Indigo Swan helps to empower businesses into an understanding of the government's Feed In Tariff.

2. The UK has a challenging EU target to meet 15% of
energy demand from renewables by 2020. Official
projections suggest around 30% of our electricity
must be from renewables by that year if this target
is to be met.
Small-scale electricity generation is expected to play
an important role in helping meet the target.
The Feed-in Tariff (FiT) scheme launched in 2010
Offers guaranteed cash payments to households and
businesses who produce their own electricity using
‘microgeneration’ technology under 5MW.
FiTs also provide payments for any power exported
onto the local distribution network.
The scheme replaced previous government grants as
the main financial incentive to encourage uptake of
renewable electricity generating
technologies.
Technologies currently receiving subsidies
- Solar Photovoltaic (PV) Panels
- Wind Turbine
- Anaerobic Digestion (energy from waste)
- Hydro Pumps
- Micro combined heat and power fired by gas.

3. The support is paid in the first instance by
electricity suppliers. They collect the money to do
this from the bills they send to their customers.
A complicated “levelisation” process ensures all
suppliers receive sufficient monies to pay their
FiTs generators and that each supplier faces an
appropriate cost based on its market share.
For larger business customers the costs of FiTs can
vary every quarter, with the charges in the
summer likely to be higher than the cost in winter.
This is because a large amount of solar panels,
which are supported under the scheme, produce
more electricity in summer months.
For most other consumers, suppliers estimate
a cost in advance that is fixed for the year. FiTs
contribute around 2% of a small to medium sized
business’ electricity bill.

4. The FiT scheme was slow to get off the ground
and during the period April 2010 to March 2011
FiT costs were around 0.004p/kWh
(100,000 kWhs = £4).
The following year saw a significant increase in
the number of microgeneration installations, a far
greater amount than expected. This was due to a
drop in the cost of both purchasing and installing
solar panels. As a result FiT costs rose to over
0.05p/kWh (100,000 kWhs = £50).
In 2012 to 2013 costs continued to rise
aggressively and they are expected to triple over
the year rising to around 0.16p/kWh for the year
as a whole (100,000 kWhs = £160).
Interestingly, seasonal patterns show that the cost
of FiT approached 0.25p/kWh (100,000 kWhs =
£250) during Q2 of 2012 as solar installations
operated to high load factors because of warm,
sunny weather in the summer.
Why are the costs rising?
The main driver for the rising cost of FiTs is the
significant uptake of solar PV panels installed in
houses and fields. Capacity has risen from a base
of around 10MW in 2010 to nearly 1.4GW
currently.
The costs of the scheme are likely to continue to
rise over the coming years. Some suppliers
expects the cost for 2013-14 will exceed £2/MWh
if high output from solar panels is maintained.
This has made it difficult for energy suppliers to
forecast how much to build into their electricity
contract prices.

5. The government has implemented a cost control
mechanism that now applies to ‘generation
tariffs’ under the scheme.
This mechanism sees tariff reduction triggers
activated at pre-determined levels of capacity for
new installations added to the scheme;
installations that have already entered the
scheme will not be effected.
It is hoped the move will stop the sudden uplifts in
power bills, due to FiT costs, experienced in recent
years. But as the overall volume of installations
supported by the scheme will continue to
increase, the costs will also continue to increase
although on a much smoother path.

6. Any organisation, business, community or
individual can install an eligible generation
system. The first step in applying for the scheme
is to check whether your installation is eligible.
To ensure your project gets the FiT it must be
registered with a licensed electricity supplier (if
50kW or less) or with energy regulator Ofgem (if
over 50kW but less than 5MW).
The licensed supplier or Ofgem will make sure the
project is eligible to receive payments through the
scheme and will process the generation data.
The supplier will then pay you for any electricity
generated and, where applicable, an export tariff
for any surplus electricity put back on the local
grid. These payments are recouped by the
supplier through electricity bills of all customers,
as described earlier.

7. FiT rates are set at varying levels for different
technologies, according to costs and how much
electricity is expected to be generated.
The tariffs are index-linked to RPI inflation.
Having your own on-site generation can help
secure electricity supplies and bring other
intangible benefits.
There are exceptions when it comes to the
installation of solar PV panels. Further
information can be found on Ofgem’s website.
What Next?
Typically schemes will receive financial support for
20 years from the point of commissioning.
A comprehensive review of the FiTs scheme was
carried out by DECC in 2011-12 and considered all
aspects of the scheme. DECC will be monitoring
how these changes impact the scheme
throughout 2013.
A further review of the scheme will be carried out
at the end of 2013 or early 2014 in preparation for
the end of the Spending Review period in March
2015, which may introduce further changes and
amendments to the scheme.

8. About Indigo Swan
We believe everyone is entitled to the truth about
their energy and shouldn’t be penalised because
they don’t have the knowhow.
The information in these guides has been
prepared in conjuction with Cornwall Energy who
provide strategic energy market intelligence.
If you have any questions please get in touch.
hello@indigoswan.co.uk
0333 320 0475
Indigo Swan Limited
2 Millennium Plain
Norwich
NR2 1TF