What are feed-in tariffs?
A feed-in tariff is a rate of money paid by the government to homeowners, business and organisations such as schools and community groups to generate their own electricity through small-scale green energy installations such as solar panels. Under the UK scheme, which was launched on 1 April 2010, a typical homeowner could receive around £500 per year.
How does it work?
You can receive feed-in tariffs for both the generation of electricity (a generation tariff) and for giving unused generated electricity back to the National Grid (an export tariff). The level of payment depends on the technology and whether it is being fitted to an existing home, or installed as part of a new build. In the UK, future payments are guaranteed for the next 25 years for solar and 20 years for wind turbine-generated power and are linked to inflation. Solar installations registered after 1 August 2012 will only receive the payment for 20 years.
How much could I receive?
It depends on how much electricity you generate and how you generate it. As of May 2012, anyone fitting an average-sized 2.5kW solar photovoltaic (PV) system to their existing home will be paid 21p per kilowatt hour (kWh) generated. Households also receive an extra 3.2p for every kWh that they export back to the grid, on top of the money given in the first place for generation (though this export tariff will rise to 4.5p after 1 August 2012).
The income is tax-free. The Guardian's Miles Brignall estimated at the scheme's launch that solar PV could generate a return of 7-10%. The Energy Saving Trust has a feed-in tariff calculator which you can use to see how much you could earn.
What will happen to the rate in future?
On 1 August 2012, it will drop again to 16p per kWh for new registrations, though the government still estimates a return of 6%. After that, the level will be assessed every three months, and frozen or cut depending on the number of installations in the quarter before.
How do I know if I am eligible for the scheme?
The scheme is available to those who have one or more of the following technologies: solar PV panels (roof-mounted or stand alone), wind turbines (building mounted or free standing), hydroelectricity, anaerobic digestion (generating electricity from food waste), and micro combined heat and power (through the use of new types of boilers, for example). You will only qualify for the full feed-in tariff if the technology was installed using a product and installer certified under the government's microgeneration certification scheme. Under changes introduced to the scheme in the spring of 2012, homes must be brought up to a minimum energy efficiency standard – D, which many of the UK's homes do not meet – in order to be eligible for the tariff.
Where does the money come from?
From all energy users' bills, with payments made via the utility companies. Climate minister, Greg Barker, has previously estimated that if there are a high number of installs, it will add around £80 to the average household energy bill in 2020.