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United Kingdom Feed in Tariff

The UK has long been progressive in the areas of alternative energy and reducing carbon emissions. In 2010, the Low Carbon Buildings Program in the UK was withdrawn to make way for new mechanisms designed to further encourage the installation and use of alternative energy sources.

Feed-in-Tariff Reward

The first program, introduced in April 2010, is called the feed-in-tariff reward. This program is for homes that install solar panels and offered two benefits as follows:

  • An average of 43.3 pence “generation tariff” is paid per kilowatt hour of electricity produced by a solar system.
  • 3 pence is paid under a “feedback tariff” for every kilowatt hour that is returned to the grid

 

In 2011, as the recession deepened and the cost of solar panels also fell, it became evident that the government of the United Kingdom would not be able to sustain its FIT Reward program. Proposals were made to reduce the “generation tariff” from 43.3 pence to 21 pence per kilowatt hour of electricity generated. This would increase the payback period on most systems from 8 years to 15 years. The matter is currently in the courts and while it is almost certain that the reduction will occur, it did not occur on the 12 December 2011 deadline. The current proposal works like this (though it will most certainly be modified again before final approval):

  • Systems installed before 12 December 2011 – full 43.3 pence tariff for 25 years
  • Systems installed between 12 December 2011 and end of March 2012 – 43.3 pence until 31 March 2012 then 21 pence starting 1 April 2012 for the remainder of the 25 years
  • Systems installed 1 April 2012 or later – 21 pence tariff for 25 years.

 

This program is designed to encourage installation of solar panels by providing tariffs simply for creating electricity through solar means. No energy has to be returned to the grid to earn the 43.3/21 pence that falls under the “generation tariff.” The program further encourages energy conservation and wise use by offering an incentive for energy that is returned to the grid via the “feedback tariff.” The average solar system pays for itself after 25 years, so to make installation even more attractive, the tariff values in this program are guaranteed by the government for 25 years (hence the reason to reduce them to 21 pence). They are tied to the index price of consumer electricity, so the tariffs will increase over time to keep pace with both inflation and the price of consumer electricity. The program has been intentionally designed to provide 5 to 8% rates of return for solar panels in “well-situated sites.” To qualify for this program, installations must have Microgeneration Certification Scheme, Solar Keymark, or an equivalent approval as well as be inspected and approved by the government.

Renewable Heat Incentive (RHI)

This program was introduced in 2011 and is designed to favor heating technologies that rely on alternative fuels, which includes solar. This program pays a tariff of 8.5 pence per kilowatt thermal hour for any heat generated using for following technologies:

  • Solar Thermal
  • Ground Source Heat Pumps
  • Biomass

 

Like the FIT Reward program, tariffs in the RHI program are guaranteed. In this program, the guarantee is for 20 years. Though the program began in 2011, it applies only to commercial installations until October 2012 when it will be expanded to include domestic installations.

There are a number of criteria for application and acceptance to this program that vary depending on the RH technology being used. For solar thermal, the system must produce less than 200 kilowatt thermal hours of energy. Just as with the FIT Reward above, RHI installations must have Microgeneration Certification Scheme, Solar Keymark, or an equivalent approval as well as be inspected and approved by the government.
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