The complete guide to Feed-in Tariffs (FITs)

Learn how it works, what is pays and who is eligible

The energy that can be harnessed from natural sources and is constantly replenished is called renewable energy. Sometimes known as clean energy or green energy, renewable energy is generated by the likes of the sun and the wind.

Using renewable energy to power and heat your home or business is better for the environment, whereas using non-renewable energy sources such as fossil fuels like oil and coal can cause damage to the environment, release carbon emissions and contribute to climate change. On top of this, non-renewable energy sources cannot be quickly or easily replenished.

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Switching to renewable energy is a more sustainable option. So much so that the UK Government introduced a scheme to reward local businesses and citizens for using green energy sources. This is known as the Feed-in Tariffs (FIT) scheme, a government programme promoting low-carbon electricity generation and renewable power.

Introduced on 1 April 2010, the scheme was open to new participants for nine years before closing to new applicants on 1 April 2019, with some exceptions. Through the FIT scheme, households or small businesses can benefit from generating and exporting renewable energy.

Renewable energy technologies for the FIT scheme

Feed-in Tariffs can be applied to renewable technologies with the capacity of 5MW or 2kW for combined heat and power. The renewable energy technologies covered by the scheme are:

  • Anaerobic digestion (AD) to create biomass as fuel.
  • Hydro technology harnessing running water to generate electricity.
  • Micro combined heat and power (CHP) to generate heat and electricity from the same energy source.
  • Solar photovoltaic (solar PV) to convert sunlight into energy through solar panels.
  • Wind power to generate energy through wind turbines.

How the FIT scheme works

Through the FIT scheme, you can be paid for the electricity you generate and export from the renewable energy technology you install at your property.

Payments are made by your energy supplier, sometimes referred to as your FIT licensee. Your payments will typically be made on a quarterly basis, starting from the date you are eligible for the scheme.

The amount you are paid for your Feed-in Tariffs will depend on the meter reading you submit to your energy supplier.

Why Feed-in Tariffs were introduced

Feed-in Tariffs (FITs) were introduced a decade ago as a government scheme to encourage consumers to use environmentally friendly technologies such as solar panels, wind turbines and hydropower to produce their own energy.

Households or small businesses use the green energy they produce, meaning the costs to run a home or business premises are lessened. Therefore, money can be saved through reduced energy bills.

Additionally, the excess electricity produced by participants of the Feed-in Tariffs scheme can be fed back into the national grid. So, through the scheme, participants are paid for the surplus green energy they produce.

This positively impacts the environment because it increases the share of renewable energy that powers homes from the national grid, whilst giving homes and businesses involved with the Feed-in Tariffs scheme a financial incentive to contribute.

Financial returns from Feed-in Tariffs

The returns from Feed-in Tariffs have changed over the years. When the scheme launched, initial setup charges were offset by attractive financial returns.

The payments that any typical households can expect from Feed-in Tariffs have since reduced, having been impacted by cuts. However, in parallel, renewable technologies have become more reasonably priced.

Tariffs and payments are typically managed by larger energy suppliers, who are required to participate in the scheme by law. Some smaller energy suppliers may not have Feed-in Tariffs available as an option.

To get a better idea of the investment and potential savings you could make, you can use online calculators from Energy Saving Trust.

If the Feed-in Tariffs scheme is not an appropriate choice for you, a range of other government incentive schemes and funding options for installing low carbon technologies are also available.

FIT payments

The financial returns from Feed-in Tariffs are commonly referred to as FIT payments, which take a range of forms:

  • Generation tariff
  • Export tariff
  • Saving on your energy bills

The payment rates you are offered will vary depending on the:

  • type of technology installed,
  • date of installation,
  • size of the system,
  • and energy efficiency of your property.

Generation tariff

Firstly, there is a generation tariff for the electricity you generate. This will be paid to you by your energy supplier and, typically, they will pay an agreed rate for each unit of energy you use. This is measured in kWh, just like the energy used on your energy bills. The tariff is guaranteed for an agreed period of time, which can be up to two decades and is often linked to the Retail Price Index (RPI).

Export tariff

Secondly, there is an export tariff for each unit of energy you sell back to the electricity grid. Similar to the generation tariff, this is paid by your energy supplier and measured in kWh. The export tariff allows you to sell a surplus of electricity you generate but is not used by your household or business. This payment is often based on estimations in the same way that annual or quarterly energy bills are estimated unless you are using a smart meter, which provides accurate, real-time readings.

Saving on your energy bills

Although not strictly a payment, you'll spend less money by generating green energy yourself because you will reduce your energy bills.

Storing your energy with home batteries

It's also possible to store excess energy you create so that you can use on this at a later date. This covers you if there is a period with less sun or wind, allowing you to tap into your pre-generated green energy instead of relying on a back-up generator or the national grid.

The technology for storing energy within home batteries is developing over time. As these become more easily available, affordable and capable of storing more energy, it's likely that they will serve as a valuable tool for households that generate their own power through renewable methods.

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Qualifying for Feed-in Tariffs

Feed-in Tariffs make is possible to get payments from your energy supplier for generating electricity using renewable technology, such as solar panels or wind turbines. However, before investing in renewable technology for your home or business, check you meet the criteria required for the Feed-in Tariff scheme or similar green energy incentives from the government.

The products you use and the person who installs them must both be certified by the Microgeneration Certification Scheme (MCS) unless you are installing hydropower or anaerobic digestion systems. In which case, certification should be through the ROO-FIT process.

Changes to the scheme

The Feed-in Tariffs scheme stopped accepting new applications on 31 March 2019. If your renewable technology was installed and certified before this date, applications could be made until 31 March 2020. However, the scheme no longer accepts new applications.

Compare and switch energy supplier

If you've missed out on the Feed-in Tariffs scheme because the deadline for new applicants has passed, you can still benefit from comparing energy suppliers to find a tariff that offers you better value for money.

Use our free comparison tool to find the best value renewable energy deals from some of the most highly-rated energy firms for customer service. It takes just a few minutes to compare energy companies and contracts after inputting some details from a recent energy bill.

Once you've found a better deal and confirmed you'd like to switch, everything is taken care of on your behalf by Utility Saving Expert and your new energy supplier.