Government announces scheme to generate a profit by generating your own electricity

By Susie Weldon
Feb 5, 2010

By Susie Weldon

Start generating your own electricity using a small wind turbine or solar panel and from April you’ll be entitled to claim payments for the green energy you produce.

The long awaited ‘feed-in tariffs’ — which have given a huge boost to green energy in countries such as Germany – have finally been announced by Energy and Climate Change Secretary Ed Miliband.

He also announced plans to introduce a similar scheme in April 2011 for low carbon heating technologies which would, he said, be a world first.

But while green groups and industry have largely welcomed the cash-back scheme – which will provide a 5-8% return on investment – some criticised it for not going far enough.

Wiltshire-based energy supplier Good Energy said it was delighted by the recently announced feed-in tariffs: “We think it will signal a huge step forward in the growth of in independent renewable generation,” said a spokesman.

Wind of change: Householders can generate a profit from green energy production at home

Friends of the Earth, however, said the scheme “lacked ambition” and should have set payment levels to deliver a 10% return instead of the 5-8% laid out by the Government.

“Installing renewable technologies will now be a good investment for many homes — but farmers, businesses, communities and others will get little or no extra incentive to invest in clean electricity,” says green homes campaigner Dave Timms.

So what’s involved?

From April 1 householders and communities who install low carbon electricity technology such as solar photovoltaic (pv) panels and wind turbines up to 5 megawatts will be paid for the electricity they generate, even if they use it themselves.

The level of payment depends on the technology and is linked to inflation but is calculated to offer between 5-8% return on initial investment.

Householders will get a further payment for any electricity they feed into the grid. The scheme will also apply to installations commissioned since July 2009 when the policy was announced.

A typical 2.5kW well sited solar pv installation could offer a homeowner a reward of up to £900 and save them £140 a year on their electricity bill, according to the Department of Energy and Climate Change.

Ed Miliband said: “The feed-in tariff will change the way householders and communities think about their future energy needs, making the payback for investment far shorter than in the past.

“It will also change the outlook for a range of industries, in particular those in the business of producing and installing small scale low carbon technology.”

Ofgem will administer the feed-in tariff scheme and suppliers will be responsible to paying the reward to their customers. Householders and communities can apply for the feed-in tariff from their electricity supplier from April.

The government believes these kinds of small scale renewable installations could meet 2% of electricity demand in 2020. The UK currently gets around 5.5% of electricity from renewable sources but needs to increase this to around 30% by 2020.

A similar cashback scheme for renewable heat generation will be implemented in April 2011 for people who install technologies such as ground source heat pumps, biomass boilers and air source heat pumps.

Under the proposed tariffs the installation of a ground source heat pump in an average semi-detached house with adequate insulation levels could be rewarded with £1,000 a year and lead to savings of £200 per year if used instead of heating oil.

The heat incentive could help thousands of consumers who are off the gas network. A consultation on the proposed renewable heat incentive financial support scheme has just opened and will run for 12 weeks.