Feed-In Tariffs
Financial Incentives for generating green electricity
Clean Energy Cashback
Feed-In Tariffs – FiTs – Clean Energy Cashback Financial Incentives
The UK government has introduced Feed-In Tariffs for microgeneration of electricity from April 2010. The tariff levels for the electricity financial incentives are calculated to offer between 5-8% return on initial investment. The tariff levels for photovoltaic (up to 36 pence per kWhour) and wind (up to 34 pence per kWh) are set at a higher level per kWh than for the Renewable Heat Incentives to compensate for the high capital costs and lower efficiencies of these technologies. The tariffs for the Renewable Heat Incentive have been calculated to offer a rate of return of 12% across the tariff bands.
FiTs provide a positive step change in the business case for delivering on-site renewable electricity generation, not only to reduce electric bills and carbon emissions, but also to deliver an electricity related cash flow into your building. The FiTs cashback incentives are calculated to offer between 5-8% return on initial investment.
The RHI provides a positive step change in the business case for delivering on-site renewable heat generation, not only to reduce energy bills and carbon emissions, but also to deliver a heat related cash flow into your building. The RHI cashback incentives are calculated to offer 12% return on initial investment.
Feed-In Tariffs for microgeneration of electricity
On 1 February DECC published the tariffs which apply from April 2010. Renewable electricity installations commissioned since July 2009 are due to receive a cashback subsidy for the lifetime of the equipment used.
The table below shows the eligible technologies, the subsidy to be received and the deemed lifetime of each technology. This provides a major incentive for owners to invest in renewable electricity generation. The feed-in tariffs are based on pence/kWh of renewable electricity delivered. The rates and lifetimes will vary with the technology and scale used as follows:
| Feed-In Tariffs - FiTs | Scale | Feed-In Tariff pence/kWh | Tariff lifetime in years |
| Anaerobic digestion | <500kW | 11.5 | 20 |
| Anaerobic digestion | >500 kW | 9.0 | 20 |
| Hydro electric | <15 kW | 19.9 | 20 |
| Hydro electric | <100 kW | 17.8 | 20 |
| Hydro electric | <2 MW | 11.0 | 20 |
| Hydro electric | >2 MW | 4.5 | 20 |
| Photovoltaic | <10 kW | 36.1 | 25 |
| Photovoltaic | <100 kW | 31.4 | 25 |
| Photovoltaic | >100 kW | 29.3 | 25 |
| Wind | <1.5 kW | 34.5 | 20 |
| Wind | <15 kW | 26.7 | 20 |
| Wind | <100 kW | 24.1 | 20 |
| Wind | <500 kW | 18.8 | 20 |
| Wind | <1.5 MW | 8.4 | 20 |
| Wind | >5 MW | 4.5 | 20 |
.
These "Feed-In Tariffs" are a form of Clean Energy Cashback which are paid based on metered electricity generated - whether or not the electricity is fed back to the Grid. If the electricity is paid back to the Grid the consumer receives a further 3 pence /KWatt hour.
Comment on the Feed-In Tariffs and RHI
While there are a number of renewable energy options to be considered, ICAX believes the most practical, affordable and reliable answer to generating renewable energy is to use Interseasonal Heat Transfer to heat buildings in winter and provide domestic hot water all year round.
Interseasonal Heat Transfer is a more economic technology than those which generate renewable electricity, and Renewable Heat attracts the RHI clean energy cashback which is calculated to provide a higher return on the initial investment than Feed-In Tariffs.
However, the FiTs and RHI are not alternatives: you can benefit from both forms of Clean Energy Cashback if you install photovoltaic cells to provide electricity to control your ground source heat pumps.
Tax free income from Feed-In Tariffs
Tariffs will be exempt from income tax. This means that domestic users and other income tax payers will not be taxed on any income received from the Feed-In Tariffs or the Renewable Heat Incentive.
See also: Banking on IHT The Merton Rule Ground Source Energy
