UK Feed in Tariffs announced

DECC has, at last, announced the UK feed-in-tariffs (FiTs)for renewable generation. On the whole it's an increase in the tariffs depending on the technology. The government scheme to start in April this year will include:

• payment for the electricity you generate guaranteed for 20-25 years
• payment for any surplus electricity you don't need guaranteed for 20-25 years
• money saved from the electricity you no longer need to buy

Essentially, the big six power companies will pay households or businesses the FiT or cash-back if they generate electricity from renewable sources. Any surplus electricity can be sold to your supplier at a guaranteed price or on the open market. Ultimately, we all pay for this through higher electricity bills - DECC claims an average increase of about £11 per year, but hopes that one in 10 homeowners will fit solar PV panels or small wind turbines by 2020.

Although the return on investment averages out at around 5%-7%, Friends of Earth thought the policy too timid and the Solar Trade Association argued that returns should have been more like 10% to garner interest.
However, Solarcentury executive chairman Jeremy Leggett said the tariffs would be enough to encourage homeowners to install solar panels earning more than £1,000 per year with a typical solar electric system.

In plain english what does it all mean?

If a business or a household installs a standard Solar PV unit it's likely to generate 2-2.5kilowatt peak with an annual output of around 2000KWh.

Annual output:   2000 KWh

FiT  41.3p per KWh (guaranteed and index linked for 25 years, paid to you by your electricity provider)

Total value of FiT £823

Used in the home/business 1,200 KWh (your electricity supplier is charging around 12p KWh)

Savings from not buying supplier electricity £144

Electricity exported 800 kWh (electricity you don't need at various points in the day. You can sell for 3p or on the open market. The 3p rate is guaranteed for 25 years and index linked)

Export payment £24

Total return £991

The figures may vary somewhat, but they are in range with most calculations I have seen. The cost of this type of installation will vary from £8000-£12000, but the good news is that the FiT and export price is index linked which means a return on investment is likely to be around 5%-7%. Other factors worth considering are whether you predict energy prices will rise as this will improve returns. At the same time, energy security is increased and you have significantly reduced your carbon emissions.

The great advantage of solar PV is that it is easy to install and once it's there you don't have to do much. Maintenance is minimal. The main disadvantage is that the load factor is low compared to wind or biomass.

Next time I'll be comparing Solar PV with Wind.