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You may have heard of the terms ‘Feed-In Tariff’ and 'Smart Export Guarantee', but what exactly are these schemes and how can you use them to your advantage?
This Energy Guide will go through exactly what Feed In Tariffs are and allow you to decide if you can make them work for your home or business.
Essentially, the Feed-In Tariff (FIT) scheme allows you to generate your own electricity using a renewable source such as solar panels or wind turbines, and get money from your energy supplier.
You'll receive two payments; one for generating electricity (even if you don't use it) and another for the electricity that you export to the National Grid.
This can be a great way to cut your electricity bills and also contribute to efforts to lower our carbon emissions.
The Feed-In Tariff scheme became closed for new applicants at the end of March 2019 and the Smart Export Guarantee (SEG) scheme was launched as a replacement.
Unlike the FIT scheme, SEG only pays you for the electricity that you export to the National Grid. If you were already registered for the FIT scheme prior to its termination, you’ll continue to receive payments until your contract ends.
Feed-In Tariffs were introduced in 2010 and were brought in to replace government grants as an extra incentive for people to adopt solar and wind energy technologies. The majority of renewable energy technologies will qualify for the scheme, the most notable being:
In order to qualify for FITs, you simply needed to use installations and products that have been certified under the Microgeneration Certification Scheme (MCS).
If you were pursuing the use of anaerobic and hydro digestions, the ROO-FIT (Renewables Obligation Order Feed-In Tariffs) process needed to be adhered to.
Your property’s Energy Performance Certificate would also be assessed when determining what kind of tariff you were placed on.
The Feed-In Tariff scheme was administered by the energy regulator Ofgem. Key decisions were made by the Department for Energy and Climate Change (DECC).
As the FIT scheme is now closed to new applicants, you’ll need to apply for the Smart Export Guarantee in order to receive payments for using renewable technologies.
To qualify, all of the following requirements must be met:
If you are already an applicant on the FIT scheme, you cannot apply for SEG. Your FIT payments will continue until your contract ends. FIT contracts typically last around 20 years.
If you want to apply for SEG, you’ll need to opt-out of the FIT scheme. However, this is not usually recommended as the rates for FITs are generally higher than SEG payments.
The key difference between Feed-In-Tariffs and the Smart Export Guarantee is that with the FIT scheme, you would receive payments when you generate and export electricity, whereas with SEG, you only receive one payment for the electricity you export to the grid.
SEG also measures the amount of electricity you export to the grid and pays you for that, whilst FIT would estimate 50% of the total amount of energy you generated and paid you for this.
Additionally, the government along with Ofgem were in charge of setting FIT payment rates, so they were the same regardless of the supplier. In contrast, energy suppliers set their own tariff rates with SEG.
Furthermore, a levy on customer energy bills contributed to FIT payments, whilst SEG payments are made by energy suppliers.
If you successfully generate enough power to be rewarded financially, then your energy supplier makes these payments to you.
If you are with one of the Big Six, then they are legally obliged to pay you, however the smaller firms are not. That said, the majority of these providers have decided to pay out anyway. You can find a full list of FIT licensed suppliers by visiting the Ofgem website.
This is the point from which you start receiving your FIT payments from the renewable energy you have generated. The eligibility date is really crucial as this is what your payments will be based on.
If you think you can add some more solar panels to boost the amount of renewable energy you are producing, then you can apply for an extension, but the rules change slightly.
The eligibility date is the date that the new panels are commissioned, not the day your claim is received. This is very important to remember, especially if you want to claim the higher rate by submitting an EPC (which must be dated prior to the commissioning date other the higher rate will be invalid).
You should bear in mind that as the FIT scheme has now closed, the rules for extensions may have changed. You should discuss this with your supplier.
If you registered with the FIT scheme before its close date, you could benefit from:
Reduced Electricity Bills – Ultimately, as is the name of the game here at Love Energy Savings, you can reduce your electricity bills by choosing to generate your own power. It doesn’t take a genius to work out that this will mean you have to buy less from your supplier, so as a long-term option it is extremely viable. You often have to rely on the weather which can be problematic in the UK, but it will more often than not end up being a good business decision.
Generation Tariff – The rates you agreed with your supplier could be guaranteed for periods up to 20 years and these are index linked.
Export Tariff – For every unit that you contribute back the grid, you earn 4.64 pence per kWh meaning that none of the electricity you generate is wasted. This is the same for any technology you decide to employ to produce your renewable energy. Smart technology now allows you to track exactly what you have produced, so you can stay on top of exactly what you have earned.
Although the earnings from SEG may not be as much as FIT payments, you can still earn a useful amount of money and reap the benefits of using a renewable energy source; such as a reduced carbon footprint and the satisfaction of knowing that you are generating your own electricity.
According to reports, approximately 5.5p per kWh can be made with SEG. Energy companies are required to pay above zero per kWh and the government has pledged to intervene if suppliers fail to offer competitive rates.
If you’re considering applying for the SEG scheme, it is recommended for you to compare tariff options as energy suppliers set their own rates, so prices can vary.
It is essential that you keep on top of your power generation and FIT payments. You should record information such as your MCS Database certificate, your eligibility date and your payment schedule. This is a precaution which is necessary just in case of unforeseen circumstances such as FIT licensees becoming insolvent and other such scenarios. The exact criteria are:
If you are worried about any aspect of your gas and electricity supply, then Love Energy Savings are here to help.
Although generating your own electricity can be a great way to save money, you need to ensure you are on the right energy tariff in the first place.
You can use our online comparison engine free of charge and we’ll get you moved over to a better deal so you can concentrate on the more important things in life.
If you found our Guide to The Feed-In Tariff helpful, then why not take a look at some of our other great Energy Guides? There you will find advice on everything from insulating your home to the latest smart heating technology.