What Are Feed-In Tariffs?
There is a lot of jargon in the energy world and for the most part, many of the terms won’t come up in day-to-day conversation. Feed-in tariffs, however, are worth understanding and you will understand why as you read through this article.
There has been a huge push for clean and sustainable energy to become more mainstream. However, in order for this to happen there has to be some kind of incentive for businesses and industry leaders other than the general greater good of saving the planet. With an increasing awareness of and drive towards profitability, we need to make renewable energy as profitable as possible.
Feed-in tariffs (also called FITs) are part of what is known to some as the Clean Energy Cashback. Essentially, the scheme pays people for generating their own ‘green electricity’. FITs are on offer for everyone, including households, schools, businesses, care homes and anywhere else that needs electricity.
These tariffs were introduced in the UK with the hopes that they would promote the generation of renewable energy. The UK has a legally binding target it needs to meet of 15% of its total energy to come from renewable energy by 2020. It is an economic policy designed to increase investment in renewable energy and to boost the production of it.
The tariffs work by paying you for all of the renewable electricity you produce – even if you use it yourself. They also guarantee access to the grid if you choose to export it. For companies that want to generate renewable electricity to sell to the public, the tariffs will ensure long-term contracts and guaranteed pricing, which reduces some of the risks faced by renewable energy producers.
The Renewable Heat Incentive is a similar program that has been set up for heat, but operates separately to feed-in tariffs. It went live in April 2011 and was, at the time, the first of its kind in the world.
So, the feed-in tariffs sound pretty great, right? Unfortunately, the UK didn’t think so and has ordered the program to be closed in March 2019. This means that any applications for funding received after that date will be discarded. The move has been met by much criticism from green activists and small-scale energy suppliers. For those who have already purchased solar panels in order to take advantage of this scheme, little will be done to help them recoup lost expenditure.
There is yet to be announced a scheme that will replace FITs. But, the future isn't entirely bleak. The huge reduction in the cost of solar panel installations (from around £12,000 to £5,000) means that more households will be able to generate their own renewable electricity without the assistance of the feed-in tariffs. However, whether or not individuals will be willing to take on this expense without any government subsidy is dubious.
Naturally, there are many questions still to be answered regarding the future of the UK’s energy industry after March. The most pressing issue of all is how the UK is planning on reaching its binding energy target when it has stripped away much of what was propelling it to meet it.
There has been a huge push for clean and sustainable energy to become more mainstream. However, in order for this to happen there has to be some kind of incentive for businesses and industry leaders other than the general greater good of saving the planet. With an increasing awareness of and drive towards profitability, we need to make renewable energy as profitable as possible.
Feed-in tariffs (also called FITs) are part of what is known to some as the Clean Energy Cashback. Essentially, the scheme pays people for generating their own ‘green electricity’. FITs are on offer for everyone, including households, schools, businesses, care homes and anywhere else that needs electricity.
These tariffs were introduced in the UK with the hopes that they would promote the generation of renewable energy. The UK has a legally binding target it needs to meet of 15% of its total energy to come from renewable energy by 2020. It is an economic policy designed to increase investment in renewable energy and to boost the production of it.
The tariffs work by paying you for all of the renewable electricity you produce – even if you use it yourself. They also guarantee access to the grid if you choose to export it. For companies that want to generate renewable electricity to sell to the public, the tariffs will ensure long-term contracts and guaranteed pricing, which reduces some of the risks faced by renewable energy producers.
The Renewable Heat Incentive is a similar program that has been set up for heat, but operates separately to feed-in tariffs. It went live in April 2011 and was, at the time, the first of its kind in the world.
So, the feed-in tariffs sound pretty great, right? Unfortunately, the UK didn’t think so and has ordered the program to be closed in March 2019. This means that any applications for funding received after that date will be discarded. The move has been met by much criticism from green activists and small-scale energy suppliers. For those who have already purchased solar panels in order to take advantage of this scheme, little will be done to help them recoup lost expenditure.
There is yet to be announced a scheme that will replace FITs. But, the future isn't entirely bleak. The huge reduction in the cost of solar panel installations (from around £12,000 to £5,000) means that more households will be able to generate their own renewable electricity without the assistance of the feed-in tariffs. However, whether or not individuals will be willing to take on this expense without any government subsidy is dubious.
Naturally, there are many questions still to be answered regarding the future of the UK’s energy industry after March. The most pressing issue of all is how the UK is planning on reaching its binding energy target when it has stripped away much of what was propelling it to meet it.
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