Feed-in Tariffs

To address the low uptake of small scale renewables the Government put in place a feed-in tariff schema (FITs) shortly after the creation of the new Department of Energy and Climate Change in 2008. The Secretary of State, Ed Miliband, introduced an enabling clause at a late stage of the Energy Act 2008 to allow the introduction of tariffs for small-scale generators up to 5MW output.

Individuals and businesses eligible for the scheme are paid a set amount per kilowatt hour (kWh) they generate and use themselves, which will vary according to the type of generation and the size of the scheme. In addition they are paid a smaller amount per kWh for any surplus exported to the grid. The cost of Feed-in Tariffs, which is passed onto consumers, is capped by the Government through the Levy Control Framework, which has been revised several times since being introduced.

The high uptake through FITs, particularly for Solar PV, has resulted in the Feed-in Tariffs being cut several times since their introduction. The Government also attempted to cut tariffs for Solar PV retrospectively but this was ruled unlawful in court.

Most recently the Government carried out a Review of Feed-in Tariffs to ensure compliance with EU state aid requirement and to set out proposals aimed at controlling the cost of the scheme to limit the impact on consumer bills following higher than projected levels of deployment.

Following the Review, tariffs for all technologies were reduced, although not to the level proposed in the original consultation and quarterly caps on deployment introduced. Pre-accreditation for Feed-in tariffs, which had been removed in a previous consultation was re-introduced

The reductions came into force in January 2016. The accreditation for the first quarter opened on 8 February 2016 and was oversubscribed within less than an hour for several categories.

Financial incentives for large scale renewables are set out in Library Note SN05870 on the Renewables Obligation