A guide to PLC Environment's materials on feed-in tariffs (FITs). FITs consist of guaranteed payments, for a fixed period of time, to generators of low-carbon electricity on a small scale.
This toolkit gathers together the key materials produced by PLC on feed-in tariffs (FITs).
Note that FITs are sometimes also referred to as the clean energy cashback scheme.
This section of the note explains feed-in tariffs (FITs) in a nutshell. For a detailed explanation of FITs, see Overview materials below.
FITs are a support payment for electricity generated from small-scale low-carbon sources, to help the UK meet its climate change and renewable energy targets.
They consist of guaranteed payments, for a fixed period of time, to producers of low-carbon electricity on a small scale, paid per-kiloWatt hour (p/kWh) of electricity generated. The intention is that the payment helps the renewable electricity generator to overcome the cost disadvantages of renewable energy sources. FITs are sometimes also referred to as "clean energy cashback".
FITs came into force in Great Britain on 1 April 2010 and are administered by Ofgem. For links to the relevant legislation and guidance, see Primary sources and background documents below.
The government is also introducing financial incentives for renewable heat in the form of a Renewable Heat Incentive (RHI) (see Practice note, RHI: Renewable Heat Incentive (www.practicallaw.com/9-505-2881)).
The FITs scheme imposes an obligation on electricity suppliers in England, Wales and Scotland with a minimum of 50,000 domestic customers to offer FITs to all accredited small-scale generators of electricity using a low-carbon energy source that is eligible under the scheme. Electricity suppliers with fewer than 50,000 domestic customers can offer FITs on a voluntary basis.
The scheme provides a fixed payment for electricity that is generated on-site (the generation tariff) and for any unused electricity that is exported to the national grid (the export tariff). FITs are available to everyone, including businesses, landlords, local authorities and households.
The scheme applies to installations with a generating capacity of 5 megawatts (MW) or less. Installations with a larger capacity may be eligible for financial incentives under the Renewables Obligation (RO) (see Practice note, Renewables Obligation (www.practicallaw.com/0-204-8340)).
The government is required to carry out regular reviews of the FITs scheme, including tariff levels. However, following higher take-up than expected, the government has been carrying out earlier than scheduled reviews, in stages. It has also modified the scheme. Some of the changes and proposals have been highly controversial and subject to judicial review challenges (see Practice note, Feed-in tariffs (FITs): overview: Reviews of FITs (www.practicallaw.com/7-500-4773)).
The rest of this note explains where you can find more information about FITs.
For more information on:
Renewables in general, see Practice note, Renewable energy: overview (www.practicallaw.com/7-380-7949).
Microgeneration in general, see Practice note, Microgeneration (www.practicallaw.com/2-385-0884).
For a detailed explanation of FITs, see:
Standard document, Feed-in tariff (FIT) lease of part (www.practicallaw.com/2-504-9613).
Legal update, CML and BSA publish FITs guidance (www.practicallaw.com/7-506-5747).
Legal update, Solar panels are not a nuisance (www.practicallaw.com/6-508-3209).
The government confirmed, in December 2009 Pre-Budget Report, that households which use renewable technology to generate electricity mainly for their own use will not be subject to income tax on any FITs payments that they receive (see Legal update, 2009 Pre-Budget Report: environmental announcements (www.practicallaw.com/4-500-9729)).
In February 2011, HM Revenue and Customs (HMRC) issued a manual on domestic microgeneration, which deals with the income and capital gains tax treatment of FITs and incentives under the RO (see HMRC: BIM40500 - Domestic microgeneration (www.practicallaw.com/5-505-0638)).
For information on the SDLT and VAT issues on the grant of a FITs lease for solar panels on the roof of a commercial property, see:
Ask the team, Feed-in Tariff leases: SDLT and VAT (www.practicallaw.com/8-506-4498).
Legal update, VAT: HMRC feed-in tariffs guidance (www.practicallaw.com/0-516-7749).
In December 2011, HMRC announced that enhanced capital allowances (ECAs) will not be available for expenditure on plant or machinery that generates heat or electricity that receives FITs or RHI payments. (This contrasts with the original proposal that ECAs would not be available where RHI or FITS could be received.)
The changes were implemented by section 45 of the Finance Act 2012 and apply to expenditure incurred on or after 1 April 2012 (for businesses subject to corporation tax) or 6 April 2012 (for businesses subject to income tax). However, businesses will be able to continue to claim ECAs for expenditure incurred up to April 2014, provided the expenditure is on good quality combined heat and power (CHP) that meets the criteria in the Energy Technology List.
