Residential renewable energy production may get a boost in the UK if that nation decides to join Spain, Germany, and Italy in tailoring its feed-in-tariffs (FITs) to provide better financial incentives to homeowners, local municipalities (“councils” in the UK), and small businesses…
By Alicia Carrasco, eMeter Director for EMEA Regulatory Affairs
The point of the UK FIT is to promote small-scale renewable generation. However, the current version has created a gold rush by larger businesses building major solar projects. In Spain, Germany, and Italy, FITs have been so successful that those governments have changed (or may change) these incentives to make them less generous.
This week UK Energy Secretary Chris Huhne announced the upcoming review of that nation’s FIT, in use since April 2010. The goal is to focus the FIT’s benefits toward small solar projects. The review will assess all aspects of the tariff — including levels, administration, and technology eligibility.
This review is expected to be completed by December 2011. Any changes to the tariff probably would not happen until April 2012 — unless the review indicates greater urgency.
As initially crafted, the FIT aims to encourage deployment of additional low-carbon electricity generation — especially by organizations, businesses, communities and individuals not traditionally engaged in the electricity market.
How the FIT works. The idea is that receiving “clean energy cash back” will allow many people to invest in small-scale, low-carbon power generation. In return, they’d receive a guaranteed payment for selling back to the grid any excess electricity they produce (beyond what gets used on site).
Currently, UK utilities pay the FIT to renewable energy producers — so the FIT has promoted rapid expansion. As of September 2010, 9350 renewable power generation units were registered under this program: 44% photovoltaic, 35% wind, and 21% hydro. From April-June 2010, a total of £182,059 was paid to these small power producers.
In the UK, the FIT is higher than retail electricity prices, so it offers energy customers a good return on their renewable energy investments. Also, a small renewable generation units costs about £11,000 to install. This investment can achieve payback in as little as one year — due partly to lower utility bills, but mostly thanks to FIT payments.
Because the FIT is so attractive, some UK solar panel vendors are offering to rent homeowners’ roofs in exchange for free solar panels. The homeowner gets lower energy bills, and the solar vendor profits from the FIT payments.
Smart meters can optimize the use and distribution of solar and other renewable energy. This, in turn, can make it easier to track where power is generated, used, and supplied to the grid. Smart meters also enable dynamic electricity pricing, so solar producers can be paid the higher value of energy produced during peak hours.