Following of the government’s announcements on the Feed in Tariff and our
online question and answer session last Tuesday (to read the debate, visit
http://ow.ly/14aLF), the team at Regen SW has scoured the reports and
pulled out the key points for you (below).
There are still some unanswered questions on the Feed in Tariff, which we
will be feeding back to DECC, and even more on the Renewable Heat Incentive
that we expect to come out of our consultation event on 16 March (to sign
up, visit http://ow.ly/14aTI), but the points below should give you a good
overview of the key elements.
Feed In Tariff (FIT)
To read the government’s full report, visit: http://ow.ly/14aY
To see the below information as a word document, visit:
www.regensw.co.uk/downloads/RegenSW_424.doc
The cornerstones of the Feed in Tariff have not changed following the
consultation period, but some of the detail has been refined. Changes are
highlighted.
Tariffs
From April 2010, the FIT will offer a fixed payment per kilowatt hour
generated
The levels of these generation tariffs have largely been increased in
the final version of the scheme, by up to 5p per kWh (see table below
for the values)
The FIT will also offer a guaranteed minimum payment of 3p per kWh
exported to the market – this figure has decreased from the
originally proposed 5p per kWh
Tariffs will now be index-linked to the Retail Price Index so that
they increase in line with inflation – this is in response to a
strong lobby on this issue
The FIT will be offered for a 20 year period, with the exception of
solar PV projects for which the period will be 25 years
FIT income for domestic properties generating electricity mainly for
their own use will not be taxable
The aim is for the FIT to offer standard renewable projects a 5-8 per
cent return on investment.
Where appropriate, support will degress in line with expected
technology cost reductions. In the latest document, rather than
expressing degression as a percentage (as they did in the
consultation document, tariff levels for the first 11 years of the
scheme have been set out. Only solar PV and wind below 100kW have
degressed tariffs for this period, starting from year 3 of the scheme
(see table on reverse for details)
Support levels will be reviewed periodically and in response to
sudden changes in technology costs. However, tariff levels will be
‘grandfathered’, so that projects continue to receive the generation
tariff offered at their registration throughout their 20 year support
period (25 years for PV. For example, if you register a 2kW
retrofitted panel in year 1 of the scheme you will receive a
generation tariff of 41.3p/kWh for 25 years. The same panel
registered in year 3 of the scheme would receive 37.8p/kWh generated
for 25 years.
Changes have been made to the banding of the anaerobic digestion
(AD), hydro and wind tariffs to provide more effective support to
these technologies. A band has been introduced to provide additional
support to farm-scale (<500kW) AD projects. The wind and hydro
banding structure has been improved to introduce a new “community
scale” band providing additional support between 100 kW and 2 MW for
hydro projects, and 500kW and 1.5MW for wind projects
|---------------+--------------+ --------------+--------|
| Technology | Scale | Tariff level | | Tariff|
| | | for new | | lifeti|
| | | installation | | me |
| | | s in period | | (years|
| | | (p/kWh) [nb | | ) |
| | | tariffs will | | |
| | | be inflated | | |
| | | annually] | | |
|---------------+--------------+-----------------------------+--------------+--------|
| | | Year 1: | Year 2: | Year 3: | |
| | | 1/4/10-31/3/| 1/4/11-31/3/| 1/4/12-31/3/| |
| | | 11 | 12 | 13 | |
|---------------+--------------+--------------+--------------+--------------+--------|
| Anaerobic | =500kW | 11.5 | 11.5 | 11.5 | 20 |
| digestion | | | | | |
|---------------+--------------+--------------+--------------+--------------+--------|
| Anaerobic | >500kW | 9 | 9 | 9 | 20 |
| digestion | | | | | |
|---------------+--------------+--------------+--------------+--------------+--------|
| Hydro | =15 kW | 19.9 | 19.9 | 19.9 | 20 |
|---------------+--------------+--------------+--------------+--------------+--------|
| Hydro | >15-100 kW | 17.8 | 17.8 | 17.8 | 20 |
| | | | | | |
|---------------+--------------+--------------+--------------+--------------+--------|
| Hydro | >100 kW-2 | 11 | 11 | 11 | 20 |
| | MW | | | | |
