Understanding the Feed-in Tariff
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To understand the Feed–in Tariff you first need to understand the following key terms:
Key terms:
Feed-in Tariff (FiT)
The FiT is a collective term which covers everything related to the electricity your solar electricity system generates and how much you get paid for it. Under the FiT there are two tariffs, the Generation Tariff and Export Tariff.
Generation Tariff
This is a set tariff through which your electricity supplier pays you a fixed amount for every unit of electricity your solar (PV) system generates each year for 25 years, whether you use this electricity or export it to the National Grid. You get paid for every unit of electricity your system produces!
Export Tariff
This is the amount you earn in addition to the Generation Tariff for any electricity you don’t use and export back to the National Grid through your electricity supplier.
Avoided Costs
These are the savings you make on your electricity bill by not having to import electricity from the National Grid through the ability to generate your own electricity ‘on-site’.
Imported electricity
This is the amount of electricity you import direct from your electricity supplier.
What does this mean in terms of money?
This means that even after paying for importing a small amount of electricity from your usual supplier, a Tesco 3.76kWp solar electricity system can earn the homeowner £678 in cashback per year!
|
Import Costs (You Pay) |
Generation Tariff (You Earn)^ |
Export Tariff (You Earn)^ |
Avoided Costs (You Save) |
Overall Saving & Income (minus Import Costs) |
| 2190.5 x 13p/kWh = £284.77 /year* | 2219 x 21p/kWh = £465.99/year* | 1109.5 x 3.1p/kWh = £34.40/year* | 1109.5 x 13p/kWh = £144.24/year* | + £359.86 per year* |
*Figures based on example shown using a 2.585kWp system.
Source: SAP2009 v9.90, the Standard Assessment Procedure used by government, produced by the Building Research Establishment. Based on electric price of 13p/kWh. Under the rules no export meter is required, so customers are deemed to export 50% of electricity they generate in our examples. RPI is set at 2.5% and raises the tariff rates only and electricity rises at 5.0%.
These figures are for guidelines only.
Tracking your investment
FiT rates are linked to the Retail Price Index (RPI).
This means that the Generation Tariff rate of 21p/kWh paid at the first year, and the Export Tariff of 3.1 p/kWh, will adjust in line with the inflation rate in subsequent years - so when inflation rises, your FiT rate rises.
The measure of inflation used in this case is the Retail Price Index (as opposed to the Consumer Price index.)
The average RPI since 1999 has been 2.5%. In July 2011 the RPI was 5.0%. In a world with growing oil prices due to scarcity of supply, the situation is very likely to be higher RPIs in the longer term.
^Estimated annual payments are based on earnings from the proposed Feed-in Tariff rates as of the 1st April 2012. These calculations may alter due to changes made to the Feed-in Tariff by the Department of Energy & Climate Change (www.decc.gov.uk).
