Feed-in tariffs explained Feed-in tariff savings and earnings
One question we keep getting asked about the feed-in tariff scheme is 'how much money can I earn from it?'. The answer is - every case is different, and will depend on the specific renewable technology you have installed.
However, as a general rule of thumb, you need to offset the upfront cost of installing your system against how much money you'll earn from the different elements of the feed-in tariff and the savings you'll make on your energy bills.
Can I make money from solar?
There are two tariffs that will earn you money from solar PV.
1. The first is the generation tariff. It's a fixed rate for the total amount of energy you produce, and it currently stands at 4.39p per kWh, having been lowered from 15 January 2016.
2. The second is the export tariff, which is the amount that you export back to the national grid. This is estimated at half the energy you generate. This currently stands at 4.85p per kWh.
With a new generation tariff, we calculated the earnings and pay-back time for an average solar PV panel installation (4kWp), positioned on an optimum roof (south-facing and with a 30-degree tilt) on a house in Birmingham, with an Energy Performance Certificate (EPC) of band D or higher and registered for the FIT between 15 January 2016 and 31 March 2016.
For an electricity bill that is £55 a month, we found that the typical pay-back time would be about 24 years with a net profit of about £300. Broken down, this system would give a:
- yearly generation tariff income: £150
- yearly export tariff income: £83 (based on a deemed export rate of 50%)
- savings on electricity bill (in first year) £120
- total annual benefit £352
- lifetime benefit £7,000 minus cost of system and installation £6,700 - expected net profit over 25 years: £300
These calculations are from the Energy Saving Trust Solar Energy Calculator and include a degradation factor to account for the solar panels decline in efficiency. They also account for the FIT to last 20 years and savings from the panels to last 25 years. The figures do not include fuel price increases over time, inflation, net present value or discounting. Actual prices will be different based on efficiency, shading, location and FIT installations. This system will reduce carbon emissions by 37.59 tonnes of CO2 over 25 years.
Before 1 January 2016, the rates for solar PV systems were split by sizes. Our table below for solar shows the two most common sizes for domestic installations: up to 4kW (about 16 panels) and between 4 and 10kW. After January 2016, systems up to and including 10kW receive the same tariff.
Rates are tax free and will rise in line with inflation. The rate is also guaranteed for a certain number of years. The duration of the feed-in tariff payments dropped from 25 years to 20 years for solar PV installed after 1 August 2012.
How much can I earn from other types of renewable energy?
Generation tariff rates are payable according to the type of technology you have - the latest rates are set out in the tables below.
|Solar PV panels: feed-in tariff generation rates|
|System size||Generation tariff for 1 Oct - 31 Dec 2015||Tariff if EPC below band D for 1 July - 31 Dec 2015||Generation tariff 1 Jan 2016 - onwards|
|4kW or less||12.47 p/kWh||5.94 p/kWh||4.39 p/kWh|
|4kW to 10kW||11.30 p/kWh||5.94 p/kWh||4.39 p/kWh|
Duration: 20 years. Export tariff rate: 4.85 p/kWh.
|Other technologies: feed-in tariff rates|
|Technology||Generation tariff rates (1 Oct 2014 - 31 Mar 2015)||Generation tariff rates (1 Apr 2015 - 31 Mar 2016)||Generation tariff rates (1 Jan 2016 - ongoing)|
|Wind turbine (1.5kW or less)||16.00 p/kWh||14.45 p/kWh||8.54 p/kWh|
|Wind turbine (over 1.5kW, up to 15kW)||16.00 p/kWh||14.45 p/kWh||8.54 p/kWh|
|Hydroelectricity (15kW or less)||19.01 p/kWh||17.17 p/kWh||8.54 p/kWh|
|Micro Combined Heat & Power (2kW or less; first 30K units)||13.24 p/kWh*||13.45 p/kWh||-|
Table note: All for 20 years, except micro-CHP for 10 years. Export tariff rate: 4.85 p/kWh.
* 15 Mar 2013 to 31 Mar 2015
How much does it cost to install renewable technology?
Renewable technologies can widely differ in size, scope and complexity, so pinpointing a typical cost is tricky. However, the Energy Saving Trust has the following guidance:
- 4kWp solar PV panel system: around £5,000 - £8,000.
- Roof-mounted 1kW wind turbine: around £2,000.
- Larger 6kW freestanding wind turbine: £21,000 - £30,000.
- Hydroelectricity (5kW): from £25,000.
- Micro combined heat and power (micro CHP): from £5,500.
But before spending thousands on renewable technology, make sure your home is as energy efficient as possible. Particularly if you're installing solar PV, as it is now mandatory that your property reaches band D or higher in the Energy Performance Certificate to get the higher rate. If it is below band D, you will get a much lower rate of FIT.
You also need to make sure the renewable technology you choose is right for your home - the Energy Saving Trust's home energy generation tool is a good first port of call to decide which, if any, are suitable.
How can I make the most of the feed-in tariff?
Here are some money-saving tips from a Which? member who has solar panels on his roof.
- 'Energy companies buy back unused electrical energy that you have surplus in your installation. Unfortunately, they have no way of measuring how much electricity you return to the grid. What the energy companies do is take a figure of 50% of the electricity produced and estimate this figure as returned unused back to the grid. If you use more than the 50%, you gain. If you use less than 50%, you lose.'
- 'It make sense to use as much of your free solar-generated electricity as you can before allowing the surplus to be fed back to the energy company. Most people will find that they use more energy than they produce and still require some energy from their supplier. If you have a device in your home, as I do (a SMA Sunny Beam), that shows your energy generated live with up-to-the-minute information, you can time your electricity usage to coincide with when you are generating the most energy.'
- 'I set the "time delay" on major electricity appliances - i.e. dishwasher, washing machine, tumble dryer etc - so that they come on sequentially throughout the day, and not all together. Therefore, I use less extra energy bought in from my energy supplier. Normally, if you have south-facing panels, your peak PV energy production will be around midday, but if you have more easterly facing panels then your peak production will be a bit sooner, and westerly facing panels a bit later.'
- 'If you also have an energy monitor that you clip on your incoming electric cable, you can use that to monitor your reduced energy usage, and alter your timing as necessary.'
Find out more tips on how to maximise benefits from your solar system in our dedicated guide to making the most of your solar panels.
What about 'free' solar panel deals or 'rent a roof' schemes?
These are schemes where a company leases your roof for 20 years and, in exchange, installs and maintains solar panels on it. This means you do not have to find any cash upfront for the panels - and you benefit from the free electricity produced by the system - but the rent-a-roof firm generally takes all generation and export tariff payments.
These schemes could be worth considering if you can't afford the upfront installation costs and don't want to take out a loan. But beware that the returns would be smaller than if you were to own your own solar system. We suggest you carefully read the legal small print before signing on the dotted line - find out more about 'free' solar panel schemes in our dedicated guide.