Home-made power could soon be a nice little earner for many

Published on Wednesday 16 December 2009 20:38

RENEWABLE energy technologies may soon be commonplace in homes across the UK following implementation of the government's Feed-in Tariffs (Fits) scheme.

This initiative is an environmental programme expected to be introduced by the government on 1 April, 2010.

It is aimed at driving widespread uptake of a range of small-scale, low-carbon electricity-generation technologies.

To meet its own green agenda and to achieve its share of European Union targets – of 20 per cent of electricity produced from renewable sources by 2020 – the UK will need to generate about 40 per cent of its electricity from renewable sources.

To help achieve this, the UK government has introduced the financial incentive scheme as a means of encouraging renewable energy production from individuals, households, communities, local businesses and local authorities.

Combined with the Scottish Government's grant programme to help Scottish home owners install renewable technologies in their properties (30 per cent of the cost up to a 4,000 ceiling) it is expected to create a flurry of activity.

A study by the Energy Saving Trust for the Department of Business Enterprise Regulation and Reform – see www.berr.gov.uk – suggested that 30-40 per cent of the UK's electricity demands could be met by small-scale renewable sources by 2050.

Under the new financial incentive scheme, small generators – those that produce up to 5MW – would be guaranteed an income stream, based on a tariff system, for the power they produce.

However, the Fits scheme would only make payments for renewable electricity production using particular technologies, such as wind, solar, biomass or hydro.

The generation tariff will be attractive for those who wish to produce electricity on site, because not only will they be paid for any renewable electricity generated from their installed equipment, but they will also benefit from not having to buy electricity from the grid. This would create potentially large cost savings in the long term.

Scotland is ideally placed with an abundance of natural resources to play a key role in achieving the government's target. Scotland is estimated to have at least a quarter of Europe's wind, wave and tidal power generation potential.

Wind and solar projects will be most attractive for household and small scale generators when compared with biomass and hydro.

A wind project could generate income of between 4.5p/kWh and 30.5p/kWh (higher tariffs for smaller generation sites). That compares with biomass, which could attract an initial tariff of between 4.5p/kWh and 9p/kWh.

There should also be better incentives for combined heat and power stations, as they will get the double benefit of enhanced Fit rates, and the renewable heat incentive, which is expected to come into force in April 2011.

Under the Fits scheme, generators can also be paid an additional 5p export tariff if they export electricity back to the grid (ie, surplus electricity that is generated but not consumed).

Although some question marks remain around aspects of the scheme – including the best sources of energy generation; the installation of equipment and meters; setting the scheme up with power companies; and possible exporting tariffs – the government is expected to set up an advisory body to implement what is in the whole fairly straightforward for potential generators.

Currently 17 European countries have adopted a FIT system with great success. Figures from the German government (in a report titled "Renewable Energies Grow Strongly Again in 2007") revealed that in 2007, 14.2 per cent of its electricity was driven by Fits legislation to produce renewable energy.

We may be somewhat behind some European countries and the United States in implementing this scheme, but there is little doubt of the benefits for individuals if they select their renewable technologies wisely.

The potential to transform the UK's means of energy generation and meet its ambitious targets could reap rewards, both environmental and financial, for all involved.

&#149 Nathan Goode is government and infrastructure advisory partner at Grant Thornton Scotland