The ability to pre-register FiT scale projects before they are fully operational is a major new development that DECC have introduced in their recent consultation response (issued July 2012). Effectively this allows project owners that have secured planning consent and a grid connection for their site to pre-register the project to receive the FiT tariff that is currently available. This overcomes the substantial financial risk of FiT tariffs being cut (or ‘degressed’) during the period that the project is being finalised, built and commissioned.
We believe the process of Preliminary Accreditation is likely to become ‘de facto’ for most eligible FiT projects to ensure there are no nasty surprises should DECC cut the tariff rates over the period of project build and commissioning.
Which projects will qualify? Eligible installations include PV and wind projects greater than 50kW declared net capacity, and all AD and hydro installations.
When is this being introduced? We think that Preliminary Accreditation will be available from 1st December 2012 onwards. This is the date that DECC are intending to introduce the reduced tariff rates so, as we understand, there is no way to pre-register your project between now and December to receive the current FiT rates. We are trying to seek clarification from DECC on this point.
What is needed to qualify? Proposed installations will need to have planning approval and evidence of acceptance of a firm grid connection offer (assuming a grid connection is needed). Hydro installations will also need the relevant environmental permit.
Once accredited, eligible installations will receive the tariff that they would have received if they had accredited at the time they applied for preliminary accreditation. However, there is one small catch - installations that are granted preliminary accreditation with an effective date in the period 1 January to 31 March each year will be eligible for the tariff that applies from the following April. So, if FiT degression is planned from 1st April each year, this suggests you need to get your pre-registration application in before the end of a calendar year to reduce the risk of lower tariffs.
How long with the tariff guarantee last for? Tariff guarantees will apply for a fixed period from application for preliminary accreditation. These will be (i) six months for PV, (ii) one year for AD and wind; and (iii) two years for hydro. Tariff lifetimes will still apply from the installation’s commissioning date.
What are the implications of this? We can't see many situations where you wouldn't want to pre-register your project to 'lock-in' the current tariff. Hopefully funders of projects will get considerable comfort from the fact they can invest in projects without the risk that project returns could be cut substantially if tariffs are degressed.
But watch out if you need to change the specification of your project! The tariff guarantee will apply only to the capacity, site and technology that is included in the preliminary accreditation application. If you change the site or technology or increase the project capacity then this will cancel the guarantee. Decreases in capacity will be permitted only if they are in the same tariff band.
Can I withdraw an pre-application if the project fails to progress? Yes, an application for preliminary accreditation can be withdrawn.
Do these preliminary accreditations count towards the thresholds (so called ‘degression triggers‘) at which DECC will cut the tariffs? Yes, they will be counted. In order to ensure that the cycle of degression triggers is consistent with the cycle of preliminary accreditation, there will be a three-month lag in eligibility. For example, in order to be guaranteed the tariff for a particular FITs year (e.g. 1 April 2013 to 31 March 2014), an installation must have applied for preliminary accreditation in the period 1 January 2013 to 31 December 2013.
Anything else you need to know? In order to convert preliminary accreditation to final accreditation, installations must meet all other relevant eligibility criteria at that time. So, if your grid connection offer has lapsed then, chances are, your guarantee of higher FiT rates may also evaporate!
This article is based on a report written in January 2012 with minor updates at the start of April 2012. It does not cover loan-based support from banks or other financial lenders. This type of financial support is now available from most of the major UK banks and also from a number of other commercial lenders. However their terms will vary significantly. Reviewing the best options for this type of loan-based finance would be the subject of a further article.
There is a wide range of Government and other funding assistance available for renewable energy projects although many options will be limited to specific types of applicant – private households, businesses, public bodies, voluntary organisations, community groups etc.
The main options are listed below – the report on which this article is based had a strong Scottish focus. However most of the funding schemes are available across Britain. A more detailedlist of all options is provided on the Energy Saving Trust website under their funding and finance section:
Feed in Tariffs (FITs) were introduced in April 2010 by the Government with cross-party support to encourage the installation of renewable energy technologies in properties (both business and domestic). By legislating on what an individual or company gets paid for the energy generated, the technology is guaranteed to recoup the investment costs far quicker than was previously possible.
The reason the Government was so keen to get people to install renewable energy systems is because there is a legally binding EU target of producing 15% of the UK’s energy from renewables by 2020. At the start of 2010 we were only producing about 2% of our energy from renewables and whilst offshore wind farms and other big energy generation projects will make a significant contribution, it simply will not be enough on its own. Official estimates in 2010 calculated that the tariffs should produce 8% of the UK’s energy from renewables.
