What is the Feed-in Tariff (FiT)?
The Feed-in Tariff (FiT) scheme was introduced in 2010 to support small-scale, low-carbon electricity generation. Unlike the Renewables Obligation -- which targeted large generators -- FiT was designed to encourage households, communities and small businesses to install technologies such as solar PV, wind, and hydro.
Under the scheme, eligible generators receive a fixed payment for each unit of electricity they generate, regardless of whether it is consumed on-site or exported to the grid. In addition, an export tariff is paid for electricity exported to the network.
The FiT scheme closed to new applicants in March 2019, but existing installations continue to receive payments for the duration of their support term (typically 20–25 years), meaning FiT costs will remain on electricity bills into the 2040s.
How does the FiT scheme work in practice?
FiT payments are made up of two components:
- Generation tariff – a fixed p/kWh payment for every unit of electricity generated by an accredited installation.
- Export tariff – a separate payment for electricity exported to the grid.
Tariff levels were set at the point of accreditation and are linked to inflation for the lifetime of the installation. Payments are made by licensed electricity suppliers, who are required to participate in the scheme.
Suppliers recover the cost of FiT payments through the FiT levelisation process, which redistributes costs across all suppliers based on market share. These costs are then passed through to electricity consumers and will appear on invoices as a Feed in Tariff (or FiT) charge.
Who pays the Feed in Tariff?
The cost of FiT is ultimately paid by electricity consumers, including business users, via pass-through charges on electricity bills.
Both the
British Industrial Competitive Scheme and
The British Industry Supercharger offer the ability for eligible businesses to receive exemptions from paying this charge.
For most businesses, FiT appears as a non-commodity policy charge, separate from energy costs and network charges.
How much is the FiT?
FiT costs are calculated annually through the levelisation process, which reconciles actual payments made to generators against forecast collections.
In p/kWh terms, FiT charges are typically around 8.5 p/kWh for business electricity customers, although this varies slightly year to year depending on inflation, total accredited capacity and supplier market shares.
Final FiT levelisation amounts are confirmed after the end of each scheme year, with any discrepancy corrected in future charges. While FiT costs are smaller than
RO charges, it remains a persistent and unavoidable component of UK electricity policy costs.
If you would like to ensure your FiT charges have been invoiced correctly, contact us today and we can review your recent invoices to make sure you aren't paying more than necessary.
