FITs provide an income for generating electricity
A feed-in tariff (FIT) is a funding mechanism used in many countries to help promote small-scale renewable energy production. A typical 2.5kWp domestic solar PV installation costs around £12,000, but with the FIT this can generate an income of roughly £1,000 (tax free) on top of the savings on your electricity bills. This makes it not only good for the environment but also good for your wallet. The feed-in tariff has also enabled companies to offer completely free installations if you just want the electricity and not the payments.
FITs were introduced in the UK in April 2010 and guarantee the level of payment received for producing renewable electricity. For solar PV installations under 4kWp in size (as most domestic installations are) the rate was set at 41.3p per unit of electricity produced, and this has since increased to 43.3p (as the price is linked to the retail price index). There is also a bonus for electricity you produce and do not use. For each unit you send back to the grid you get a further 3p and this electricity is available for others to use.
Although FITs were introduced by the government, they are paid for by electricity companies. These companies pass the cost onto their customers, so effectively every household pays a small amount towards the FITs. Sharp estimate that an increase of £8.50 per year on the average electricity bill could pay for 250MW of solar installations – that’s about 100,000 domestic installations. Homeowners, landlords, schools and businesses can all benefit from the feed-in tariff, and over 17,000 PV installations were carried out in the 9 months between the introduction of FITs in April 2010 and the end of the year, showing how successful the feed-in tariff is.
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