Feed-in tariffs explained Feed-in tariff savings and earnings

One of the big questions surrounding the feed in tariff scheme is, 'how much money can I earn from it?' 

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.

How much can I earn from feed in tariff payments?

Generation tariff rates are payable according to the type of technology you have - the latest rates are set out in the table below. 

The export tariff element of feed in tariff has gone up recently and is fixed for all installations: 4.64p per kWh.

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 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:

• Average-sized solar PV panel system (3.5 to 4kWp): around £7,000.
• Roof-mounted 1kW wind turbine: around £2,000.
• Larger freestanding wind turbine (2.5 to 6kW): £15,000 - £22,500.
• Micro combined heat and power: from £5,500.
• Hydroelectricity (5kW): £20,000 - £25,000.

First, though, you should get your 'house in order'. Before spending thousands on renewable technology, make sure your home is as energy efficient as possible. You should have good loft insulation and wall insulation, and when it comes to replacing household products, choose energy-efficient appliances. 

For solar PV it is now mandatory that your property reached EPC band D or more to get the higher rate. If it is below band D you will only get 7.1p/kWh.

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 much will I actually save and earn from the feed in tariff?

So what does this look like in a real-life example? We calculated what an average solar PV panel installation (3.5kWp for £7,000) positioned on an optimum roof (south-facing and with a 30 degree tilt) in Birmingham on a house with an EPC of band D or higher and registered for feed in tariff after up to 30 June 2013 could receive and save:

• Annual generation tariff income: £454
• Annual export tariff: £68 (based on a deemed export rate of 50%)
• Annual fuel bill savings: £84
• Total: £606 a year. 
• Expected net profit over 20 years: £12,120 (-£7,000 installation cost = £5,120)
• Expected payback time: 12 years for a £7,000 3.5kWp system

Use as much of the electricity generated by the panels in your house to maximise savings

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 to 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 come on together and therefore 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 latter.
• '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.'

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.

More on this...

• Read our feed in tariff Q&A
• Find out about the different types of solar panel systems
• Free cash and discounted energy deals: our guide to energy grants