Feed-in tariffs explained Feed-in tariff cuts
Has the feed in tariff been cut?
Yes. The government consulted on proposals to cut the feed in tariff for solar photovoltaics (PV) - the type of solar panels which generate electricity - because the budget for these payments was running out quickly.
It has cut the feed in tariff (FIT) rate for the generation tariff - the fixed rate element of the feed in tariff that's payable to households who generate their own electricity, calculated per unit. Systems installed after 1 November 2012 will get a reduced generation tariff. Find out more about the recent rated of FIT in our guide to feed in tariff earnings and savings.
Are solar PV panels still a worthwhile investment?
With the lower rate, solar PV is less attractive as householders will earn much less money for the electricity their solar panels generate. A typical 3.5kWp system, installed in central England and costing £7,000, will now make you about £606 a year from feed in tariff with the current rate. The payback is now around 12 years.
Since 1 April 2012, properties wishing to have solar panels installed have had to meet minimum energy-efficiency requirements (see below).
This makes solar PV a long-term investment, as you'll only make a profit once the system has paid for itself. feed in tariff is paid for 20 years (it used to be 25 years) and payback time could be about 12 years for a 3.5kWh system.
However, if installation costs continue to fall and you pay less for your system, and/or if electricity prices continue to rise, the payback period will shorten. And as long as the panels function, of course, you will still benefit from the 'free' electricity.
Putting the £7,000 typical solar panel cost into an ISA for the same amount of time might lead to a higher annual rate of return. Find out more in our guide to solar PV as an investment.
I already have solar panels. Does this affect me?
No. Solar PV systems already registered for the old feed in tariff rates are not affected. Any change to the feed in tariff rates only affects new installations.
What if I wait – is the tariff fixed?
No, for solar PV the government will be introducing further reductions in the future as well as a 'degression mechanism' which will reduce the tariff on a regular basis if costs continue to fall.
What are the new requirements for solar panels installed after 1 April 2012?
Since 1 April 2012, to qualify for the higher rate of feed in tariff for solar PV, householders now also have to meet minimum energy efficiency requirements. They must be able to demonstrate as part of their application for feed in tariff that the building to which the solar PV panels are attached or wired to provide electricity is rated at Energy Performance Certificate level D or above. About half of all properties are already eligible for a D rating. If the property is below a D rating, the feed in tariff rate would be lower.
What about other technologies like wind turbines and solar thermal panels?
Wind turbines, hydroelectric and micro-combined heat and power systems are all eligible for feed in tariff and are also seeing cuts to the feed in tariff rates but to a lesser extent. Our table of feed in tariff rates shows the latest rates for all eligible technologies.
Solar thermal panels - which produce hot water rather than electricity - will be eligible for the Renewable Heat Incentive (RHI), a separate government scheme designed to reward homes generating their own heat. It is expected to launch in 2013.
Where can I find out more?
If you are unsure about your options or have any further questions, please contact the Energy Saving Trust on 0300 123 1234.