Solar PV Feed-in-Tariff Changes
Since the introduction of the FIT the government has been reducing tariff values every three months in line with falling solar module prices. On the 1st July 2013 the FIT rate for Solar Electricity (PV) dropped again from 15.44p/kWh to 14.90p/kWh, however, solar PV is still very capable of delivering a substantial return on your investment with payments, with payments of around £560 a year for 20 years at current rates. The tariffs will be reviewed again on the 1st January 2014.
The uptake of the solar PV FIT (at 45.4p/kWh) in 2011 far exceeded expectations and with money fast running out, the government tried to reduce the tariff rate to try and make it last longer so it would be available to more homes.
The tariff was halved for all installations registered on, or after 12th December 2011, however this change was challenged and the decision was overturned, latterly by the High Court, meaning that the tariff reverted to the original rate (45.4p/kWh for domestic retrofitted installations under 4kWp) and stayed there until the 3rd March 2012.
Feed in Tariff Degression
A consultation that closed on the 3rd April confirmed that there would be reductions to the Solar Electricity (PV) FIT rates every three months, which came into effect. How much the rate is reduced by is determined by the number of solar PV units that are installed nationally. The greater the number of systems installed, the further the rates come down in the next period. This is because increased demand reduces the price of the units, and so less FIT is needed to make a PV system financially worthwhile. This is known as degression.
Degression only affects new customers – once you have signed up for the FIT scheme, your rate is set for the 20 year payment period. Your tariff rate is also linked to the Retail Price Index (RPI) so that it retains its value for the duration of the payment period.
From April 2012 properties looking to install solar PV now have to achieve an EPC band rating A-D to receive payments at the full FIT Generation Tariff rate.
On the 3rd March 2012, the first rate reduction took place, reducing the 45.4p full Generation Tariff rate to 21p/kWh. On the 1st August, this was reduced to 16p/kWh, and on the 1st November this dropped again to 15.44p/kWh, with the review in July bringing it down slightly to 14.90p/kWh – this rate has been frozen until the 1st January 2014 when it will be reviewed again. The Export Tariff has been set at 4.64p/kWh for this period.
What does this mean for me?
- The tariff rate for solar PV <4kWp has been reduced to 14.90p/kWh if you have an EPC band A-D
- If the property has a Band E-G rating, the lower tariff rate has reduced to 6.85p/kWh.
- The export tariff rate has increased to 4.64p/kWh.
- The lifetime of the FIT for Solar PV is now 20 years.
The next rate review will take place on the 1st January 2014. We don’t currently know how much the rate will be reduced. We recommend that if you are thinking about installing solar PV, you start to get quotes now to maximise your returns.
- Will I need a special meter to be able to claim FIT payments?
- Generation must be metered and Feed-In Tariff payments are made to generators on the basis of metered generation. This means that you will need a generation meter, as your meter will need to be able to measure your electricity generation. DECC has announced that for now, the amount of exported electricity used in the calculation of payment of export tariffs can be deemed (estimated), subject to the following:
- These arrangements will only apply until the finalising of specifications for smart meters;
- These arrangements do not apply if export meters exist already, or are provided at the generator's expense
- Why are they called 'Feed-In' Tariffs?
- This sort of tariff was first introduced in Germany in the 1990s and it applied only to power which was 'fed in' to the electricity grid, hence the name. The tariffs in the UK apply to all the electricity the system produces, whether it is used on site or fed back in to the grid, so the name is actually a misnomer (they are really 'production tariffs').
- What's the Export Tariff?
- You earn an additional fixed income for every kilowatt hour of electricity you generate and sell back to the grid.
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