FEED-IN TARIFFS

FEED-IN TARIFFS

QUESTION: Why are there more photo voltaic solar collectors (PV’s) in Munich than in Manchester?

Is it:
A) Because there is more sun in Munich than Manchester

Or
B) Because investing in photo voltaic panels in Munich will bring a guaranteed return on investment but in Manchester it will be a very expensive way to buy electricity


Answer…..B)


But from April 2010 the British government will be introducing feed-in tariffs for small scale photo voltaic, wind energy, hydropower, biomass and anaerobic digestion installations



What is a feed-in tariff?

A feed-in tariff is when a power company buys back surplus electricity generated in from renewable sources at a guaranteed price above market rates and the electricity is fed back into the grid. The buy back price is set above the grid cost and guaranteed for a number of years, usually 20 or 25 years. The ‘buy back’ price is set in relation to the cost of generation, so the buy back price for PV’s is higher than wind power because the installation cost of the former is higher. There is therefore a guaranteed return on the investment in the installation. The aim is to encourage investment in alternative, clean energy sources to cut down carbon emissions and reliance on fossil fuels.

But the cost of producing electricity from PV’s at present is far greater than from fossil fuel and greater than other forms of clean energy such as wind power. It is argued that the money could better be spent elsewhere

So how are feed-in tariffs financed?

The payment to the few with PV feed-in is financed by the power companies by a surcharge on the many who do not. But is this like the pensions problem….the larger the number of the ‘few’ who benefit from payments becomes….the smaller the number of the ‘many’ who pay!


The case against-
• a very expensive way to harness solar energy
• makes very little inroad into the government’s carbon emission targets

The case for-
:
• brings a lot more people into contact with green issues-it widens the debate.
• Stimulates investment in green businesses and creates jobs
• Develops expertise
• Has export potential
• Raises the UK profile in the green energy sector.
• Wider benefit to the economy. The panels themselves are likely to be mass produced in low cost base economies like China, but subsidies to encourage investment in green energy will encourage home grown industries and business and create jobs, benefitting the wider economy.
• There is the aim of reducing the cost of producing and installing PV panels so that there is ‘grid parity’- the point at which PV electricity is as cheap as that coming from conventional power stations


Germany has a huge number of PV installations-much larger than the UK. With volume comes lower cost and a growing reputation for Germany as a supplier and exporter of green technology.


There is a parallel with wind turbines-the UK has no manufacturers of wind turbines-they are imported from Denmark. Why? Is it A) because they have more wind or B) Because the Danish government has supported the installation of wind turbines with feed-in tariffs? Answer B)

The British government proposes to limit feed-in tariffs to small scale installations and retain the requirement for the incorporation of renewable energy contributions in larger schemes, so the proposals will have limited effect on overall carbon reduction. But as a measure to stimulate the home market in renewables and hopefully develop exports then subsidies in the form of feed-in tariffs is very cost effective…and good news for UK Plc.