Solar Feed-In Tariffs (FITs)

Solar feed in tariffs and renewable energy subsidies

Solar feed in tariffs were introduced by the government on 1 April 2010 in order to encourage an increase in the number of small scale community renewable energy projects. The idea behind solar feed in tariffs is that an increase in the number of installations will lead to an increase in demand for solar panels that will lower the cost of individual panels as companies achieve economies of scale in manufacturing.

Solar Feed in tariffs are a way to encourage for the government to encourage the adoption of the renewable energy without the use of grants. In layman’s terms, the government forces the utility companies to buy electricity made by renewable sources (solar panels, wind turbine etc) at an inflated price to reduce the payback period for the customer. The cost of the solar feed in tariffs is spread among all the customers of the utility company. The result being a small increase in everyone’s utility bills will provide the resources to implement a scheme to make installing renewable technology much more attractive.

The idea of compensating individuals through solar feed in tariffs ensures that in order to make a good return on their investment they are encouraged to ensure that they generate the most amount of electricity for the least cost. A standard solar energy grant makes the cost of the solar installation irrelevant and therefore the amount of energy produced is less important to achieve pay back on the investment compared to solar feed in tariffs.  

The Energy Act 2008 provides broad enabling powers for the introduction of Solar feed-in tariffs (FITs) for small-scale low-carbon electricity generation, up to a maximum limit of 5 megawatts (MW) capacity - 50 kilowatts (KW) in the case of fossil fuelled CHP. The solar feed in tariffs will be introduced through changes to electricity distribution and supply licences.