|---------------+--------------+--------------+--------------+--------------+--------|
| Hydro | >2 MW – 5 | 4.5 | 4.5 | 4.5 | 20 |
| | MW | | | | |
|---------------+--------------+--------------+--------------+--------------+--------|
| MicroCHP | =2 kW* | 10* | 10* | 10* | 10 |
| pilot* | | | | | |
|---------------+--------------+--------------+--------------+--------------+--------|
| PV | =4 kW (new | 36.1 | 36.1 | 33 | 25 |
| | build**) | | | | |
|---------------+--------------+--------------+--------------+--------------+--------|
| PV | =4 kW | 41.3 | 41.3 | 37.8 | 25 |
| | (retrofit**)| | | | |
| | | | | | |
|---------------+--------------+--------------+--------------+--------------+--------|
| PV | >4-10 kW | 36.1 | 36.1 | 33 | 25 |
|---------------+--------------+--------------+--------------+--------------+--------|
| PV | >10-100 kW | 31.4 | 31.4 | 28.7 | 25 |
| | | | | | |
|---------------+--------------+--------------+--------------+--------------+--------|
| PV | >100kW-5MW | 29.3 | 29.3 | 26.8 | 25 |
| | | | | | |
|---------------+--------------+--------------+--------------+--------------+--------|
| PV | Stand alone| 29.3 | 29.3 | 26.8 | 25 |
| | system** | | | | |
|---------------+--------------+--------------+--------------+--------------+--------|
| Wind | =1.5kW | 34.5 | 34.5 | 32.6 | 20 |
|---------------+--------------+--------------+--------------+--------------+--------|
| Wind | >1.5-15kW | 26.7 | 26.7 | 25.5 | 20 |
|---------------+--------------+--------------+--------------+--------------+--------|
| Wind | >15-100kW | 24.1 | 24.1 | 23 | 20 |
|---------------+--------------+--------------+--------------+--------------+--------|
| Wind | >100-500kW | 18.8 | 18.8 | 18.8 | 20 |
| | | | | | |
|---------------+--------------+--------------+--------------+--------------+--------|
| Wind | >500kW-1.5 | 9.4 | 9.4 | 9.4 | 20 |
| | MW | | | | |
|---------------+--------------+--------------+--------------+--------------+--------|
| Wind | >1.5MW-5MW | 4.5 | 4.5 | 4.5 | 20 |
| | | | | | |
|---------------+--------------+--------------+--------------+--------------+--------|
Existing | | 9 | 9 | 9 | to |
microgenerator| | | | | 2027 |
s transferred | | | | | |
from the RO | | | | | |
--------------+--------------+--------------+--------------+--------|
Eligibility
Projects up to 5 MW will be eligible, including off-grid
installations.
Technologies that will be eligible for the FIT from April 2010 are:
wind, solar PV, hydro, anaerobic digestion, and a pilot scheme for
30,000 non-renewable micro combined heat and power (CHP)
installations. Electricity from biomass will no longer be eligible
for the FIT, though it can continue to receive ROCs.
Projects installed in the interim period between the announcement of
the FIT (15 July 2009) and the start of the scheme (April 2010) will
be eligible to receive the tariff regardless of whether they
registered in this period for ROCs. They will not receive a reduced
period of support as suggested in the consultation document; they
will be eligible for the full 20 years of FIT payments (or 25 years
for solar PV).
Regardless of technology, projects installed prior to 15 July 2009
will be eligible to receive generation payments of 9p/kWh and export
payments of 3p/kWh, provided they were previously receiving support
under the RO scheme. If the project was installed before 15 July
2009 and not registered for ROCs, it will not be eligible for the
FIT.
Projects up to 50 kW in size will not be able to claim the RO;
existing installations will be automatically transferred to the FIT.
New and interim period (15 July 2009 to 1 April 2010) projects
between 50 kW and 5 MW will be given a one-off choice between
claiming support under the FIT or the RO. Existing projects between
50 kW and 5 MW in size will remain under the RO, with no opportunity
to transfer to the FIT.
Accreditation
Wind, solar PV and hydro projects below 50 kW in size, and micro CHP
projects must be installed by microgeneration certification scheme
(MCS) accredited installers and be MCS accredited products. View the
current list of certificated installers and products here:
www.microgenerationcertification.org/Home+and+Business+Owners
50 kW to 5 MW projects must register their installation through a
process based on the existing renewables obligation process, known as
the ROO-FIT process, in order to be eligible for FITs support.
Details of this process are not clear at this stage.
