Around 800,000 households across the UK who benefit from the Feed-in Tariff (FIT) scheme are facing a reduction in the payments they receive for electricity generated and exported to the National Grid. From 1 April, the export tariff rate, which compensates homeowners for surplus energy fed back into the system, is scheduled to decrease, potentially impacting the income of those who invested in renewable energy technologies under the scheme.
The Feed-in Tariff, introduced in 2010, was designed to incentivise the uptake of small-scale low-carbon electricity generation, such as solar panels and wind turbines, by providing payments to individuals and businesses. These payments were split into two main components: a generation tariff for all electricity produced, and an export tariff for any surplus electricity sent back to the grid. The scheme proved popular, leading to a significant increase in domestic renewable energy installations before it closed to new applicants in March 2019.
The upcoming reduction primarily affects the export tariff component. While the generation tariff rates are generally fixed for the duration of a contract (typically 20 years), the export tariff is subject to annual adjustments. These adjustments are influenced by a range of factors, including wholesale electricity prices and inflation, and are designed to reflect the current market value of exported electricity. For many households, particularly those with older installations, this annual adjustment will result in a lower payment per unit of electricity exported.
The Government closed the FIT scheme to new applications in 2019, replacing it with the Smart Export Guarantee (SEG). The SEG mandates larger energy suppliers to offer a tariff for electricity exported to the grid, ensuring that new renewable energy generators can still receive payments. However, existing FIT recipients continue on their original terms, subject to these annual tariff adjustments. The Department for Energy Security and Net Zero oversees the broader policy landscape for renewable energy generation and export.
While the exact impact will vary depending on individual household generation and export levels, the reduction in the export tariff rate means that households will receive less money for each unit of electricity they send back to the grid. This comes at a time when many households are already grappling with the cost of living and high energy prices, potentially diminishing some of the financial benefits of their renewable energy investments.