Feed-in Tariffs = money for your Solar Electricity
 The
Feed In Tariff is modeled upon a scheme operating successfully in Germany
for many years. It has been introduced by the UK Government after the
passing of the Climate Change Act 2008. Its intention is to boost the use of
domestic renewable energy, hence it will boost the sector, 'kick-start' the
industry in the UK and create green jobs.
From 1st April 2010 householders and communities who install low carbon
electricity technology such as solar photovoltaic (pv) panels and wind
turbines up to 5 megawatts will be paid for the electricity they generate,
even if they use it themselves. The level of payment depends on the
technology and is linked to inflation. It is tax free too. They will get a
further payment for any electricity they feed into the grid. These payments
will be in addition to benefiting from reduced bills as they reduce the need
to buy electricity.
The scheme will also apply to installations commissioned since July 2008 when
the policy was announced.
A typical 2.5kW well sited solar pv installation could offer a homeowner a
reward of up to £900 and save them £140 a year on their electricity bill.
Ofgem will administer the feed-in tariff scheme and suppliers will be
responsible to paying the reward to their customers. The electricity
supplier pays the Feed-in Tariffs (and bills users for the electricity
imported in the normal way). Suppliers may choose to 'net these amounts off'
and just pay a cheque or submit a bill for the difference. Claimants can
appoint an agent to collect the tariffs on their behalf.
Meters will be needed to measure each of the three energy flows (generation,
import and export). You will already have an import meter, and the others
may be similar - though the whole country is changing over to Smart Meters
in the next few years, and they will be able to cope with all this.
The UK currently gets around 5.5% of electricity from renewable sources and
that will need to increase to around 30% to meet the 15% 2020 target for all
energy.
Modeling show that small scale renewable installations could meet 2% of
electricity demand in 2020. The UK currently gets less than 1% of heat from
renewable sources. This this will need to rise to around 12% in order to
meet the 15% 2020 target for all energy.
There are a couple of good web sites you can check out if you wish for further
information. These are:
-
www.fitariffs.co.uk
-
www.ownergy.co.uk
HM Treasury Spending Review 2010
On the 20th October the British Government
released the results of a comprehensive "spending review"
designed to cut the deficit by 2015. This deficit had arisen due
to the 2008/2009 Bank bailouts. There had not been much
speculation that Feed In Tariffs would be effected as the money
is collected and paid by the Utility Companies as administered
by Ofgem. Even-so the review mentions FITs thus: "Feed-In
Tariffs will be refocused on the most cost-effective
technologies saving £40 million in 2014-15. The changes will be
implemented at the first scheduled review of tariffs unless
higher than expected deployment requires an early review."
This means that FITs remain safe as the Government will not
change anything before the first scheduled review (2013).
Our advice is to get in early with the FIT as
all current agreements will be honoured. It may well be that,
after a few years, the rates quoted may well be less beneficial
or there may be more strings attached to some of these
technologies. We will have to wait and see. However you will
definitely still get you money back + profit if you are an early
adopter - that much is sure.
Post-Carbon Living is
still enquiring as to exactly how the UK Government thinks it
will save any money let alone the £40 million quoted, on the FIT
considering that the money doesn't flow through the Treasury.
This question was raised by Tim Yeo MP who was Chairing the UK
Parliamentary Energy and Climate Change Committee on the 15th
September 2010. He asked the Energy and Climate Change Secretary
Chris Huhne "[on the] point about the relationship between
this and the comprehensive spending review, why does the
Treasury take an interest in incentives whose cost is borne by
consumers rather than taxpayers?" The answer was "the
current Treasury view, is that they should be concerned about
taxable capacity. They take the view that, if a legislative
charge is imposed on consumers through the levy system, then, in
effect, this has an equivalent effect to a tax. It isn’t a tax,
but it has an equivalent effect to a tax and might
therefore limit their taxable capacity in some other area".
Tim Yeo MP retorted thus "It sounds like a typical
Treasury power grab to me... It really does not
seem to me to have anything to do with the CSR
[the Comprehensive Spending Review] at all,
and it would be extremely damaging to the whole prospect of
reaching our renewable energy target if they are allowed to try
and influence the levels at which these consumer paid for
incentives are actually set". Remarkably this point remains
largely undebated in either the media or the online forums. If
you are reading this now and find this shocking then we share
your feelings. Other than MPs it seems as if no one seems to
question the scandal that this exposes.
FIT applied to our PCH
The system we have fitted in the PCL
Post-Carbon Home is a 2.96kWp system rated at about 2500kWh per
year. So we qualify for 41.3p/kWh in the first two years and
then 37.8p/KwH for each year in the 23 years after that. It will
save in the region of £170/year from our electricity costs as we
consume our own power. The revenue from exported electricity
could be about £80 to £100 a year.
Hence:
(2500 x £0.413 =) £1032 + £170 + £100 = £1300
in year one.
Then another £1300 in year two.
Then in years three through twenty five it yields (2500 x
£0.378 =) £945 + £170 + £100 = £1200
Therefore the total money made will be (£1300
x 2) + (£1200 x 23) = £2600 + £27600 = £30200.
Performance may well drop off in that time as the panels age. So
that may degrade to £27000. Now the system only cost £13000. So
it pays back in eleven years then your profits double your
original investment. It is then all money in the bank which you
can put toward replacing the system at the end of its life. This
income is index-linked and tax free. Since Ofgem estimate a 60%
rise in fossil fuel energy prices by 2015 then these estimates
are conservative.
