Faq’s
Why is the government limiting spending on the FITs – it’s not their money?
True – the FITs are paid for by electricity users.
However it has been decreed that any spending caused by government legislation may be treated as public expenditure.
The official government explanation was:
The Office of National Statistics (ONS) is the ultimate arbiter of whether a UK Government policy should be classified as tax and spend in the National Accounts. Such judgments are made independently of Government. ONS are guided internationally in their decisions, but in broad terms define mechanisms as taxes where they result in compulsory payments by an individual or organisation who does not receive a direct benefit in return. This is referred to as a “compulsory unrequited payment”. This may result in a policy being classified as a tax even where money does not flow through a Government account (because the outcome is similar to Government taking in then redistributing the money).
A well-established example is the Renewables Obligation, which requires energy suppliers to purchase Renewables Obligation Certificates (ROCs) from renewables generators, or to make payments to the buy-out fund. Because energy suppliers do not receive a benefit in return, the payment they make is defined as a tax. The redistribution of these revenues (ie the revenue received by renewables generators for their ROCs) is defined as public expenditure.
The ONS decision to treat the Renewables Obligation as a tax is published at http://www.statistics.gov.uk/articles/economic_trends/ET635Gazely.pdf
What is Microgeneration?
It is the production of heat or electrical energy at small scale.
This is defined in legislation as follows:
- Electricity generation at capacities up to 50kW
- Heat production at capacities up to 45kWth
What are the Renewable Energy Directive (RED) and Renewable Energy Strategy (RES)?
The RED is the directive adopted by the European Union in 2009 to increase the proportion of renewable energy produced in Europe.
Each country has its target for renewable energy in 2020 averaging 20% across the whole EU.
The UK has signed up to this directive with a national target of 15% of all the UK’s energy to come from renewables by 2020. The way this will be achieved is set out in the Renewable Energy Strategy (RES).
Why would the Spending Review look at tariffs?
The tariffs come from energy users not the Treasury, so are not ‘public spending’ as such.
However, it has been decreed (by the Audit Commission, we believe) that government must be mindful of the impact of any regulatory measure that has a financial impact on the public. Clearly the Tariffs legislation has added to the cost of energy bills, so this is something the Treasury can consider.
Is it true, local councils are banned from selling electricity?
Yes it was, under the 1976 Local Government Act. However, DECC reversed this law in August 2010.
How easy is it to generate your own power?
Once you have your systems installed it is tremendously easy as your system will do everything automatically for you.
The more challenging bit is knowing what to install and how to do it. That is why we set up Henley’s Eco Energy.
Do I have to pay tax on my Tariff income?
It was announced in the Pre-Budget Report 2009 that the income from the Feed-In Tariffs will be free of income tax for householders who install systems primarily for their own use.. Similarly, it was announced in the March Budget that the Renewable Heat Incentive will also be Income Tax exempt.
Would we be able to apply for feed-in tariffs if we are not connected to grid?
FITs are payable for off-grid applications (though they obviously can’t get the export bonus).
However, if your system is DC, there’s a major catch.
Will my existing renewable electricity system qualify?
Existing systems installed before 15th July will qualify only if they are under 50 kilowatts and registered for the Renewables Obligation (RO).
Who pays for the Feed-in Tariffs?
The system is administered by the official regulator Ofgem, and uses money from a levy on all electricity sales, collected and distributed by the licensed electricity suppliers.
Therefore if you install a renewable energy system you get a treble benefit:
- Your income from the Feed-in Tariff
- An extra income for every kWh you export
- Because you are producing some of your own power, you will buy less electricity and therefore pay less for it
How long would I get this tariff for?
The Feed-In Tariffs will be paid for a period of 20 years from the date the system is first registered, except for solar photovoltaic systems where the period is 25 years. If the system doesn’t last that long, of course it will stop producing kilowatt hours and no tariff will be paid.
How much is paid for each kilowatt hour?
This varies by type and size of system – see the tariffs table to find out more.
Does this only apply to electricity? What about gas? What about heat?
The Feed-In Tariffs apply only to electricity from low carbon sources. However a similar measure is being introduced in April 2011 to cover renewable heat and gas. This will be called the Renewable Heat Incentive and you can see more about it on the website of Renewable Heat Incentive Limited.
Is this the same as Green Tariffs?
No, green tariffs are offered by some licensed electricity suppliers when they are selling power sourced entirely or mostly from renewables. This will come mainly from larger scale centralised stations.
What is the Renewables Obligation? Are Feed-In Tariffs the same?
Feed-In Tariffs are separate to the Renewables Obligation (RO). The RO is a regulation which requires licensed electricity suppliers (the companies you buy your electricity from) to ensure that an increasing proportion of the energy they sell comes from renewable sources. The RO mainly supports larger scale centralised renewable generation such as landfill gas, hydropower and offshore wind-farms. The tariffs are intended for people and companies who install renewable generators mainly for their own use.
Why are they called ‘feed-in’ tariffs?
Good question! This sort of tariff was first introduced in Germany in the 1990s and it applied only to power which was ‘fed in’ to the electricity grid. The tariffs in the UK apply to all the electricity the system produces, whether it is used on site or fed in to the grid, so it’s actually a misnomer (they should really be ‘production tariffs’).
Do the Feed-in Tariffs apply to all types of renewable electricity?
The tariffs apply to many types of renewable electricity, though not all. There is a full list of all types included on our summary about eligible energy sources.
What is renewable electricity?
It is power produced from a sustainable source such as solar, wind, or biomass. Electricity from fossil fuels like coal, oil and gas or from nuclear stations is not renewable.
What is the Microgeneration Certification Scheme (MCS)?
The MCS is a scheme to provide assurance to customers for domestic scale generation systems. It provides both for accreditation of installers and certification of products. For more information visit the MCS website.
It is also linked to the Renewable Energy Assurance Scheme (REAL Assurance), which provides protection against mis-selling and for other aspects of the system supply contract. For more information visit the REAL Assurance website.
