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Sep 14

Trying to understand Feed-in Tariffs

Posted by: Richard Musi   

 

 

A Feed-in Tariff (FIT) is a fixed rate (tariff) that is paid to renewable energy producers for each unit of electricity sent to the grid. In North America, such tariffs are also known as Advanced Renewable Tariffs (ARTs) or Renewable Energy Payments (REPs). The UK Government plans to adopt these tariffs in the UK from the 1st April 2010. 

 

The idea of a FIT is that by obliging electricity utilities to buy renewable electricity at above-market rates it is hoped this will encourage people to invest in renewable energy producing equipment.

 

Most developed countries have implemented FIT schemes and developing countries such as Argentina, Brazil, China, Ghana, Malaysia, Kenya, Nigeria, Pakistan, South Africa and Turkey have either implementated or plan to implement a scheme in the near future. The latest country to announce their FIT scheme is France, who will adopt their tariffs on the 1st January 2010. As an example, the French tariff for roof integrated solar panels will be 0,602€ (approx. £0.53) per kWh, a rate which is well above the £0.35 per kWh that someone living in the UK will receive as of April 2010 if they have installed integrated solar panels.  

 

So why should the French tariff for integrated solar be higher than the equivalent in the UK? France has greater solar potential than the UK, we could argue. In this case, why then is the proposed tariff for wind power in the UK as low as 23p/kWh? As the UK has good wind power potential, surely we should be encouraging its production as much as the French are solar? Should there be any difference at all between FITs with different technologies? We'd love to hear your views...


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written by James Alexander, September 15, 2009
REFITS have been criticised for their cost ineffectiveness arising from quantity uncertainties. This is due to the implications of setting the tariff too high or too low. The simple fact is that different technologies have different costs and so tariffs must also differ if these technologies are to continue to be backed by investors and to develop. Setting equal tariffs would simply swing deployment in favour of certain technologies, and as a mix of technologies is required to meet any KYOTO targets and reduce the reliance upon fossil fuels, this would be detrimental in the long term. It also makes more sense to offer the highest incentive to those technologies which encompass the highest potential.
Comparisons between countries are also difficult as it is important to include other factors such as planning constraints and grid connection issues.
Out of curiousity, are any tradable quota mechanisms implemented at this scale of generation?
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written by toby @ better generation, September 15, 2009
The government are holding a consultation on the feed in tariffs this Friday in London. Aside from the debate on differential tariffs between technologies, there is also a lot of talk over at yougen.co.uk about how early adopters who have already installed kit may actually be worse off after the FITs come in. Should be a lively session then!

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