Feed-in tariff: your questions answered
Posted by Cathy Debenham on 8 February 2010 at 12:02 pm
Read the updated version of this article here.
The introduction of the feed-in tariff (known as Clean Energy Cashback scheme) opens a new and exciting era for microgeneration. Here we answer some of the most common questions on the new scheme. If you've got any more, please add a comment below and we'll do our best to answer. The information below refers to domestic installations of less than 50kW. This blog post supplements our main information page on feed-in tariffs which gives all the rates for each technology.
What return on my investment should I expect?
The scheme has been devised to give a 5 to 8% return on investment for "well-sited installations". Of course, you will only get this good a return if your system performs well, so it is important to measure the wind speed, or solar potential, before going ahead with an installation.
Is it better to export the electricity I produce, or to use it at home?
The aim of the Clean Energy Cashback is to incentivise people to use the electricity they produce at home where possible. The amount you save by not buying electricity from your energy company is significantly more than the sum you get for exporting it. It makes sense to do things that use electricity while your system is generating. So you might do the vacuuming or run the washing machine during the day if you've got solar panels, or when the wind is blowing if you've got a turbine. The government hopes that by generating your own electricity you will develop a better understanding of energy and become a more efficient electricity user.
Do I have to make my house more energy efficient to qualify for the scheme?
There are no mandatory requirements to do so, but it makes sense to increase the energy efficiency first, as it is generally a more cost effective way of reducing energy bills and carbon pollution. The expectation is that by installing a microgeneration system you will get a much better understanding of how you use electricity, and that will lead to a reduction in your total use. The system is structured to encourage that too - the less you use, the more you can export and earn income on.
What happens if I move house?
With the average family moving house every 7 years or so, and the life of the feed-in tariff at 20 years (10 for CHP, 25 for solar panels), this will happen to a lot of people. The government expects standard property ownership rights to apply to the generating equipment. This means that when a house is sold, the generating equipment and the FiT payment are sold too, and the system administrator must be told of the sale. They expect that the market will decide how much a microgeneration installation will increase the price of a house.
Can I take my solar panels or wind turbine with me, and still claim the Clean Energy Cashback?
No. The scheme is only available on installation of new systems, by an an MCS accredited installer. If you took your equipment with you, reinstalling it would count as a second hand installation, and not be eligible for the Cashback.
Will there be loans available to help with the upfront costs of installing microgeneration equipment?
Although the government is currently piloting five Pay as You Save schemes, it has no plans to introduce "a mechanism for up-front capitalisation of FiT revenues". It says: "We hope the market will provide the necessary loans or other finance packages to drive the uptake of small-scale technologies". However, it is possible for owners of generating systems to assign their rights to feed-in tariff payments to others. This is expected to pave the way for a range of ways of financing microgeneration in social housing and new build, and may form the basis of a new type of loans for homeowners.
Am I eligible for the feed-in tariff if I install my own system?
No. To claim FiTs you must use an MCS accredited installer and install MCS accredited products.
Will I have to pay tax on the income I get from the Clean Energy Cashback?
Income for domestic properties generating electricity mainly for their own use will not be taxable income for the purposes of income tax.
Are the payments inflation proof?
Both the generation and the export tariffs will rise annually in line with the retail price index.
How long will I receive the tariff payments for?
25 years if you have photovoltaic (solar) panels; 20 years for hydro, wind and anaerobic digestion; and 10 years for micro-CHP. If you installed your system before 15 July 2009 you will receive payments until 2027.
I've heard that the rates "degress" over time. What does this mean?
The theory is that as the market for microgeneration grows the prices of the equipment and installation are expected to go down. As this happens there will be less need for such a large financial incentive and so the rates of the Clean Energy Cashback will go down. Degression is where tariffs for new installations are set at a lower level each year, than they were the previous year. The rate you receive at installation then stays the same for the whole life of the tariff (with annual adjustments in line with the retail price index). Degression will not start until April 2012.
What happens if I add to the capacity of my renewable energy installation?
If you have two different technologies on the same site (ie wind turbines and solar panels) they will be classed as different installations. Multiple installations of the same technology at the same site will be classed as a single installation.
If you add to an existing installation of the same technology within 12 months it will be treated as an increase in capacity of the same installation.
If you add to a system more than a year after the first part was registered in the Central FiTs Register, it will count as a new station. You will still get the same payments for your original station. The new installation will be rated for the combined capacity of the two systems.
For example: you installed a 2.1kW solar PV system in December 2009. You will get the FiT at the small generators rate of 41.3p per kWh. If, at least a year later, you add another 2.1kWp to your array, that will count as a 4.2kW capacity installation and you will move into a different rating bracket, so will receive 36.1p per kW. If your additional system was smaller, you and the combined capacity was still under 4kW, it would be eligible for the 41.3p rate.
I installed my system before the Feed-in Tariff proposals were announced. Am I eligible?
If your system was installed before 15 July 2009, and is accredited under the Renewable Obligation (RO), then you will be automatically transferred onto the Clean Energy Cashback in April 2010 (albeit at the lower 9p generation rate). If you are not accredited under the RO, then you must get accreditation before 31 March 2010 to be eligible. You will continue to receive this support until 2027.
Can I claim the Clean Energy Cashback if I install a refurbished or second-hand system?
No. The reasoning behind this is that the scheme is intended to encourage new entrants into the market, and has been designed on the basis of cost assumptions for new equipment. However, the government aims to keep this under review, and will "consider whether or not there are merits to allowing renovated or refurbished technologies to receive FiTs support in the future, bearing in mind the different cost and the fact that equipment may have received other financial support through its life".
What is the MCS?
The Microgeneration Certification Scheme is an independent, industry-led, certification scheme for both installers and products. It is accredited by the United Kingdom Accreditation Service (UKAS) and is adminstered by Gemserv.
Can I opt out of the export tariff and sell my electricity on the market?
If you feel up to dealing with the risks of the electricity market you can choose to out of the export tariff. If it doesn't work for you, you can opt back in - but can only make the change once a year.
Why is the case different for micro-CHP?
This is a new technology, which has the potential in the long run to take over from condensing gas boilers. It is being included in the Clean Energy Cashback scheme as a pilot to provide initial support for the new industry. It is limited to the first 30,000 units (with an electrical capacity of 2kW or less), and will be reviewed after the first 12,000 installations. Recipients of the Clean Energy Cashback for micro-CHP will receive it for 10 years.
Will off-grid generators qualify for feed-in tariffs?
Yes, you will receive the generation tariff. To do so, you will have to declare that the electricity generated has been used, and must comply with the scheme requirements in relation to metering. You can approach any of the mandatory FiT suppliers (ie the big electricity companies) and they will be obliged to provide your Clean Energy Cashback payments. Voluntary FiT suppliers (ie the smaller energy companies) may also agree to provide FiT payments to off-grid generators.
Eligibility for off-grid remote communities will be considered at future reviews of the scheme.
Which suppliers can I export my electricity to?
All suppliers with a minimum of 50,000 customers will be obliged to accept microgeneration customers. They are described as mandatory suppliers. Smaller specialist suppliers can
Photo by Treveyan
If you have a question about anything in the above blog, please ask it in the comments section below.
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