Small-scale Low-carbon Electricity Feed-in Tariff

The small-scale low-carbon electricity feed-in tariff (FIT) is intended to offer a simple and straightforward incentive for small-scale electricity generation projects - a less complicated alternative to the Renewables Obligation.

Coming into effect on 1 April 2010, the FIT is aimed at organisations for which energy generation is not a core business.

1. What technologies will receive support?

As its full name suggests, only small-scale projects - defined as no more than 5 MW of generating capacity per project - are eligible.

Unlike the Renewables Obligation, the FIT has the scope to support 'low-carbon' as opposed to only 'renewable' forms of electricity generation. However, again in contrast to the Renewables Obligation that supports all 'renewable' forms of electricity generation, only the following low-carbon technologies will initially be eligible for support under the FIT:

• wind
• solar photovoltaic
• hydro electric
• anaerobic digestion
• non-renewable micro CHP (2 kW or less)

The support for micro CHP is limited to the first 30,000 installations, and will be reviewed once there have been 12,000 installations.

The Government does have statutory powers to introduce support for other technologies, such as biomass, but decided there was insufficient time to do so properly at this stage.

The FIT does not apply to Northern Ireland.

2. Will existing projects be eligible?

Installations completed before 15 July 2009 (when the first consultation on the FIT was published) will not be eligible under the FIT, unless accreditation under the Renewables Obligation has been applied for by 31 March 2010. There is still scope for existing projects to qualify therefore, but the opportunity to do so will quickly pass.

Small generators (between 50 kW and 5 MW) which applied for accreditation under the Renewables Obligation prior to 15 July 2009 will remain subject to the Renewables Obligation, and will not be able to transfer to the FIT. More information on interaction with the Renewables Obligation is set out below.

3. What level of support will projects receive?

The Feed-in Tariff will provide two guaranteed income streams (indexed at RPI):

• a generation tariff which is paid for every kWh of electricity generated (whether or not exported); and
• an export tariff which is paid for every kWh of electricity exported to the grid.

The generation tariff differs depending upon the technology utilised by, and the size of, the project, and ranges from 4.5p to 41.3 p per kWh. Full details are set out in the table at the end of this article .

The export tariff is set at 3p per kWh (a reduction from the 5p originally consulted upon), but this (and the generation tariff) are now subject to indexation.

Generators will have the option to contract independently for the sale of exported electricity if they wish, in which case the generator will still receive the generation tariff, but will be paid for exported electricity at the commercial rate it is able to secure.

4. How long will such support last?

The Government has learned from experience with the Renewables Obligation - which originally had no maximum period of support - and has specified a support period for which each project will receive support.

This also varies depending upon technology and size, and ranges between 10 and 25 years. Again, full details are set out in the table at the end of this article.

The Government has also made clear that it will revise support levels for particular technologies in the future, but that these revised levels will only apply to new projects after such revision (and will not affect the support received by existing projects). This concept of degression again adopts experience gained from recent amendments to the Renewables Obligation.

5. How does a project gain accreditation?

Ofgem will oversee the accreditation process, and accredited projects will be entered on the Central FITs Register.

For technologies where there is a viable Microgeneration Certification Scheme (wind, solar photovoltaic and hydro electric up to 50 kW, and micro CHP) accreditation will be given where the generating equipment is installed by a certified Microgeneration Certification Scheme installer.

For all other projects, the generator will approach Ofgem in a similar manner as occurs now in respect of Renewables Obligation projects.

All projects will need to meter the electricity generated, and in the long-term, all electricity exported. However, until smart meters are rolled out, the smallest projects (probably 30 kW, but to be confirmed) will be able to rely on deemed export figures.

6. Who's paying for it?

You are - or rather licensed electricity suppliers will be responsible for the costs, and will pass the additional costs on to consumers.

7. How does it work for suppliers?

Licensed electricity suppliers with 50,000 or more domestic consumers will be Mandatory FIT Licensees. Other licensed electricity suppliers can opt to be Voluntary FIT Licensees.

As the name suggests, Mandatory FIT Licensees must enter into FIT arrangements with any of their own supply customers who approach them, and must also enter into FIT arrangements with any other person who approaches them and who is not supplied by a Mandatory FIT Licensee.

Suppliers who choose to be Voluntary FIT Licensees must enter into FIT arrangements with any of their own supply customers who approach them in respect of projects with a capacity of 50 kW or less.

Mandatory FIT Licensees and Voluntary FIT Licensees can also enter into FIT arrangements with other persons by agreement.

The process of levelisation is then applied between all licensed electricity suppliers to spread the cost of FIT arrangements equally among all electricity suppliers.

8. Is there any impact on the Renewables Obligation?

Microgeneration (50 KW or less) that are eligible under the FIT will no longer be supported under the Renewables Obligation. Existing projects will be transferred to the FIT, and those that had applied for accreditation under the Renewables Obligation prior to 15 July 2009 will receive a special generation tariff of 9p per kWh (indexed) until 2027.

Other generators eligible under the FIT (between 50 kW and 5 MW) who applied for accreditation under the Renewables Obligation prior to 15 July 2009 will remain subject to the Renewables Obligation, and will not be able to transfer to the FIT.

Those who applied for accreditation under the Renewables Obligation on or after 15 July 2009, and before 1 April 2010, will have a window of opportunity within which to choose between the FIT and the Renewables Obligation. They must notify Ofgem of their wish to participate in the FIT by 31 August 2010.

Going forward, all generators over 50 kW will have a one-off choice between the FIT and the Renewables Obligation.

9. Table of support levels and support periods

Click here to view the table of support levels and support periods.