Learn about feed-in tariffs (FITs) and some things to consider if you want to invest in renewable technology to help you create, and earn money from, your own electricity.
Feed-in tariffs (FITs) were introduced by the UK government in 2010 as a way of encouraging consumers to produce their own energy in environmentally friendly ways, including solar, wind and hydro power.
The electricity produced by households participating in the feed-in scheme is fed back into the national grid, with those producing the energy being paid for it, and/or having their own energy bills reduced.
Tariffs are managed through certain energy suppliers, who also handle the payments to participating households.
This will typically be one of the larger energy suppliers as they are required by law to participate in the scheme; not all small energy suppliers will have feed-in tariffs available.
When feed-in tariffs launched, the returns households could expect from them were attractive, although these had to be set against the initial set-up charges.
The returns have been cut several times since then, but the technology has also got cheaper.
If you like the thought of a feed-in tariff but you're baulking at the set-up costs, it's worth looking into whether there's a government incentive scheme available to help.† These schemes have also suffered from significant cuts since they were first launched.
You can read more about some of the options available for producing your own energy in our guide to renewable technology.
You may see feed-in tariff returns referred to as FIT payments and they fall into three categories:
The evolution of home batteries seems likely to increase the attractiveness of feed-in tariffs as they help the storage of excess energy created by renewable technology, allowing it to be used when required.
At the moment such a battery requires a large outlay for returns that are initially likely to be small, but that may add up over time. Read more in the May 2015 BBC News story Tesla unveils batteries to power homes.†
With a generation tariff, your supplier pays you a set rate for each unit (or kWh) of electricity you generate.
Once your system has been registered, the tariff levels are guaranteed for the period of the tariff, which can be up to 20 years, and are linked to the Retail Price Index (RPI).
With an export tariff, your supplier pays you a further rate for each unit you export back to the electricity grid, meaning you can sell any electricity you generate but don't use yourself.
At the moment the amount you're paid for is based on an estimation, but it's planned that this will be measured more exactly in the future using smart meters.
The third method of return through feed-in tariffs isn't really a payment but a simple saving on your energy bills; if you're using electricity you've generated yourself, you won't have to buy so much from your energy supplier.
Before you invest in the (potentially expensive) technology required for a feed-in tariff, ensure that you meet the qualification criteria.
Both the products and the installer must be certified under the Microgeneration Certification Scheme (MCS), except hydro and anaerobic digestion which have to go through the ROO-FIT process.
For the latest, in-depth information and details on how to apply for a feed-in tariff, go to the Energy Saving Trust website. You'll also find official information on the Gov.UK website and the Ofgem website.†