How the feed in tariff works
How the feed-in tariff works
Feed-in Tariffs and the Smart Export Guarantee (SEG)
The Feed in Tariff (FiT), sometimes referred to as the ‘Clean Energy Cash-back Scheme’ was a government scheme designed to reward individuals, businesses and organisations for investing in electricity producing renewable energy systems like solar panels, hydro turbines and wind turbines. It was launched in 2009 and closed in April 2019. Introduced by the Labour government, the FiT did a huge amount to develop the solar PV industry in the UK.
The key benefits of the FiT were:
The payments were index linked – they continue to rise every year in line with inflation (RPI)
The initial phase was guaranteed for 25 years and the second 20 years
For domestic systems the income is tax free
The rates that you were eligible for varied depending on:
The size of the system
The technology you chose to install
When the system was installed (as the rates reduced over time)
There were also some technology specific issues that were introduced, for example, if you wanted solar panels installed you needed your property to have an Energy Performance Certificate (EPC) of D or above if you wanted to secure the higher tariff.
Currently, installing a solar PV system on your property immediately elevates your EPC rating by one letter.
The FiT then reduced from time to time (normally every three months/quarter) depending on the number of installations that had been taken place and been registered – however the thing to remember was that you were always tied into the tariff rate that you started at and any changes later to the FiT did not effect existing systems.
Once you have a renewable energy system installed and commissioned, it will be generate electricity, some of which you will be using on site and some of which you will be exporting to the grid (your neighbours will be using it more than likely!). The FiT paid you for all of the electricity that you generated whether you used it on site or exported it to the grid and this was recorded by a 'Generation Meter' and to be paid you must. A smaller payment was paid for the electricity that may have been exported to the grid, this was called the Export Tariff and after collecting data from a number of systems, the utility suppliers decided that most systems exported 50% of what they generated, so this was the 'deemed' number of kWh's that they paid for the Export Tariff.
You CANNOT increase the size of your FiT registered PV array size without compromising your FiT. If you suffer broken panels then you may be able to replace them with written conformation from your FiT provider and normally only if they are of the same power output or lower.
You CAN install a separate system (with permission from the DNO if taken over their limit) on a separate circuit as this will not effect the FiT Solar Generation Meter used to measure the amount of kWh's generated by your system.
The Smart Export Guarantee (SEG) is the Conservative government's replacement incentive scheme to the FiT, where electricity suppliers with over 150,000 customers are obliged to pay a rate above 0p per kWh for any electricity that is exported, but the property MUST have a second generation smart meter installed (or SMETS2) to be eligible, so that the supplier can remotely check to see exactly how much electricity has been exported.
It is important to understand that each FiT provider has the right to remove your 'deemed' 50% Export Tariff once a SMETS2 meter is installed, because they can actually see how much electricity you are genuinely exporting.
Unrelated to the FiT or SEG rates that are paid out, you will get the additional benefit of a lower electricity bill. Therefore the total financial benefit from your system now will comprise of the SEG rate for any exported electricity (this does not have to be your electricity supplier so shop around for the best rate) and the electricity savings made.
These figures are often lumped together into one ‘Annual financial benefit’ and used to calculate your return on investment (ROI) and payback period.
How things work in-practice for the FiT
With your solar PV system you should have an Ofgem approved ‘Generation Meter’ installed. This will measure the amount of kWh your solar PV system has generated. The number on the screen is the cumulative total that the system has generated. You will find that this is a slightly lower figure to the number on your inverter but they will be very close. The Generation Meter is the correct or ‘official’ reading.
Every quarter your electricity supplier will ask for a reading. It is possible to submit readings online and based on this reading you will get a payment giving you the Generation Tariff for 100% of the reading and the Export Tariff for 50% of the reading.
How to apply for the SEG
For solar PV systems, firstly you will need to ensure that you have permission to install your PV from the DNO if above 3.6kW per phase. You will need and MCS approved installer to install MCS approved panels and mounting system (if the solar is installed on a pitched roof) and you will need a SMETS2 meter installed. You will then need proof that you own the system (receipted invoice from the installation company) and will have to provide the documentation for all of the above to your chosen SEG provider to be registered.
