The price paid for the electricity you produce is guaranteed by the government for 20/25 years and is index-linked
From 1st April 2010, the government introduced a system known as Feed-In Tariffs (FITs). These are payments made to people who generate their own ‘green electricity’. The Feed-In Tariffs are paid by the electricity suppliers, and guaranteed by the government, so the payments should therefore be safe from cutbacks. The government has set a target of achieving 15% of total electricity production from renewable sources by 2020 - currently that figure is only 5.5%. Another way of looking at this is to consider that, in order to meet this requirement, approximately 1.4 million 11kW or 308,000 50kW wind turbines would need to be installed in the UK in the next ten years or approximately 228,000 49kW rated PV installations.
| | Tariff Level for New Installations In Period (Pence/kWh) |
| | Scale | To March 2012 | To March 2013 |
| Wind | >1.5-15kW | 28.0 | 26.7 |
| >15-100kW | 25.3 | 24.1 |
| >100-500kW | 19.7 | 19.7 |
| | | | |
| PV | >4-10kW | 37.8 | 34.5 |
| >10-50kW | 32.9 | 30.0 |
| >50-150kW | 19.0 | 19.0 |
Linked to the retail price index
Once you have completed your installation you are “locked in” to the tariff at that time – as the table above indicates the feed-in tariffs are set to decrease in the future - which is an incentive to enter into renewable energy production at an early stage, to maximise your financial returns. The income from the feed-in tariff and export tariff are linked to the Retail Prices Index so the payments should increase over time in line with inflation.
| | 50kW Wind Turbine | 49kW PV System |
| Units Produced
per Annum | 168,900 @ 6 m/s | 41,500 |
Feed-in-Tariff
Received | 168,900 @ 25.3p = £42,732 | 41,500 @ 32.9p = £13,654 |
With 50%
Used on Site | 84,450 @ 12p = £10,134 | 20,750 @ 12p = £2,490 |
And 50%
Sent to Grid | 84,450 @ 3.1p = £2,618 | 20,750 @ 3.1p =£643 |
Total Estimated
Income per Annum | £55,484 | £16,787 |
Your investment could yield additional returns as and when consumer electricity prices increase (dependent upon the amount of electricity you use yourself)
Ofgem, the regulatory body which oversees electricity and gas suppliers, has estimated that electricity prices may increase by as much as 60% over the next 6 years. Between 1999-2009 domestic users’ bills increased by 37% and commercial users’ bills increased by 66%.
As an example - if you paid £6,000 in 2010 for your electricity and if electricity increases by 6% per annum over ten years, your bill could be £10,137 per annum in 2020. If electricity costs continued to increase at this rate for a further ten years, your electricity bill could be £18,154 per annum in 2030. Cumulatively, over twenty years, this could be an additional £101,074.