The first stage is to install the technology and have it grid connected. Once it starts generating electricity, you will use what you require. Any surplus that your system generates but you do not consume is automatically exported back to the National Grid. Any additional electricity that you need (for example if it’s night time when your solar panels don’t work or simply because you need more power than you are generating) is automatically imported into your property in exactly the same way that you currently get your electricity from the National Grid.
The payments happen in three ways:
1. You get paid for all the electricity that you generated and used yourself
2. You get paid for all the surplus electricity that you exported back to the National Grid
3. You pay your energy supplier for the additional electricity you needed to import
It is your energy supplier who will pay you, typically once a quarter, for point one (the electricity you generated and used yourself) and point two (the electricity you exported to the grid). You will pay them for the electricity you needed to import in the period.
Renewable Heat Incentive
In March 2011, the UK Government announced the details of their Renewable Heat Incentive (RHI) which is designed to provide financial support that encourages individuals, communities and businesses to switch from using fossil fuel for heating, to renewables such as wood fuel. Non-domestic installations can claim the RHI now for any installations commissioned on or after 15 July 2009. Installations that are eligible for the RHI include:
Applications opened on 28 November 2011 for the RHI and must be made to Ofgem. They will make quarterly payments to the owner of the installation.
For domestic installations, the householder, or owner, of the installation will be able to claim the RHI early 2013. In the meantime, the Renewable Heat Premium Payment can be accessed for eligible householders. This is a relatively small grant (available through a voucher) towards the purchase and installation of solar thermal panels, heat pumps and biomass boilers. Any householder can claim this money for solar thermal installation. However, only houses without mains gas can claim the grant for biomass or heat pumps. Note that this grant has recently been extended to 31 March 2013. Householders claiming the grant can also access the RHI when it becomes available to them hopefully around this time.
Green Deal is a new government initiative designed to help meet the upfront cost of making your home more energy efficient. Due to be launched in late 2012, the Green Deal will allow householders to install energy-efficiency measures and pay for the improvements with the savings on their fuel bill. Although they will repay the cost over time, this is not a conventional personal loan as the charge is attached to the meter and paid back through their fuel bill. If they move house, the idea is that the new occupant will pick up the outstanding loan while also benefiting from a more energy-efficient property.
Enhanced Capital Allowances (ECA)
The Enhanced Capital Allowance (ECA) Scheme is aimed at UK businesses allowing them to claim 100% first year capital allowances on investments in energy saving technologies and products, including some renewable energy technologies. Businesses are able to write off the whole cost of their investment against their taxable profits of the period during which they make the investment. The Government’s energy technology (www.eca.gov.uk/etl) lists promote products that encourage sustainable energy use and reward businesses for investing in them through the ECA Scheme. ECAs allow 100% of the cost of the product on the technology lists to be offset against your taxable profit of the year it was purchased. ECA’s bring forward the time that tax relief is available on qualifying investments, allowing the full cost to be written off against the taxable profits of the period in which the qualifying spending is incurred, delivering a useful cash flow boost and a shortened payback period on investment.
The company can claim the price paid for a new product and the costs directly associated with the installation of the product. Claims can only be made for products appearing on the technology lists at the time of investment (i.e. claims MUST be made within the same tax year that the equipment is purchased).
It is possible to use the ECA in conjunction with other sources of financial assistance, such as the Small Business Support Loan (detailed below)
Note that the interest free loan can be used in conjunction with the Enhanced Capital Allowance Scheme detailed above.
Interest Free Loans for domestic consumers
Interest free loans for up to £2000 are available for domestic renewable installations. The householder must contact the Energy Savings Trust to arrange for a free home survey and then the loan application pack will be sent out. Further information can be found at http://www.energysavingtrust.org.uk/
E-On Sustainable Energy Fund
The E.ON Sustainable Energy Fund offers grants of up to £20,000 to community groups and not for profit organisations who wish to consider and implement sustainable energy projects in their buildings - from energy efficiency through to micro-generation. The organisation must benefit specific groups namely:
The RDP is a significant sum of European funding for the development of rural areas. Funding is available for a wide range of activities including the development and diversification of land based businesses and the installation of biomass boilers. Further information can be found at the following website: http://www.scotland.gov.uk/Topics/farmingrural/SRDP
Note that this funding cannot be accessed if the applicant intends to take advantage of the Feed in Tariff or the Renewable Heat Incentive.
Energy Savings Trust
Provide advice on all aspects of energy efficiency and renewable technologies. They also administer the interest free loans. Website: www.energysavingtrust.org.uk
Provide advice to businesses on issues relating to the reduction of carbon emissions. Website: www.carbontrust.co.uk
When you become an energy generator, for example by putting solar PV panels on your roof, you are likely to end up with two meters:
Total Generation Meter that records the generated electricity from the Solar PV panels (which is used to calculate your FIT payments); and
Domestic Import Meter that records how much electricity you import from the grid (which your electricity supplier uses to calculate how much to bill you for).
