Feed in Tariff UK
Get Paid for the Energy You Generate
Feed-in tariffs, which are collectively called FITs, are a group of reimbursement schemes designed to encourage consumers to invest in renewable energy micro generators. The use of renewable energy benefits individuals and society as a whole. Solar and wind resources are limitless, and micro generators produce far less pollution than large, conventional power facilities.
Unfortunately, micro generators are expensive to purchase and install. They make good ecological sense and pay back their initial cost over the lifetime of the equipment, but the payback period depends upon the type of equipment, the quality of the equipment, the regional conditions where it is installed, the average annual power consumption at the residence, and the seasonal costs of the utilities being supplemented. The break-even point for return on investment (ROI) often occurs 10 years or more after micro generator installation, and many homeowners are unwilling or unable to make such a long-term investment.
Government recognizes that this is a difficult decision for homeowners, and FITs are designed to make the decision easier. Fits provide immediate revenue from micro generators and decrease the time required to return initial investments. FITs also make micro generators available to homeowners who could not otherwise afford them, because some companies are willing to provide free equipment and installation in return for the FITs payments.
Conventional energy production from petrochemical or nuclear fuel creates by-products that are detrimental to the global ecology. Petrochemical resources are finite and supply is controlled by foreign governments. Nuclear power carries tremendous safety and waste disposal concerns. Great Britain has resolved to move away from dependence on these energy sources, but there are many hurdles to overcome.
Government doesn't control energy companies and cannot force them to invest in new solar or wind technologies. Population density makes these technologies difficult to site and is also an important consideration. Where would acres upon acres of photovoltaic panels be placed? What would the risks associated with large wind farms be, and who would manage them?
The ingenious scheme that addresses these issues is FITs. Homeowners buy and install renewable energy micro generators at their own cost, and the big six energy providers -- the EDF Energy, the British Gas, the EON, the NPower, the Scottish and Southern Energy, and the Scottish Power – pay the homeowners for each kilowatt-hour of energy generated by the micro generators.
The big six win in this scheme because they are not forced to invest in or manage alternative power technology. There are no acres of solar panels, nor vast fields of wind farms. Homeowners also win because the big six are required to pay monthly stipends for installed equipment based on the amount of renewable energy generated and to purchase excess electricity generated from these sources. Each homeowner receives an immediate income from the wind turbine or photovoltaic solar panel system. Commercial energy consumption is reduced by the kilowatt-hours of free solar or wind electricity the home generates, so monthly utility bills are reduced. Excess electricity generated from wind or solar is automatically fed back into the power grid, purchased by the utility, and sold to other residences.
The scheme works as follows:
FITs are designed to generate a monthly income substantially greater than the monthly note cost on the equipment and installation. Homeowners who participate in FITs cannot lose money, and they begin producing revenue immediately. There is no need to wait years for a return on the investment.
In addition to money saved through lower energy bills, income is produced by two different FITs components.
The Generation Tariff is the main component. This scheme pays the owner for each kilowatt-hour of electricity that the micro generator produces. The payments are guaranteed at the contract rate for the life of the contract, which is usually 20 to 25 years, and some companies are willing to provide the micro generator and installation for free in return for assignment of the Generation Tariff.
The Export Tariff is a smaller component that pays the homeowner 3p/kilowatt-hour for all excess electricity sent back into the residential power grid. This rate is the same regardless of the micro generator technology used. Homeowners with renewable energy micro generators are paid for all electricity produced, and they are paid again when they feed excess electricity back into the power grid.
FITs place sustainable power within the grasp of ordinary homeowners. The tariffs provide a stable monthly income higher than loan repayment costs on the equipment, and the payments can be assigned directly to the micro generator equipment companies to avoid the need for a large, long-term loan.