UK Government to introduce feed-in tariff as part of its Renewable Energy Strategy

Households which contribute electricity from renewable sources to the UK National Grid are to receive payments under a new government feed-in tariff scheme, labelled the "Clean Energy Cash-back Scheme”.

Back in 2008 the UK Government outlined policies in "The UK Low Carbon Transition Plan, National strategy for climate and energy" White Paper designed to significantly reduce carbon emissions in the country by 35% by 2020 and by at least 80% by 2050. Now, as part of its recently released Renewable Energy Strategy designed to contribute to achieving these targets, the Secretary of State of Energy and Climate Change, Ed Miliband, has announced that a feed-in tariff rate will be introduced in the UK for suppliers of renewable energy who feed energy back into the grid.

The Clean Energy Cash-back Scheme is a more user-friendly term for feed-in tariffs (FITs), which other countries such as Germany have used so successfully to promote small as well as large-scale renewable energy production over the last decade. The UK Government’s decision to introduce FITs is intended to simplify the incentives for using renewable energy sources, since the current system – the Renewable Obligation (RO) – is a very lengthy and complex system designed for energy professionals who generate electricity on a large scale (50kW+). The Clean Energy Cash-back Scheme has therefore been designed to benefit micro-generators (households, communities and businesses with installations of up to 50kW), while larger installations of 50kW-5MW will be offered the choice of either the FIT or the RO scheme.

In a recent media interview, Mr Miliband told the BBC that the plan to give payments to households for contributing electricity to the National Grid will mean "we can harness people's enthusiasm for getting involved" in tackling climate change and that "individuals and communities can both play their part in the kind of clean energy revolution that we need."

The planned FITs will vary from one type of renewable to another, although exact rates still have to be agreed and implemented. Climate change minister, Joan Ruddock, has confirmed that the new scheme will come into effect from April 2010 for most renewable sources, but has warned that plans for a similar renewable heat incentive scheme for technologies such as solar and biomass heaters would be more complicated to develop and as such will not come into effect until April 2011.

The key now is to wait and see at what level the UK Government establishes the FITs, as previous experience in other countries has shown that setting them too low can lead to a lack of take-up of renewables, while excessively high limits become economically unsustainable and politically sensitive. Charles Hendry MP, the conservative shadow minister for energy, for example, welcomes the Clean Energy Cash-back Scheme, but shares the view that judgement should be reserved until the government confirms the level at which the new tariffs will be set. "It would be a tragedy if having got a [feed-in tariff] mechanism in place it was not set at the right level that solar and other technologies need," he said.

Meanwhile, Mike Childs, campaigns director at Friends of the Earth, believes such schemes could play a significant part in meeting the UK's climate change targets, although he points out that “payments have to be generous enough to reward people for investing in green power".

For additional information:

UK Renewable Energy Strategy

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