Final proposals to revolutionise UK energy generation by putting people in charge of their own energy were unveiled by DECC today. The ‘Feed-In Tariff’ (FIT) scheme will pay people for all the renewable power they produce from this April [1].  DECC also launched consultation proposals for the Renewable Heat Incentive, due to follow next April 2011, which will pay people for the renewable heat they generate.  

REA Policy Director Gaynor Hartnell, commenting on both schemes, said; “The potential impact on households, businesses, farmers, schools and virtually every other energy user you can think of should not be underestimated. The balance of power has shifted. Instead of being tied to fossil fuels and energy price fluctuations, people and communities can now take control of their energy supply and their energy bills.”

Both schemes guarantee a fixed payment to the user for every unit of renewable energy generated over a period of 10-25 years [2].  Technologies under the FIT scheme will also earn a further bonus payment for power exported back to the grid [3].  Installations up to 5MW in size will qualify under the FIT, allowing for significant community-scale renewable electricity schemes.

A recent public opinion poll by YouGov showed 70% of UK homeowners would be interested in investing in domestic renewables under the scheme, if they felt the returns were attractive enough [4].  With interest rates at a current historic low, the 7-10% [5] estimated returns under the FIT scheme offer a better investment than leaving money in the bank.  At the same time investors can cut carbon, help to build a successful UK industry and enjoy protection from unpredictable future energy price rises [6].

Hartnell said; “The next ten years must be the decade of delivery for renewables and these schemes mean every home and every neighbourhood can get actively involved.  Come 2020 we hope installing renewables such as solar panels on roofs or heat pumps in backyards will be as every day as putting up satellite dishes or installing double-glazing.”

The REA estimates that the proposals published today will mean for example that a 2kW (p) PV (solar electricity) system will generate £702 income per annum.  The system will further avoid importing grid electricity leaving to total savings of £831 per annum [7].  After the payback period owners of renewable systems are likely to enjoy substantial savings on their energy bills of up to 15 years [8].

In a surprise announcement biomass (apart from Anaerobic Digestion [9]) has been removed from the FIT scheme.  REA is also disappointed that the FITs have not been used to help advance the commercialisation of new technologies including wave, tidal and pyrolysis.

While new to the UK, the ‘feed-in Tariff’[10] approach is currently used by over 40 countries and has been demonstrably successful at attracting investment in renewables from people who would not otherwise have considered, or been able to afford, such investment. At the same time the scheme has enabled countries to benefit from strong growth and employment in the renewables industry, and to bring down the cost of renewable technologies [11]. The REA successfully campaigned for the introduction of the measure in the UK with Friends of the Earth.  

See the REA FIT Briefing here or at the bottom of the page.

DECC press release and FIT decision document

Please see the REA’s separate release on the Renewable Heat Incentive. 

For further information REA switchboard: 020 7925 3570, or 

Leonie Greene, External Affairs, M: 07932 720 091, E: lgreene@r-e-a.net   

Jemma Robinson, Communications, M: 07726 694 989, E:jrobinson@r-e-a.net   

Notes for Editors:

1. FITs supports the following renewable electricity technologies up to 5MW in size; solar PV; wind; hydro-electric; biomass electricity; and Anaerobic Digestion of organic wastes.  Dedicated heat technologies including solar thermal, ground and air-source heat pumps, geothermal and biomass boilers will follow next year under the Renewable Heat Incentive (see separate REA press release), offering plenty of choice.
2. Each technology is supported according to its level of cost and maturity.  Therefore payments will range from 4.5p kWh for hydro to 41p for retrofit PV.
3. A floor price of 3pkW hour has been set for the additional export bonus payment.  This export bonus will incentivise energy efficient behaviour and appliances.  The payment has been reduced from the initial proposed rate of 5pkW.
4. In a YouGov poll 19th-21st Jan carried out for REA, The Co-operative and Friends of the Earth, when asked if they would consider installing a renewable energy system, such a solar panels, in their home if they received enough money from the government’s Feed-In Tariff scheme 71% of homeowners said yes they would consider it.
5. REA has won it’s ask that the FIT payments should be index-linked to inflation.  DECC calculate this means the 5-8% returns will increase to 7-10%.
6. Recent scenarios produced by Ofgem suggest price rises could increase up to 60% by 2020.
7. Assuming a 2kW (p) PV system costs £9K (DECC assumption), with a generation tariff of 41.3p and an export bonus of 3p.  With the FIT adjusted for inflation at 2% and the export bonus at 5%.  For a system generating 1700kWh per annum.  
8. For example, with 40 years old solar electric (PV) systems still working effectively today home owners can enjoy bill savings long after the end of the scheme.
9. Even for Anaerobic Digestion, the suggested levels are inadequate for delivering the large potential number of small biogas/AD plants for farms and communities.
10. Schemes which offer a fixed price for every unit of electricity generated, or exported to the grid, over a typical 20 year term are known as Feed-In Tariffs.  The UK FIT scheme boasts particularly innovative features; it applies only to local renewables; it offers an extra bonus payment for exports; it rewards every unit of renewable electricity generated even when that electricity is consumed onsite.
11. For example, every doubling of PV capacity has led to a 20% reduction in unit costs.  Since the start of the scheme in Germany in 2000 the cost of PV has halved.  The REA expects that PV will reach grid parity (i.e. support will no longer be needed) around 2020.  The aim of Feed-In Tariff schemes internationally is to bring down the unit cost of technologies through innovation not just in technologies but in manufacturing and production methods.  The FIT scheme is ‘digressed’ to ensure technology costs reduce year on year.