Financial Incentives

Since the introduction of Feed in Tariff (FiT) in April 2010, the UK solar PV industry has come a long way. The solar PV industry now is benefitting from stable and predictable mechanisms, FiT and ROC, that have been put in place to give the industry transparency and confidence to grow. Solar is now, for the first time, a priority in the Governments Renewables Roadmap and is recognised as one of the key renewable technologies in the UK's energy mix.

Solar will benefit from the new Energy Bill designed to put in place measures to attract a £110bn investment needed to replace current generating capacity and upgrade the transmission and distribution grid by 2020.

The development of the UK Solar Energy Strategy, which the BPVA is part of, will look at how we can tackle the barriers that lie ahead and how the industry and the Government can work together as partners facing future challenges. With just over 8 GW installed, the UK Solar PV industry is now on a sustainable path to grow.

From the beginning the BPVA formed a strong partnership with the Department of Energy & Climate Change (DECC) which has enabled us to voice our views in a positive and constructive atmosphere. Solar photovoltaic is accepted as a safe, clean, reliable, affordable and accessible source of energy in the UK. We can only look forward to the future with optimism.

Financial Incentives 
There are various different financial incentives which have been provided by the Department of Energy and Climate Change (DECC) to encourage solar installations both for household and non-domestic use.

Feed in Tariff

The Feed-in Tariff (FiT) was introduced in 2010 by the UK government in order to encourage the uptake of renewable energy sources. FiT payments are guaranteed by the government for a period of 20 years. The payments received are tax free and indexed, meaning that they will increase annually according to inflation. Payments remain tax free as long as you continue to reside in the property where your solar system is installed. Taxes apply if you rent the property out. The FiT is based on the day that the system is installed, these tariffs are reviewed every 3 months, please check the Ofgem website for current rates here. Savings will vary in different households depending on the usage of electricity, the size of the solar system, the orientation of the roof and the inclination of the roof.

 

Am I Eligible for the Feed-In Tariff?

You need to meet some basic requirements in order to qualify for the FiT and receive payments:

  • Both your installer and the solar panels have to be accredited by the Microgeneration Certification Scheme (MCS).
  • Your system size must be under 4kW in order to receive the maximum tariff.
  • You have to ensure that your energy supplier offers FiT payments.
  • From 1st of April 2012 you are also required to acquire an energy performance certificate (EPC). The EPC shows the energy efficiency of your home. You need a grade of D or above to receive the full payment from the FiT. If the grade of your home is lower than D, you need to make some improvements to the energy efficiency of your house in order to receive the standard rate payments. If you do not make the necessary improvements required to get a D grade, you will still receive payments, but at lower rate.

 

The Renewables Obligation Certificates (ROCs)

The RO is available for projects from 50kW up to 5MW. The RO was available to projects above 5MW until April 2015, but the government decided to close the RO for Solar PV projects above 5MW after then.

The scheme works by giving solar PV projects certificates (Renewables Obligation Certificates, ROCs) for every unit of energy that the system generates. All energy suppliers (principally made up by the Big 6) are then obligated to source a certain proportion of their energy from renewable sources by buying the energy from these RO-accredited projects.
A table of the ROCs per MWh can be found here. Note that for ground mounted Solar PV, these are only valid for projects less than 5MW in 15/16 and 16/17.

Contracts for Difference (CfDs)

Contracts for Difference (CfDs) are a subsidy mechanism to replace the existing Renewables Obligation (RO) subsidy mechanism for encouraging large-scale renewable energy deployment in the UK. There are multiple auctions, called rounds, which are planned to run annually. The first round was in October 2014.

CfDs work by allowing companies to bid for contracts for subsidy; large-scale projects of different technologies and in different years compete against each other in auctions. The contracts are awarded to the cheapest technology, regardless of delivery year, capacity or technology.


There are multiple auction rounds that are planned to be yearly (the first was in Oct 14, the next in Oct 15). This means that any projects that became eligible in Nov 14 will only be able to compete for subsidy in Oct 15.


The projects bid based on a “strike price”: this is a guaranteed price that they will be paid for each unit of energy they produce. The strike price is made up from the price the electricity is sold for, which is then “topped” up by the CfD to the specified strike price. This strike price is guaranteed for 15 years.

The DECC page on CfDs contains a document on frequently asked questions, as well as other details such as the budgets for the first allocation round in Oct 2014. 



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