The Real Cost of the Solar Energy Feed-in Tariff

by Solar Selections on December 12, 2011

The Real cost of the Solar Feed-in TariffThere has been a lot of speculation from many perspectives in the United Kingdom about the true costs of the solar energy feed-in tariff. This summary will look at the most compelling sources of evidence and examine how far the public’s opinion on the matter is from the truth.

The solar feed-in tariff works by essentially establishing a minimum value on solar energy units (measured in kWh’s) generated by eligible systems. For a list of what an eligible system is, we can look at the Department of Energy and Climate Change’s website (DECC).

Through the Generation tariff and the export tariff the values for solar kWh’s are set. The six respective Distribution Network Operator’s (DNO) then have to pay these rates to customers that register their systems with them. This of course counts towards the running costs and on goings for the DNO’s. (See a full list of the DNO’s.) Now what the DNO’s do in turn is absorb some of these charges and pass them on to their customers. The reality is that such a process of spreading the costs out over their operations is that it is a discreet process, and it is impossible to know exactly how and where these charges go. Some points worth considering is that there is likely forms of benefits to the DNO’s for paying these rates that are not widely known. An example could be that the tariffs rates are tax deductible. In addition these costs would be spread out to all customers of the DNO’s. As every property on the grid in the UK needs to have a DNO, that means people that don’t install solar power will be on the receiving end of this cost as well.

Now the true costs of the tariffs have been tossed around commonly. The official figures from the DECC have the cost at approximately £1.40 per year, per property. 

Sharp Solar conducted a research study into people’s awareness of this rate, and some startling results arrived back. Around 27% of people believed that the cost of the tariff was significant for each property, ranging from £12 to £1,200. With the government stating that one of the primary justifications behind the fast track review and the 12th December deadline was the price per household for the cost of the tariff, it’s easy to see how confusing and contradictory their position is.

However, the problem is not whether we can determine the true costs to the end consumer from the limited released information, but more whether the budget has been spent for the tariff or not. Now the issue of the budget itself has been quite ambiguous, with many in the industry stating that the DNO’s pass the costs on to the market, and the government itself should have no expenditure to consider as a finite budget to be spent or not. The truth of the matter though is that the ‘budget’ as such is a threshold on the increase on energy bills, not an amount gathered through taxation that is available to be spent. It must be thought of as a ceiling that is set by the HM Treasury and that the permanent secretary for the DECC is entirely responsible to uphold. This threshold is what is being reached so rapidly with the growth of the industry at 43.3p rates, and that is the real crux of the ‘budget’s’ overspending.

The reality is that the true costs for solar are minimal compared with the charges of processes such as Nuclear Decommissioning. This article highlights and agrees withe £1.40 cost for solar, but points out an excruciating £260 per year charge for the decommissioning. People in the UK need to understand that the solar feed-in tariff was not an expensive process for the average household. It is a unique system that spreads minimal costs over the entire kingdom, and with rising brown energy costs set to continue the new tariff rate changes nothing about solar being a viable and worthwhile investment.

Written by Jarrah Harburn

T: 020 7205 2267

© 2011 Solar Selections Ltd

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