Grants
Domestic projects that have received grant funding from central
government will not have to pay back the grant to be eligible for the
FIT. While this was not reconfirmed in the government’s 1 February
response, it was set out in the UK Renewable Energy Strategy 2009.
Any non-domestic projects (commercial or community) that receive or
have received grant funding from central government might have to
return the grant before they can receive FIT payments. This
situation was not clarified by the government’s response to the FIT
consultation. Regen SW will be lobbying for clarity on this key
issue.
Scheme launch
The FITs scheme will start from 1 April 2010. In the run-up to the
scheme, information will be available for individuals, households,
community groups and small business on how they will be able to
benefit from the scheme. Guidance will be provided by Ofgem, and help
will be available from the Carbon Trust, Energy Saving Trust and DECC
Central government will not provide a mechanism for up-front
capitalisation of FITs revenues. This does not preclude other
organisations from offering such schemes. However, building on the
experience of pilot projects for ‘pay as you save’ financing and Warm
Front, the government will consult later this year on measures to
help low-income households take advantage of the FIT and the
Renewable Heat Incentive.
Renewable Heat Incentive (RHI)
To read the government’s full report, visit: http://ow.ly/14XZG
To see the below information as a word document, visit:
http://www.regensw.co.uk/downloads/RegenSW_425.doc
The proposed Renewable Heat Incentive is similar in design to the feed in
tariff, with some distinctive features, due to the differences between
producing heat and generating power. It is a consultation document at this
stage, so it is subject to change.
Tariff payments
Tariff levels are proposed to provide a rate of return of 12 per cent
on the additional capital cost of renewables, with a lower rate of
return of 6 per cent for solar thermal (see table of tariff rates at
the end of this document)
RHI will remain open to new projects until at least 2020. Its design
and tariff levels will be reviewed from time to time for new
projects, to adapt to changes in technology costs and other
circumstances.
Annual payments will be made for installations below 45 kW and
quarterly for those above this level.
The number of years of support proposed varies depending on the
technology, from 23 years for small ground source heat pumps to 10
years for biogas onsite combustion.
The issue of tax on the payments is still to be determined by the
Treasury
It is unclear whether the payments would be index-linked to inflation
or not.
It is proposed that payments are ‘grandfathered’, meaning that a
project installed in year one of the scheme continues to receive
payments at the level set in year one throughout the time that it is
eligible for RHI support. Tariffs are reduced for new projects
installed in later years.
The market is expected to develop up-front financing schemes.
Central government is unlikely to provide products (outside of the
Pay as You Save scheme that is currently being piloted).
Calculating payments
Payments will be calculated on the annual amount of heat output,
expressed in kilowatt hours (kWh). At the small and medium scale (see
the tariff level tables for details of what is classified as small or
medium), the amount of heat generated by the equipment is proposed to
be estimated (or “deemed”) when installed, in most cases. This will
allow the beneficiary of the incentive to receive a set amount based
on the deemed output, to encourage low0energy consumption and
discourage wasting heat.
Deemed payments for small-scale installations will be based upon the
estimated heat demand for a building, calculated for each property
using the Standard Assessment Procedure (SAP) rating for domestic
properties or Simplified Building Energy Model (SBEM) for nondomestic
situations, as well as the assessments carried out to create Energy
Performance Certificates (EPCs) for new buildings in particular.
Medium-scale installations will follow the same approach as small
scale, with solid biomass installations being allowed to choose
between deemed payments and metering. Installations choosing this
approach would still receive the same tariff for the same deemed
number of kWh, but where the metered number of kWh used exceeds the
deemed number, an additional lower tariff per kWh would be paid for
the metered excess.
Large-scale and process-heating (and medium-scale, where not covered
by SAP/SBEM/EPC) support would be calculated as the metered number of
kWh multiplied by the tariff per kWh. Biomethane injection and
district heating would be metered at all scales.
Eligibility
The scheme should support a range of technologies, including air,
water and ground-source heat pumps (and other geothermal energy),
solar thermal, biomass boilers, renewable combined heat and power,
use of biogas and bioliquids and the injection of biomethane into the
natural gas grid.
Woodstoves are not included, though the issue of backboilers needs to
be clarified
To ensure that the incentive is paid only to installations that
function correctly, regular evidence of ongoing maintenance and
repair may be required within a fixed time period, or payment of the
incentive would be at risk.
As announced in the RES, eligible installations completed after 15
July 2009, but before the start of the RHI, will benefit from the
scheme as if they had been installed on the date of its introduction.
