The UK government has introduced feed in tariffs or FiT payment for generating electricity from home solar power systems. The feed in tariff is paid for each unit of electricity that you generate provided you follow all the rules to qualify for feed in tariff payments. It’s very important to understand how FiT payments work so you can see how much money you could make by getting solar panels for your home.
In this article we’ll look at how the feed in tariff works for retrofitting photovoltaic or PV solar panels to an existing home. That is, adding solar panels to a house that has already built, there are different FiT payments for new build homes, and other forms of electricity generation.
The solar feed in tariff comes in two parts:
- The Generation Tariff (this pays most of the money)
- The Export Tariff (a small additional payment for selling money back to the grid)
The Generation Tariff is paid for every unit of electricity that you generate (up to a maximum system size which is roughly what you would be able to put on a four bedroom house). This is the important part to understand: The generation tariff is paid for all electricity that you generate from your solar panels, whether you use it or not. Many people miss this important point and it makes a big difference to the payouts you can get.
The generation tariff has been set at 41.3p per unit until April 2012. It will then reduce to 37.8p per unit and keep reducing every year. However, the generation tariff is locked in for 25 years so if you get in quickly you will keep the higher rate. And even better that rate increases in line with inflation, calculated based on the Retail Price Index (RPI). The is very important – who knows how much inflation will increase by over the next 25 years.
The Export Tariff is an additional payment, on top of the generation tariff, which is also paid for any electricity that you generate but don’t use.
The export tariff will is set by your electricity supplier, but must be a minimum of 3p per unit. As you can see, this is a small amount compared with the generation tariff. It will add up over 25 years though! And the saving will become more significant if energy prices increase significantly as they are predicted to do. The export tariff is also index-linked so it will also increase in line with inflation.
Perhaps the best news is that the FiT payments are tax free. This makes a very big difference to tax payers, especially higher rate tax payers.
To work out how much money you could make from Feed in Tariff payments, try the Solar PV Panel Payback Calculator. This solar payback calculator shows how much money you could make by putting solar panels on your roof.