Feed-in tariff savings and earnings
Article 2 of 5
Feed-in tariff savings and earnings
Could you earn money from the feed-in tariff? We calculate typical costs of renewable energy, plus energy savings and earnings from the feed-in tariff.
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. Generation tariff. This is a fixed rate for the total amount of energy you produce. It currently stands at 4p per kWh for new installations. (It was lowered from 15 January 2016 and caps on the number of installations were introduced.)
2. Export tariff. This is the amount that you export back to the national grid, which is estimated at half the energy you generate. The export tariff is currently 5.03p per kWh.
We calculated the earnings and payback 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 1 October 2017 and 30 December 2017.
£880Expected net profit over 25 years, minus cost of system and installation
For an electricity bill that is £49 a month, we found that the typical payback time would be about 20 years with a net profit of about £880. Broken down, this system would give a:
- £136 yearly generation tariff income
- £86 yearly export tariff income (based on a deemed export rate of 50%)
- £72 savings on electricity bill (in first year)
- £294 total annual benefit
- £6,850 lifetime benefit
- £880 expected net profit over 25 years, taking into account £5,970 cost of system and installation
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, FITs rate adjustments, 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 34.26 tonnes of CO2 over 25 years.
Before 1 January 2016, the rates for solar PV systems were split by sizes. From 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 as long as your system is eligible. Rates for new installations can change as often as every three months. 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|
|Generation tariff for 1 Apr - 30 Jun 2017||Generation tariff for 1 Jul - 30 Sept 2017||Generation tariff for 1 Oct - 31 Dec 2017||Generation tariff for 1 Jan - 31 Mar 2018|
(0.48p/kWh if EPC below band D)
(0.43p/kWh if EPC below band D)
(0.38p/kWh if EPC below band D)
(0.34p/kWh if EPC below band D)
Duration: 20 years. Export tariff rate: 5.03p/kWh. Solar PV with total installed capacity of 10kW or less.
|Other technologies: feed-in tariff rates|
|Technology||Generation tariff for 1 Apr - 30 Jun 2017||Generation tariff for 1 Jul - 30 Sept 2017||Generation tariff for 1 Oct - 31 Dec 2017||Generation tariff for 1 Jan - 31 Mar 2018|
|Wind turbine (50kW or less)||8.39p/kWh||8.33p/kWh||8.26p/kWh||8.19p/kWh|
|Hydroelectricity (100kW or less)||7.80p/kWh||7.80p/kWh||7.78p/kWh||7.77p/kWh|
|Micro Combined Heat & Power (2kW or less)||13.95p/kWh||13.95p/kWh||13.95p/kWh||13.95p/kWh|
Duration: 20 years, except micro-CHP for 10 years. Export tariff rate: 5.03p/kWh
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 £3,000.
- 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 renewables selector 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 makes 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 - ie 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.