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FITs - UK government tariff support for the micro generation of electricity

The Feed-in-Tariff (FIT) is a UK Government backed scheme were licensed electricity suppliers pay homeowners for the generation and export of renewable and low carbon electricity. The scheme was developed to help to ensure dependence on fossil fuels is reduced by 20% by 2020.

The generation rates offered are set by the government and the scheme is watched over by Ofgem, The Energy Saving Trust, The Carbon Trust and the licensed electricity suppliers. They will offer advice on how to qualify and apply for FIT, and how the scheme works.

It is the energy companies who will pay you for the energy you generate.

Currently energy companies (backed by the Government) will pay you 21p for each kW/h your domestic Solar PV installation produces. This is under review and will be reduced in August 2012 to 16p. However, the additional 3.1p per kW/h that is currently paid for excess energy exported to the national grid is to be increased to 4.5p.

The current Feed-in-Tariff guarantees payments for 25 years (20 years from August), is index linked and tax free. BeBa Energy UK Ltd calculate the initial cost of installing solar panels could be paid back two or three fold during a 25 year period, even with the expected reduction in tariff payment from August, as component parts and installation costs continue to reduce in price.

FITs and Return on Investment

The FITs scheme went live on 1st April 2010. Through the use of FITs DECC hoped to encourage deployment of additional low carbon electricity generation, particularly by organisations, businesses, communities and individuals who were not traditionally engaged in the electricity market. This “clean energy cash back” replaces previous grants. FITs  have and will continue to encourage many people to invest in small scale low carbon electricity, in return for a guaranteed payment both for the electricity they generate and export.

Households are seeing strong returns on investment of around 10% to 12% annually.

Remember all income from the domestic Solar FIT payments is tax free. In addition VAT on installation has been reduced to only 5% to reflect the Government's commitment to the uptake of the scheme.

BeBa Energy UK Ltd predict all domestic install customers will get a strong return on investment even with the  reduction in Feed-in-Tariff expected in August 2012. Estimates vary (on size of installation) but 8% or 9% annually, tax free over 20 years, should be achievable with the expected reduction in component and installation costs.