Accreditation
In small and medium-sized installations, both installers and
equipment must be certified under the Microgeneration Certification
Scheme (MCS) or an equivalent standard.
For larger installations, it is proposed that similar standards are
not imposed. The government would instead expect those involved with
larger projects to have or obtain the necessary expertise to make
appropriate choices and ensure they get value for money.
Auditing
Ofgem will administer the RHI, making incentive payments to recipients and
taking responsibility for auditing and enforcing the scheme. DECC will work
with Ofgem to devise a simple process for accrediting smaller
installations. This is to ensure that standards are met and payments can be
made.
Funding of the scheme
Following informal consultation with stakeholders and appraisal of the
issues associated with raising funds for RHI payments, the government is
considering what would be the most effective way to fund the RHI, including
reviewing the levy provisions in the Energy Act 2008. The government plans
to make a further announcement at Budget 2010. Work to assess options for
funding the RHI scheme will not impact on DECC’s intention to launch the
scheme in April 2011.
Small installations
|----------------+-----------+--------------+------------+---------|
| Technology | Scale | Proposed | Deemed or | Tariff |
| | | tariff | metered (3)| lifetime|
| | | (pence/ kWh) | | (years) |
| | | (2) | | |
|----------------+-----------+--------------+------------+---------|
| Solid biomass | Up to 45kW| 9 | Deemed | 15 |
| | | | | |
|----------------+-----------+--------------+------------+---------|
| Bioliquids (7) | Up to 45kW| 6.5 | Deemed | 15 |
| | | | | |
|----------------+-----------+--------------+------------+---------|
| Biogas on-site| Up to 45kW| 5.5 | Deemed | 10 |
| combustion (5) | | | | |
| | | | | |
|----------------+-----------+--------------+------------+---------|
| Ground source | Up to 45kW| 7 | Deemed | 23 |
| heatpumps (8) | | | | |
| (9) | | | | |
|----------------+-----------+--------------+------------+---------|
| Air source | Up to 45kW| 7.5 | Deemed | 18 |
| heatpumps (9) | | | | |
|----------------+-----------+--------------+------------+---------|
| Solar thermal | Up to 20kW| 18 | Deemed | 20 |
| | | | | |
|----------------+-----------+--------------+------------+---------|
Medium installations
|----------------+-----------+-------------+------------+--------+
| Technology | Scale | Proposed | Deemed or | Tariff |
| | | tariff | metered (3)| lifetim|
| | | (pence/ kWh)| | e |
| | | (2) | | (years)|
| | | | | |
|----------------+-----------+-------------+------------+--------+
| Solidbiomass | 45-500 kW| 6.5 | Deemed | 15 |
|----------------+-----------+-------------+------------+--------+
| | | 2 | Optional: | 15 |
| | | (fueltariff)| for metered| |
| | | | kWh above | |
| | | | deemed | |
| | | | number of | |
| | | | kWh | |
|----------------+-----------+-------------+------------+--------+
| | | | | |
|----------------+-----------+-------------+------------+--------+
| Biogas on-site| 45-200 kW | 5.5 | Deemed | 10 |
| combustion (5) | | | | |
| | | | | |
|----------------+-----------+-------------+------------+--------+
| Groundsource | 45-350 kW | 5.5 | Deemed | 20 |
| heat pumps | | | | |
| (8)(9) | | | | |
|----------------+-----------+-------------+------------+--------+
| Air source heat| 45-350 kW | 2 | Deemed | 20 |
| pumps (6)(9) | | | | |
|----------------+-----------+-------------+------------+--------+
| Solar thermal | 20-100 kW | 17 | Deemed | 20 |
| (6) | | | | |
|----------------+-----------+-------------+------------+--------+
Large installations
|----------------+----------+--------------+-----------+----------|
| Technology | Scale | Proposed | Deemed or | Tariff |
| | | tariff | metered | lifetime |
| | | (pence/kWh) | | (years) |
| | | (2) | | |
|----------------+----------+--------------+-----------+----------|
| Solid biomass | 500 kW | 1.6-2.5 | Metered | 15 |
| (4) | and above| | | |
|----------------+----------+--------------+-----------+----------|
| Groundsource | 350 kW | 1.5 | Metered | 20 |
| heat pumps | and above| | | |
| (8)(9) | | | | |
|----------------+----------+--------------+-----------+----------|