What is the Feed-In Tariff?
The FITs reward incentive is the new government backed replacement of the previous grant system and is paid for by your energy company.
With FITs, anyone who has an eligible Solar PV system installed will receive a guaranteed fixed payment for generated electricity, including the electricity that they use. This payment is guaranteed for a 25 year period. There is also an extra payment for any electricity that isn’t used and which is fed back into the National Grid. Additionally those installing systems also benefit from reduced electricity bills as they become their own electricity generators and don’t need to draw as muc electricity from the grid itself.
Who pays the Feed-in Tarriffs payments?
The payments are made from your electricity provider, e.g. Eon, EDF, British Gas. They can make the payment as a direct payment into your bank account or alternatively you can chose to have it paid as a credit against your own energy bills. Whilst the FITs payments are a government incentive for renewable energy, the actual fund set up to pay those who have the renewable energy systems installed, is funded by the different electricity supplier and is based on the proportion of the UK that they supply. The suppliers recover this cost through an increase in electricity bills to standard consumers, although this is estimated at only £3 extra per bill by 2016. So it makes sense to beat the electricity suppliers at their own game, Get them to pay you the FITs payments and reduce your own electricity bill at the same time!
What will my payments be and how much can I save?
An average three-bedroom home will earn around £900 a year by generating its own solar electricity – and that’s on top of the likely reduction of £140 from the household electricity bill. You can earn a fixed income for every kilowatt hour of electricity you generate and use in your property. And you can also earn an additional fixed income for every kilowatt hour of electricity you generate and sell back to the grid. The income is guaranteed for 25 years (for solar pv systems) and index-linked.
When you need to use electricity at night (when it is dark you won’t be able to generate enough electricity from solar technology), you can still buy your electricity from your utility company, but you will need to use much less than usual. If you want to make the most of solar technology – and to save even more on your electricity bills – try to become as energy efficient as you can; for example, run electrical appliances like your washing machine and dishwasher during the day.
If you invest in solar energy now, you will be guaranteeing that income for the next 25 years. Ofgem will administer the feed-in tariff scheme and energy suppliers will be responsible for payments to their customers.