You may also have a third meter, an Export Meter, that records how much electricity you export back to the grid. This is required if you want to ‘opt out’ of the 50:50 ‘deeming deal' – see our accompanying article on FiT registration and opting in or opting out.
Although your Total Generation Meter should have a digital display, your Domestic Import Meter may be an older ‘dial’ or ‘disk’ meter (see photo at top of this article).
Unfortunately these older meters are not really compatible with on-site generation. Often the meter will start to run backwards. While this seems to be the normal practice in the United States, it not the case here. If this does happen then the meter will need to be replaced, or a backstop fitted, to prevent this happening.
If you do notice this happening then we would recommend that you notify your electricity supplier as soon as possible as this causes a range of problems. Some suppliers take a long time to replace/fix the meter. In such a situation common practice is to estimate a bill for the period that the meter was running backwards. However this is not always in the customer’s favour. The energy supplier would often base their estimates on consumption data that included a period before the generation technology was installed. However, in reality, consumption should be less because the customer will be using some of their self-generated units.
We would advise customers to check what meter they have and to be aware of this happening and the problems caused (as above). However unless it is actually faulty the supplier will probably not replace the meter.
Experience suggests that customers often assume that a meter going backwards is not their problem and a rather favourable benefit of installing on-site generation technologies like solar PV. The energy supplier then doesn’t get told. However, most suppliers take a very different view and would put the onus on the customer to inform them that the meter is going backwards.
Newer digital meters do not have the capacity to go backwards. As we get closer to 2020 (and maybe sooner) energy companies will be rolling out 'smart meters' to UK customers. These will potentially replace all 3 of the meters mentioned above. More on the issue of 'smart meters' in a future article.
Thanks to Simon Proctor of Good Energy who contributed heavily to this article.
If you generate energy through solar PV, wind or hydro power and claim the Feed-in Tariff then you will be selling a proportion of your energy back to the grid. The majority of smaller generators 'opt in' - the amount they are paid is based on an assumption that 50% of what they generate is used on-site and 50% is exported back to the grid. This process is called ‘deeming’ – effectively a broad brush estimate applied to everyone. We’ve talked to the a number of energy suppliers and most are now strongly encouraging domestic scale micro-generators to ‘opt in’ to the 50:50 ‘deeming deal’. However, for the vast majority of households receiving the FiT, they are not getting close to using 50% of the energy they generate. At most it’s likely to be 30% and, for many, it may be closer to 10%. For properties that are used rarely the figure could be 5% or lower. Many of these households are asking the question – “why are we not being paid more for all the energy we export?”
The short answer is that to accurately measure the energy you export back into the grid requires you to ‘opt out’ and install extra kit – this costs money. For many people with solar PV projects of 4kW or less, the costs exceed the benefits you would get from opting out. A rough rule of thumb suggests that solar PV projects of a capacity greater than 10 kW and wind projects of a capacity greater than 5 kW (due to their higher output) should consider ‘opting out’. Over the next few years the people that own your export meter are likely to upgrade it to a new ‘smart meter’ which should be capable of accurately tracking what you export back to the grid. Hopefully, once this happens, everyone will be paid for what they generate!
GEN’s John Maslen interviews Simon Proctor at Good Energy, the UK’s only 100% renewable electricity supplier, in September 2011 to get the full story about FiT registration and some of the thornier issues around whether to opt in or opt out.
John> Is it correct to say that you can register your FiT project with any of the registered FiT providers? You don’t have to use your existing energy supplier?
John> Our experience is that many people rely on being advised about their FiT registration from their installer – is that your experience too?
Simon> Yes, we try to establish relationships with all installers and keep them informed on all these issues by providing them with accurate, up-to-date information to pass onto their customers. There is a small financial incentive for installers through our Installer Referral Partnership agreement when one of their customers signs up to our FiT service.
John> Why would someone decide not to register their FiT project with their energy supplier (called their ‘import supplier’) and use the Good Energy FiT registration service instead?
Simon> Although the rates a generator will receive are fixed, the level of service from FIT suppliers will vary significantly. For more than seven years we have offered award winning schemes paying microgenerators for the energy they produce. We have FIT experts in every team at Good Energy and our customer facing teams are all trained in renewable energy and our Feed-in Tariff service, so they can guide new microgenerators through our process to sign up for FIT. Our team members swiftly register customers with OfGem and contact them when they have successfully registered, and Good Energy is working with over 4,000 independent renewable generators all over the UK. Fast processing times are particularly important as the latest deadline for FiT registrations (April 2012) draws closer – making sure your project doesn’t miss this deadline could make a very significant financial difference.