The Renewable Heat Incentive = money for your
Solar Hot Water
 When
the Energy and Climate Change Secretary Ed Miliband announced the feed-in
tariff (FITs) levels on February 1st 2010 his department also published a
blueprint for a similar scheme to be introduced in April 2011 to incentivise
low carbon heating technologies. The renewable heat incentive (RHI) will be
a world first.
The FIT & RHI schemes are designed to bring about a significant increase in the
amount of locally produced green energy, as a contribution to the wider
shift of the energy mix to low carbon.
The Department of Energy and Climate Change RHI scheme is to incentivise
renewable heat generation at all scales. This will guarantee payments for
those who install technologies such as ground source heat pumps, biomass
boilers and air source heat pumps.
Under the proposed tariffs the installation of a ground source heat pump in an
average semi-detached house with adequate insulation levels could be
rewarded with £1,000 a year and lead to savings of £200 per year if used
instead of heating oil.
The heat incentive could help thousands of consumers who are off the gas
network lower their fuel bills and gain a cash reward for greening their
heating supply. Details of funding for the scheme will be published in the
Budget 2010.
The money comes from a levy administered by the official regulator Ofgem on
sales of fossil heating fuels and is collected by the suppliers of these
fuels. Therefore if you install a renewable energy system you get a double
benefit: a) Your income from the Renewable Heat Incentive b) Because you are
producing some of your own heat, you will buy less gas or fuel and therefore
pay less for it (and so less levy)
There are a couple of good web sites you can check out if you wish for further
information. These are:
-
www.rhincentive.co.uk
-
www.ownergy.co.uk
HM Treasury Spending Review 2010
On the 20th October the British Government
released the results of a comprehensive "spending review"
designed to cut the deficit by 2015. This deficit had arisen due
to the 2008/2009 Bank bailouts. There had been much speculation
that RHI would be effected even though the money is collected
and paid by the Utility Companies as administered by Ofgem. The
review mentions RHI thus: "£860 million funding for the
Renewable Heat Incentive which will be introduced from 2011-12.
This will drive a more-than-tenfold increase of renewable heat
over the coming decade, shifting renewable heat from a fringe
industry firmly into the mainstream. The Government will not be
taking forward the previous administration’s plans of funding
this scheme through an overly complex Renewable Heat levy."
So the good news remains that we will get an
RHI in 2011/2012 and it will be designed to make renewable heat
"mainstream" which is assumed to mean the domestic sector. The
RHI is still in consultation and we don't know what form DECC
will implement the RHI. DECC doesn't say whether it will adopt
the proposals Labour consulted on earlier this year. A policy
statement is expected at the end of November 2010. If you are
unsure then please wait until November and we'll give you
further advice then. However, in the meantime please don't
change any plans to install renewable heat in your home. You
will be rewarded one way or another.
The figure of £860 million is, allegedly, 20%
less than had been expected and the Government is now abandoning
plans to use the Renewable Heat levy to pay for the RHI. The
Renewable Heat levy was simply the money collected by Ofgem from
the Utility Companies. It didn't flow through Treasury coffers
hence it remains unclear how the Treasury now thinks it will
save 20% of the costs of the RHI by now paying for it out of
general Revenues from taxpayers rather than letting the industry pay
for it. The money will now come via DECC from the Treasury. Of
course this is incomprehensible. Are we to believe that the
Renewable Heat levy was so "complex" that it cost more for Ofgem
to administer than it does for DECC to administer it and pay for
it out of taxpayer receipts? How is this more efficient and how
does it save money? Even politically this makes no sense as it
goes from "stealth Carbon Tax" on fossil fuel guzzlers direct to
straight "tax". Bizarre.
RHI applied to our PCH
Our Post-Carbon Home will qualify for the RHI both for the KWB Biomass Boiler
but also for the Solar Thermal panels on the roof. It remains to be seen how
much that will be but the returns are expected to be 18p/kWh for 20 years.
The MCS Certificate reads "1051kW"/yr based upon a SAP rating. It
should read "kWh" per year. When queried with the MCS Certificate issuing
body they said this wasn't a problem! It is a little amazing that they can't
get the certificate to read the right unit of measure. Power is not energy!
The MCS Certificate has to use the SAP rating.
The T-Sol estimating software actually shows 1202kWh/year. T-Sol is more
accurate because SAP (amongst other things) bases its calculations on the
installation being a couple of hundred miles further north in Sheffield!
We'll use tthe disappointingly low 1051kwh/yr figure to calculate the RHI
(assuming Ofgem will use that too) but the higher number of 1202kWh/yr for
actual savings. According to T-Sol we'll save 344kg of wood pellets a year.
One tonne currently retails at over £220/tonne delivered. This will save us
just £75 a year.
(1051/yr x £0.18/kWh =) £190 + £75 = £265/year.
Now £265/year x 20 years = £5280. The
ST system cost us £3750 so we get payback in fourteen years
(a 7% pa return on investment). You
then get another £1530 in the final six years out
of twenty years. This is money in the
bank which you can put towards a replacement system at the end
of the current system's life. This income is index linked and
tax free. Since Ofgem estimate a 60% rise in fossil fuel energy
prices by 2015 then these estimates are conservative. Of course
the price of wood fuel may not track fosil fuel prices exactly
but you save either way.
These figures are only for illustration as we await the policy
review document from the Government due in November 2010. |
