UK introduces feed-in tariff for small-scale renewables

London, 4 February: UK householders, businesses and communities which install small-scale renewables will, from April, earn a feed-in tariff.

The Energy and Climate Change Secretary Ed Miliband also announced plans for a “world’s first” incentive scheme for renewable heat generation, to begin in April 2011 and help the UK towards its target of sourcing 12% of heat from renewables by 2020.

“The feed-in tariff will change the way householders and communities think about their future energy needs, making the payback for investment far shorter than in the past,” said Miliband.

“It will also change the outlook for a range of industries, in particular those in the business of producing and installing small-scale low-carbon technology,” he added. The UK government estimates its policy should result in small-scale renewables making up 2% of the UK’s electricity mix in 2020.

Up until now, Britons wanting to install ‘microgeneration’ renewables had to rely on an oversubscribed pot of grants and the UK’s market-based Renewables Obligation, tailored to support large-scale renewables capacity. Under the Clean Energy Cashback package, small-scale generators – with capacity under 5MW – will be paid the feed-in tariff, both for electricity they use themselves and electricity exported to the grid.

The scheme will be administered by the electricity and gas regulator Ofgem, but households, businesses and other generators will be paid the feed-in tariff by their electricity supplier.

Dave Sowden, chief executive of the Micropower Council, called the tariff “a major step forward in allowing people to save money on their fuel bills, cut carbon emissions, and [it] is set to help the recovery by creating thousands of  new ‘green collar’ jobs during the next few years”.

Alex Murley, head of small systems at the British Wind Energy Association (BWEA), said the introduction of feed-in tariffs represents “a historic day for UK citizens, the UK energy sector and anyone interested in reducing their energy bills”, adding that the government should streamline the planning process for microgeneration, to herald in a “green energy bonanza”.

The Department of Energy and Climate Change published a full breakdown of the level of the feed-in tariffs, estimating that a “well-sited” solar photovoltaic installation with a 2.5 kilowatt capacity could be eligible for an annual subsidy of up to £900 ($1,420) through the scheme, in addition to saving its user £140 a year in electricity bills.

Juliet Davenport, CEO and founder of renewable electricity supplier Good Energy, said: “The rates that will be paid to renewable generators should provide the incentive that a lot of homeowners, landowners and businesses have been waiting for to generate their own energy, allowing them to follow the pioneering individuals that have put their own generation in already.”

However, Tim Warham, energy director at consultancy Deloitte, warned: “Higher returns may be necessary in order to stimulate widespread adoption, especially to encourage intermediaries such as energy service companies to initiate major programmes.”

Details of the proposed Renewable Heat Incentive are scheduled to be released in April, in the government’s 2010 Budget, and will guarantee payments for installing technology such as biomass boilers, solar thermal and ground-source heat pumps.