Expenditure on solar panels is specifically designated as special rate where it is incurred on or after 1 April 2012 (for businesses subject to corporation tax) or 6 April 2012 (for businesses subject to income tax).
For more information on:
Section 45 of the Finance Act 2012, see Legal update, Finance Act 2012: environmental implications (www.practicallaw.com/6-520-5475).
HMRC's announcement and the draft legislation, see Legal update, Government responds to consultation on capital allowance treatment of FITs and RHI plant (www.practicallaw.com/9-516-3068) and Legal update, Consultation on draft Finance Bill 2012 legislation: key environmental measures: Enhanced capital allowance treatment for feed-in tariffs and Renewable Heat Incentive (www.practicallaw.com/3-516-3349).
The May 2011 consultation, see Legal update, HMRC consults on proposals to clarify capital allowances for FITs and RHI plant (www.practicallaw.com/1-506-3925).
ECAs in general, see Practice note, Enhanced capital allowances (ECAs) for investment in environmental technologies (www.practicallaw.com/8-204-8355).
In July 2011, HM Treasury published a consultation paper outlining the government's proposals for reforming the current venture capital schemes and creating a new scheme for seed investment. The consultation includes draft legislation and draft explanatory notes to deal with the exclusion of FITs (see Legal update, Reform of venture capital schemes and creation of seed investment scheme: consultation (www.practicallaw.com/3-506-8069)).
In December 2011, the government published draft legislation for the Finance Bill 2012 (together with draft explanatory notes and tax information and impact notes) to implement the new Seed Enterprise Investment Scheme (SEIS) and changes to the EIS and VCT schemes from, broadly, 6 April 2012. (see Legal update, Reform of venture capital and creation of seed enterprise investment relief: draft Finance Bill 2012 (www.practicallaw.com/1-515-4548)).
In July and September 2012, EU ProSun, on behalf of other EU producers of crystalline silicon photovoltaic (PV) modules and key components, brought complaints against Chinese imports of those products to the Commission.
The Commission starting anti-dumping investigations in September 2012 and anti-subsidy investigations in November 2012.
In March 2013, Regulation (EU) No 182/2013 making imports of crystalline silicon photovoltaic modules and key components (i.e. cells and wafers) originating in or consigned from the People’s Republic of China subject to registration was published in the Official Journal.
The Regulation requires customs authorities to register certain crystalline silicon PV modules and key components panels that originate in China, or are consigned from China. Registration will allow the retrospective collection of anti-dumping of countervailing duties, if they are imposed following the European Commission’s current investigations.
Any duties imposed by the Commission are likely to have a significant adverse impact on the UK market for solar PV installations.
The power to introduce FITs was granted under sections 41-43 of the Energy Act 2008.
The scheme is implemented by a combination of statutory instruments and modifications to the Standard Licence Conditions of Electricity Supply Licences (Modifications to the SLCs). These should be read together as they share definitions and cross-refer closely.
The key instruments (in date order) are the:
Feed-in Tariffs (Specified Maximum Capacity and Functions) Order 2010 (SI 2010/678) (FITs Order 2010), which sets out the key provisions for the FITs scheme.
Modifications to the Standard Conditions of Electricity Supply Licences (31 March 2010) (www.practicallaw.com/6-517-8764), which set out the eligibility periods and tariffs for FITs for different types of technologies and capacities (Annex 1 and 2 respectively).
Feed-in Tariffs (Specified Maximum Capacity and Functions) (Amendment) Order 2011 (SI 2011/1181), which came into force on 30 May 2011 (see Legal update, Minor changes to feed-in tariffs legislation (www.practicallaw.com/4-506-0464)).
Further Modifications to the Standard Licence Conditions of Electricity Supply Licences (21 July 2011) (www.practicallaw.com/1-517-8766), which introduced changes to some of the tariffs (see Legal update, FITs: Government introduces new feed-in tariffs by modifying electricity supply licences (www.practicallaw.com/3-507-0859)).
Feed-in Tariffs (Specified Maximum Capacity and Functions) (Amendment No.2) Order 2011 (SI 2011/1655), which came into force on 1 August 2011 (see Legal update, Government makes minor changes to feed-in tariffs, including for hydro generation (www.practicallaw.com/2-506-9371)).
