The Feed In Tariff was launched in April 2010 and aimed to encourage Britons to install renewable energy systems. Photovoltaic (PV) solar systems are by far the most common of these systems, so it was hoped the introduction of the tariff would see a rise in the number of domestic solar panels. In this article we will look at how the Feed In Tariff works for the owners of PV solar panels.
The Feed In Tariff Explained
The tariff rewards the owners of green energy systems by paying them for the power they create. For PV solar panels, this meant owners were paid for the amount of electricity their panels made. This electricity attracted these rewards even though it could be used by the owners themselves to power their own home. Upon the Feed In Tariff's launch, solar panel owners received 43.3 pence per unit of electricity (kilowatt) produced. Excess electricity produced by the panels had to be returned to the national grid as there was no method to store it. However, each of these units received an extra 3 pence bonus. A standard domestic solar panel would make its owners around Â£1,000 a year from the tariff payments. The scheme was guaranteed to run for at least 25 years and its payments were tax free, so, even deducting the £8,000 or so installation costs, PV solar panel owners stood to make a healthy profit.
Was it all Too Good to be True?
Barely a year into the scheme, the government launched a review of the Feed In Tariff scheme. The results were that the government proposed to cut the tariff payments to just 21 pence per kilowatt. The decision was met with anger by those in the solar panel industry and a legal battle ensued. However, the government's plans were put into place on 3rd March 2012. This meant that any new solar panel installation from 3rd March 2012 would only receive 21 pence per kilowatt of electricity produced. Solar panels installed before this time would, however, still be eligible to receive the original tariff for the remainder of the scheme.
There is no doubt that the Feed In Tariff scheme helped the UK solar panel industry, but the dramatic cuts to the tariff so soon into the scheme have left a bitter taste in the mouths of many. Whilst the payments still amount to around Â£500 a year, many are now concerned that the government will simply cut the tariff rate again in the future. This means people will have to wait much longer to see a return on their investment and ultimately this may deter potential buyers. The government argues the tariff is still generous and encourages the use of renewable energy, but it remains to be seen whether the solar industry can recover from this unexpected setback.