As specialists in 100% renewable electricity supply, empowering individuals to become generators and supporting them through the process runs through the core of Good Energy and we are confident that when it comes to providing outstanding services to generators, we’re experts.
John> If I already have a FiT supplier but I’m not very happy with them, how would I switch to a new FiT supplier?
Simon> Under the FIT license terms you can switch FIT provider whenever you like (as with your electricity supply). So, if you feel that you are not getting a good service you should shop around for a new FIT provider. Switching is very simple – you just need to complete a sign-up form. The old and new FIT provider will then arrange for the switch to take place and (like changing electricity supplier) they will require an end/start read to mark the point that the FIT payments switched over.
John> Do you encourage people to switch to your energy supply tariffs if they use you for FiT registration?
Simon> Of course we would like more people to switch to a 100% renewable electricity supply. However, we realise that this is a choice, so if a customer just wants us to provide their FIT services then we can, although I am aware that some companies do make it compulsory for customers to be supply customers in order to provide them with their FIT services.
John> As an energy generator, why should I consider ‘opting out’ of selling my exported energy in the standard way using the 50:50 deeming process and being paid 3.1p per unit?
Simon> If you ‘opt out’ of the standard deeming process and sell your energy direct to us, we can pay you for all the energy you export – this might be closer to 70-80% of what you produce rather than 50%. We offer a higher payment for the exported units - right now this is 5.3p per kWh instead of 3.1p per kWh and we review it quarterly.
John> So what’s the catch? Why isn’t everyone doing this?
Simon> They’re not doing this because, for the vast majority of generators with solar PV projects of 4kW or less, it doesn’t make financial sense unfortunately. There is also a ‘hassle factor’ as there is more paperwork (see below). You might get an estimated £30 extra annually but this is unlikely to cover the extra costs you will incur – see also our discussion below on Smart Meters which are likely to be coming in fairly soon. To ‘opt out’ generators under 30kW will need to install Non Half-Hourly (NHH) export metering to claim metered export a well as requesting an export MPAN. They would arrange both through their import supplier. In the case of Good Energy (and many others) there is a charge to install the export meter. In our case it is approx. £80.00. There is also an annual maintenance fee to maintain the meter – in our case approx. £60.00. There may be one or two electricity suppliers that will supply you with an export meter for free (provided you are a customer of theirs) when you register your FiT with them (although you may be charged for installation and on-going maintenance). [John - at the time of writing we couldn't find any other suppliers that offered a free export meter although a few months ago they were doing this.]
In our experience, as a rule of thumb most Solar PV generators under 10kW are better off on the ‘deemed’ export rate rather than choosing to ‘opt out’. The costs of fitting and maintaining the export meter will out-weigh the benefits of ‘opting out’ and getting a higher tariff. Due to the increased outputs of a wind turbine application, this threshold may be nearer 5 kW. So wind turbines with a capacity greater than 5 kW should consider opting out unless there is a large onsite demand.
In general small to medium scale generators are always going to want to opt out to get a better rate of return.
Ultimately our job is to make generators aware of the implications and processes involved and guide them through it. Although we advise and support them every step of the way, the choice as to whether they decide to opt out or not is always their decision.
John> So am I right in saying that you need an export meter (with MPAN number) from your import supplier to opt out?
Simon> This is correct. This will need to be supplied and installed by a registered Meter Operator (MO) and requested by the import supplier.
To benefit from being on metered export you need to be aware of the meter installation costs and any on-going fees. It is also important to point out that the process to remove a meter is very onerous, so once the meter is in it is hard to remove and you could be stuck paying a maintenance fee that would eat into your return on investment, so it is better to wait until you have been generating for at least one year if you are unsure of whether or not an export meter is the best option for you.
John> Will the Meter Operator charge you to install one and, if so, any idea how much?
Simon> There is a cost to install the export meter and most suppliers will need to pass this cost onto the customer as an installation fee. For Good Energy customers this is around £80.00, but the costs will vary depending on your supplier.
John> Is there any other paperwork you need if you decide to opt out?
Simon> Yes, Good Energy (like most suppliers) requires generators exporting through a registered NHH export meter to register with OfGem for LECs (Levy Exemption Certificates) and REGOs (Renewable Energy Guarantees of Origin), so that we can claim these on their behalf.
John> Is deeming on its way out with the roll-out of smart meters? In which case will generators then be paid for what they export?
Simon> Nothing has been confirmed but my own feeling is that this will be the case. It is hard to view ‘deemed’ export as anything other than a short term fix until a more cost effective and suitable alternative to NHH export metering, like Smart Metering, can be implemented.