Feed-in Tariffs (Specified Maximum Capacity and Functions) (Amendment No.3) Order 2011 (SI 2011/2364), which came into force on 18 October 2011 (see Legal update, FITs Order closes installation extension loophole (www.practicallaw.com/0-508-8224)).
Modifications to the Standard Licence Conditions of Electricity Supply Licences (No 1 of 2012) (www.practicallaw.com/3-518-4035), which were made in March 2012 (see Legal update, Government publishes licence modifications for reduced FITs (www.practicallaw.com/5-518-3271)).
Modifications to the Standard Licence Conditions of Electricity Supply Licences (No 2 of 2012) (www.practicallaw.com/0-519-4248), which were made in March 2012 (see Legal update, FITs: electricity licence modifications to introduce energy efficiency requirement and new multi-installation tariff rates come into force (www.practicallaw.com/8-519-4305)).
Feed-in Tariffs (Specified Maximum Capacity and Functions) (Amendment No. 2) Order 2012 (SI 2012/1393) (see Legal update, FITs: order introduces quarterly tariff changes and monitoring (www.practicallaw.com/9-519-9449)).
Feed-in Tariffs (Specified Maximum Capacity and Functions) (Amendment No. 3) Order 2012 (SI 2012/2268) (see Legal update, FITs: minor amendment to FITs legislation for small hydro electricity generation (www.practicallaw.com/3-521-3943)).
Every year, the Secretary of State is required to make determinations in respect of several aspects of FITs, including:
Deeming the amount of electricity exported from very small FITs installations.
The export tariff.
Qualifying FIT costs.
The Secretary of State's determinations are available on the Department of Energy and Climate Change's (DECC's) website (see DECC: FITs implementation).
Ofgem: Feed-in Tariffs: Guidance for renewable installations (Version 4) (www.practicallaw.com/5-520-7743), which is aimed at operators of renewable energy installations that wish to receive payments under the FITs scheme.
Feed-in Tariff: Guidance for licensed electricity suppliers (Version 2) (www.practicallaw.com/5-517-8397), which provides guidance for licensed electricity suppliers on their duties to administer FITs (see Legal update, Ofgem publishes latest revised versions of Feed-In-Tariff guidance (www.practicallaw.com/2-520-6556)).
Central FIT Register User Guide (March 2013), which provides guidance to help licensed electricity suppliers to access the Central FIT Register in order to undertake a number of functions, including registration of installations.
Draft guidance for community energy and school installations (version 1). Ofgem launched a consultation on draft guidance in December 2012 (see Legal update, FITs: Ofgem consults on draft guidance for community energy and school installations (www.practicallaw.com/6-523-5081)).
For more information, see (in date order):
Legal update, Government consults on Renewable Electricity Financial Incentives, including FITs (www.practicallaw.com/1-386-6932) and Legal update, DECC publishes final details of feed-in tariffs (FITs) (www.practicallaw.com/6-501-3829).
Legal update, CERT, CESP and FITS: DECC consults on increasing customer threshold so smaller energy suppliers are not obligated (www.practicallaw.com/6-504-4430) and Legal update, Small energy suppliers to be taken out of the Carbon Emissions Reduction Target and the Community Energy Saving Programme (www.practicallaw.com/2-506-5052).
Legal update, Government consults on FITs for anaerobic digestion and large-scale solar photovoltaic generation (www.practicallaw.com/5-505-3415) and Legal update, FITs: DECC confirms that it will cut feed-in tariffs for large-scale solar installations (www.practicallaw.com/2-506-4175).
Legal update, HMRC consults on proposals to clarify capital allowances for FITs and RHI plant (www.practicallaw.com/1-506-3925) and Legal update, Government responds to consultation on capital allowance treatment of FITs and RHI plant (www.practicallaw.com/9-516-3068).
Legal update, FITs: DECC consults on changes to rules for extensions to installations (www.practicallaw.com/2-507-0826) and Legal update, FITs Order closes installation extension loophole (www.practicallaw.com/0-508-8224).
Legal update, FITs consultation proposes reduced support for smaller solar PV generation (www.practicallaw.com/0-510-2456), Legal update, Government lays draft licence modifications for reduced FITs before Parliament (www.practicallaw.com/1-517-3311) and Legal update, FITs review: Phase 2A and B consultations and government's response to Phase 1 consultation (www.practicallaw.com/3-518-0037).
