FAQs
Why did the Appeal Court rule that the government’s proposed FITs changes were illegal?
The Court said the proposed change was effectively retrospective because (as summarised by the supreme court ruling):
The Court of Appeal upheld the Administrative Court's judgment that it is not within the power conferred on the Secretary of State by the Energy Act 2008 to reduce the tariff paid for electricity generated by small-scale solar photovoltaic generators, in respect of installations becoming eligible for payment prior to the coming into force of the modification.
This gives comfort that the government cannot change tariff levels applicable to systems installed before the new tariff levels have been approved by parliament.
What if I own more than one installation - will I be paid less?
Not unless you are in receipt of tariffs for more than 25 solar PV installations. If that is the case, you will receive a lower tariff. These lower tariffs are in the third column of the table linked here, and described in the footnotes to this table.
I heard the tariffs are going down on 12 December. Am I affected?
The cut in tariffs only applies to installations registered on or after 12 December 2011. It does not apply to installations that are already receiving tariffs. If you are already receiving tariffs, you will continue to receive your current rate (going up with inflation).
If you register a system on or after 12 December 2011, you will receive the pre-December tariff until 31 March 2012, and then the reduced rate thereafter.
Note that the 12 December 2011 cut-off may be brought forward to 3 March 2012 (if the government loses its appeal against legal action being taken against it). However, it is safer to assume that the lower tariffs will be applicable from 12 December 2011.
When do the reduced PV tariffs apply?
The tariffs apply immediately to all installations registered after 31st March 2012.
However any installations after 12th December 2011 will receive the existing tariffs only until 31st March 2012, whereafter they get the new reduced rate.
The government consultation said:
44. The new tariffs will come into force from 1 April 2012 but will apply from that date to all new PV installations with an eligibility date of on or after 3rd March 2012 (the ‘reference date’). Existing generators with an eligibility date before the reference date will not be affected by the proposed change in tariffs.
45. The effect of this is that, depending on the result of the consultation, installations with an eligibility date that falls between the reference date and 31 March 2012 will receive the current tariff for that period only, and will then move to the new tariff from 1 April 2012. Those installations with an eligibility date on or after 1 April 2012 will start immediately on the new tariff.
What is meant by ‘aggregated projects’ to which the ‘multi-installation’ tariffs would apply?
It's basically where the same tariff beneficiary has more than one tariff-registered installation.
Paragraph 51 of the government consultation said it:
would apply to any solar PV installation where the FIT generator or nominated recipient already owns or receives FITs payments from one or more other PV installations, located on different sites. Specifically, we propose that the multi-installation rate would apply:-
(i) if the FIT generator (whether or not the person in receipt of FIT payments) is either the FIT generator or the nominated recipient for FIT payments for any other solar PV installation; and
(ii) if the nominated recipient for FIT payments (where there is one) is either the FIT generator or the nominated recipient for FIT payments for any other installation.
Are renewable energy installations eligible for Enhanced Capital Allowances (ECAs)?
At present some are, but the Treasury intends to remove this privilege from all equipment eligible under the Renewable Heat Incentive and the Feed-In Tariffs. There is a consultation on this issue which closes on 31st August 2011.
The government justifies this move, saying:
the tariff levels for FITs and RHI are carefully set to provide a sufficient investment incentive, and any extra incentives to invest in these technologies is not appropriate
Are Feed-In Tariffs eligible for EIS and VCT tax breaks?
Yes at present, but for many this is to be stopped from 2012, further to an announcement in paragraph 2.38 of the 2011 Budget.
This says:
The Government will consult on options to provide further support for seed investment, simplification of the EIS rules by removing some restrictions on qualifying shares and types of investor and refocusing both EIS and VCTs to ensure they are targeted at genuine risk capital investments. Feed in tariffs businesses will be added to the excluded activities list.
However some concessions were made in the Treasury consultation in July 2011. This sets out the proposals for the exclusion in sections 4.16 to 4.21, including:
4.19: Based on the discussions with stakeholders, the legislation ensures that community interest companies, co-operative societies, community benefit societies and Northern Ireland industrial and provident societies will continue to qualify, as will trades generating electricity by hydro power or anaerobic digestion.
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
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.
What is tariff degression and how would it apply to my system?
The level of the tariff applicable to systems installed in the future will decrease with time, according to annual degression rates. The degression rate is used only to determine the tariff applicable to the system based on its registration date - once you've been allocated a tariff that rate would apply for the full 20 or 25 years.
[For example: If you install a 5kW PV system in June 2010 you would receive 36.1p/kWhr for 25 years until June 2035. If you installed it in June 2012 you would receive 33p/kWhr until June 2037]
Do I have to accept the 3p/unit of power exported or can I trade the electricity on the market?
You don't have to accept the fixed price; you can opt to negotiate your export price on the market. However, you will have to decide at the start of each year if you want to do this, and will then have to stick to it - you can only swap between fixed and market pricing once a year.
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. See the details here. Similarly, it was announced in the March Budget that the Renewable Heat Incentive will also be Income Tax exempt.
Is the Tariff subject to inflation?
The Feed-In Tariffs are index-linked to the Retail Price Index (RPI). It is currently proposed that the Renewable Heat Incentive will not be index-linked. See more information on the page for durations and variations for the RHI.
Which is better financially for larger systems, FITs or ROCs?
The government has tried to set the tariffs for larger systems at about the same level as the RO.
The decision on which to go for will depend on your view of the administration associated with each option, and the certainty of the price you will get under each (ROC and electricity prices are both variable and can be volatile at times).
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. Find full information on our page about funding.
Therefore if you install a renewable energy system you get a treble benefit:
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.
Read detailed information on our page about durations and variations.
How much is paid for each kilowatt hour?
This varies by type and size of system - see the tariffs table to find out more.
