buy less electricity from your electricity provider.

 

 

The Generation Tariff

 

In April 2010 the Government introduced a piece of legislation stating that every electricity provider is obliged to pay anyone generating electricity from an accredited renewable source, for all the electricity they produce, irrespective of use. 

 

The rate paid for the electricity is set by the Government and varies depending on the potential output of the system. It is linked to the Retail Price Index (RPI) in order to rise with inflation annual, and payments are made for a 20 year period.

 

The Export Tariff

 

In addition to receiving payment for all of the electricity you generate, you can also sell unused electricity to your electricity provider. This is known as the ‘Export Tariff’ and is paid at a standard rate for all systems no matter their size. This rate is linked to the Energy Price Index (RPI) and therefore is also adjusted annually in line with inflation.

 

For systems smaller than 30kWp this payment is based on the assumption that 50% of the generated electricity is used onsite and the other 50% is exported into the national grid. For the 50% assumed to be exported, your electricity provider will pay 4.64p per kWh. In reality you may use more or less than half of the electricity generated, however you will always receive payment based on 50% of the total electricity generated.

 

If the system is greater than 30kWp your electricity provider will install an export meter. This will meter exactly how much electricity is exported to the national grid, and all payments are made on readings from this meter.

 

The other main benefits of the FiT are:

  • Guaranteed to remain in place for 20 years from the date your system is installed. This is backed by the Government and paid by the electricity provider.
  • The scheme is aimed at encouraging early adopters – the sooner you have your system installed, the more you have to gain.
  • The FiT rate you start at will not be affected by possible lower rates introduced at a later date.
  • The FiT is Retail Price Index (RPI) linked; the value of your electricity increases in line with inflation. An annual review is carried out with a new, inflation adjusted rate set which comes into effect at the beginning of each financial year. For 2011, the rate was increased by 4.8%!
  • On top of all this all FiT payments are tax-free for domestic installations! This is for both the Generation Tariff and the Export Tariff.
 
 

Table of Rates

 

  

From 8thFebruary 2016 Rates

Description

Standard Generation Tariff (p/kWh)

Multi-installation Tariff – more than 25 (p/kWh)

Lower Tariff – energy efficiency not met (p/kWh)

4kW or less, new build and retrofit

4.39

-

-

Greater than 4kW but not exceeding 10kW

4.39

-

-

Greater than 10kW but not exceeding 50kW

4.59

-

-

Greater than 50kW but not exceeding 150kW

2.70

-

-

Greater than 150kW but not exceeding 250kW

2.70

-

-

Greater than 250kW but not exceeding 5MW

2.27

-

-

Stand-alone solar photovoltaic (not attached to a building and not wired to provide electricity to an occupied building)

0.87

-

-

 EXPORT TARIFF

4.40

4.40

4.40

 

Expected Returns on Investment

 

A 176kWp solar PV array mounted on a south facing commercial roof will cost in the order of £217,000 plus 20% VAT. Taking into account the ‘Generation Tariff’ earned from payment on every unit of electricity generated by the system, revenue from the ‘Export Tariff’ paid on every unit of electricity exported to the national grid and most importantly the huge reduction of imported energy due to on-site usage of the generated electricity, it can be shown that returns of 16.2% can be achieved:

 

 

System Size and Cost  
Installed System Size(kWp)

176

Installed System Cost (excl. VAT)

£217,000.00

VAT @ 20%:

£43,400.00

Total Cost of System (incl. VAT)

£260,400.00

   
System Output  
Estimated System Generation per annum (kWh)

179,520

   
Feed-In-Tariff (FiT) Income  
Year 1 FiT Generation Revenue (10.62p / kWp)

£19,065.02

Year 1 FiT Export Revenue (20% @ 4.64p / kWh)

£1,665.95

Total Year 1 FiT Revenue

£20,730.97

Total FiT revenue over system life (20 years)

£585,665.58

   
Energy savings  
Year 1 value of avoided electricity cost (80% @ 10p/kWh)

£14,361.60

Total value of avoided electricity cost (over 20 years)

£648,298.47

   
Total Benefits   
Total Year 1 Benefits

£35,092.57

Total Benefits over 20 Year Term

£1,233,964.05

   
Payback Calculations  
Break-even Point (years)

6.2

   
Annual Return on investment

16.2%

 

Assumptions;

 

Visit the dedicated Feed-in-Tariff website for further details. www.fitariffs.co.uk

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