Introduction

The Climate Change Act 2008 includes a legally binding target of at least an 80% cut in greenhouse gas emissions by 2050, to be achieved through action in the UK and abroad, and a reduction in emissions of at least 34% by 2020.  Both these targets are against a 1990 baseline.

As one of a number of measures to help achieve these targets, the Department of Energy and Climate Change (DECC) has used powers in the Energy Act 2008 to introduce a system of Feed-in Tariffs (FITs) to incentivise small-scale (less than 5 MW) low carbon electricity generation.  The scheme came into effect on 1 April 2010.

This guide aims to inform social landlords, housebuilders, and all those who wish to understand the FIT scheme and its implications.  It covers the eligible technologies and how the scheme works, illustrates financial returns and carbon dioxide emission savings through a number of worked examples, and identifies key issues and opportunities related to strategic implementation.
 

Aim of FITS

Until the recent introduction of FITs, the principal financial incentives for investing in small-scale renewable energy technologies have been a number of capital grant schemes (most significantly the Low Carbon Buildings Programme) and the Renewables Obligation (RO) – a requirement on electricity supply companies to obtain a proportion of their electricity from renewable sources.

FITs work alongside the RO, which will remain the primary mechanism to incentivise deployment of large-scale renewable electricity generation, and the forthcoming Renewable Heat Incentive (RHI), which aims to incentivise generation of heat from renewable sources at all scales and is due to be introduced in April 2011.

FITs are intended to encourage the uptake of small-scale low carbon technologies through tariff payments made on both generation and export of produced renewable energy.  UK legislation is based on FIT schemes that have operated for some time in various versions in many other countries, most notably in Germany, Spain, and Italy.

The scheme policy and tariff rates are set by the Government, with the scheme itself administered by energy suppliers and the Office of Gas and Electricity Markets (Ofgem).  The Energy Saving Trust and the Carbon Trust have been nominated by the Government to provide public information on the scheme and advice on how to apply.  FITs is funded through a modest increase in all consumers’ electricity bills.

Elegibility

Small-scale low carbon electricity technologies eligible for FITs are:

• wind
• solar photovoltaics (PVs)
• hydro
• anaerobic digestion
• domestic scale microCHP (with a capacity of 2 kW or fewer)

* The domestic scale microCHP pilot will support up to 30 000 installations which will be reviewed when the 12 000th installation is completed.

Wind, solar PV, and hydro projects of 50 kW or less and microCHP (Combined Heat and Power) projects supported through the pilot programme will have to use Microgeneration Certification Scheme (MCS) certified products and installers in order to be eligible for FITs.