What Is Going To Happen To The UK's Feed-In Tariff Scheme?
The British government's reward scheme for renewable energy systems was launched amid much publicity on 1st April 2010. Owners of renewable energy systems such as solar panels and air source pumps would receive payment for the electricity their systems produced. Excess electricity that would be returned to the national grid would receive a bonus payment. Upon its launch, the Feed-In Tariff paid 43.3 pence per kilowatt (unit of electricity) created by a qualifying system. An additional 3.1 pence was paid per kilowatt for any unused power that was returned to the national grid. Owners stood to make a substantial profit in the 25 years that the tariff was guaranteed to run for. Indeed, owners of an average domestic solar panel system would likely make over £1,000 a year. An additional bonus was the fact that all the tariff payments were tax free.
The Changes to the Feed-In Tariff Scheme 2011
In early 2011, the government announced a fast track review into the Feed-In Tariff Scheme. Immediately, there was concern amongst the renewable energy industry that they would slash the payments owners received. Indeed, the government did propose to cut the current tariff by over 50%. They argued that the changes were part of the austerity measures that were necessary to improve the country's finance. The government therefore proposed that from 1st January 2012, each kilowatt of electricity would receive 21 pence rather than 43.3 pence. This decision was met with widespread criticism, with many arguing that the cuts would deter any potential investors of renewable energy systems. Environmentalists were angry that the government appeared to be turning its back on its green commitments barely a year after launching the scheme. A long and bitter legal battle ensued but eventually the government won out. As from 3rd March 2012, new installations of qualifying systems would receive the new 21 pence rate. Systems installed before this date would continue to receive the 43.3 pence rate for the duration of the scheme.
The Effect of the Change to the Feed-In Tariff
The change in tariff is still in its early months so it is difficult to assess the impact the tariff cut has had on the uptake of renewable energy technology. However, it is clear that many fear people will be deterred from installing new technology when others with the exact same system who had it installed a few months before will receive more than double in tariff payments. There is also the concern that rates could be cut again in the near future.
The Future of the Feed-In Tariff Scheme
The Feed-In Tariff Scheme is guaranteed to run for another 24 years so the government cannot simply stop making payments to renewable energy system owners. However, the scheme's future is uncertain. The government could choose to cut tariff payments again or they could choose to raise them. The latter is highly unlikely, but with the government under pressure to promote environmentalism and with the negative backlash surrounding the tariff cut, it is equally unlikely they will move to cut them again.
Can the Feed-In Tariff Succeed?
It is hoped that the scheme can recover from the recent negative publicity and encourage more people to embrace renewable energy systems. After all, tariff payments can still amount to £500 a year, and over the 24 remaining years, this equates to £12,000. The payments are also tax free and represent a solid return against the initial outlay of one's energy system. So it seems the future success of the Feed-In Tariff scheme is heavily reliant upon people forgetting its initial generosity and accepting the cuts in order to reap smaller, but still significant rewards.
Ian Wright is a contributor to The Eco Experts - a UK based site that focuses on renewable energy and energy efficiency techniques and technology. If you're looking for green energy solutions in the UK, look to The Eco Experts for solar panels.