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Feed-in-tariffs: the what, the how and the why

Feed-in-tariffs: how do they work?

Feed-in-tariffs: how do they work?

What is the problem?

Feed-in-tariffs are a government scheme paying you for generating electricity using renewable tech like solar panels and wind turbines. The ‘tariffs’ refer to how much you get per kilowatt of energy generated.

To help the uptake of renewable technology like solar panels (also referred to as solar pv, or solar photovoltaic), the government offered a generous rate of 43.3p for every kilowatt generated over a 25-year period.

The thinking was to help the roll-out of solar and offset the high costs, but installation costs have since plummeted as more of us took up the solar challenge. For example, you can currently buy solar panels and qualify for a feed-in-tariff from £4,000 through uSwitch.

So what is happening now?

The government launched a consultation proposing to cut it in half – to 21p – from the 10th of December. However, this proposed date was 11 days before the end of the consultation.

The industry cried foul and launched a legal challenge with Friends of the Earth – which they won. The higher tariff will therefore remain in place for installations made before the 3rd of March unless the government wins their challenge.

What’s more, as feed-in-tariffs are linked to inflation (RPI) they have now gone up to 45p for some pending the outcome of the court ruling.

Why should I care?

Well, for those who are considering solar, have a home that qualifies, and want to generate their own energy you’re unlikely to find a better time to invest in solar. However, with the deadline of the 3rd of March, you may find it hard to get your solar panels installed in time to qualify for the higher feed-in-tariff rate.

However, even for those who don’t make the 3rd of March deadline, the 21p rate is still generous, with an estimated payback time of around the 10-year mark, depending on the level of solar installation. What’s more, you can skip the feed-in-tariff altogether and get solar panels installed for free. The downside is that you won’t earn anything for them, but you can skip the upfront costs.

You should be aware though that while the government will contribute to a building’s energy efficiency rating, anyone wishing to register for the feed-in-tariff from the 1st of April must obtain a Level D Energy Performance Certificate (EPC) on their house.

What if i’m not ready for solar?

Insulate, insulate, insulate. Insulation is often heavily subsidised, and offers huge energy savings that will make your annual statement look a lot healthier. Take a look at our insulation page for more information on how to insulate your home.