With two similar but distinct schemes available it can be confusing for householders who are keen to install solar PV on their homes. With so much in the press about the Feed in Tariff (FIT) as well as the Green Deal, many are perplexed by exactly what is available, and how these two schemes can work together for their benefit. This overview of the schemes is designed to demystify the relationship between the two. It outlines how the householder can use both FIT and Green Deal to help maximise the benefits they get from their solar installation.
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What is FIT?
The Feed in Tariff (FIT) is an incentive scheme for householders installing renewable electricity generating technologies in their homes. The technologies covered include:
- Solar PV
- Wind turbines
- Hydroelectricity
- Anaerobic digesters
- Micro CHP
The scheme pays householders for the electricity they generate, whether they use it themselves or not. The generation tariff pays the owner of the technology a set rate for every kWh of energy their system generates. Any of this energy which is not used by the household is exported to the national grid, and attracts a further payment of 4.64p/kWh in the form of an export tariff. The payments have been guaranteed by the UK government for the next 20 years, and will increase with inflation in accordance with the Retail Price Index (RPI).
What is Green Deal?
The Green Deal is a new and innovative means of financing energy saving improvements to people’s homes. The mechanism allows householders to apply for loans for energy efficiency and renewable energy technologies, helping them with the upfront cost, and this money is paid back in instalments through their energy bills. The repayments are set at such a level that the money they are paying back is about equal to the savings they are making as a result of the installation.
Households can apply for finance towards:
- Insulation
- Heating and hot water
- Glazing
- Microgeneration
To apply, their property must be assessed by a Green Deal specialist, and then measures recommended. The householder then goes through a Green Deal provider to have the technology installed, and then pays the money back through the savings from their energy bills.
How Green Deal and FIT work together for Solar PV
Having a Green Deal assessment is a good first step for anyone considering renewable energy for their homes. The assessment can tell you if your home is going to be suitable for the technology you are considering, as well as flagging up any other energy efficiency improvements you should be making beforehand.
Once you have decided on a technology, you can use the Green Deal finance mechanism to help with the cost of installing solar PV, with the amount you can apply for dependant on the amount you will be expected to save on your energy bills. The loan may only cover part of the cost, in which case you will be expected to raise the rest of the capital yourself.
Once you have installed your PV system, you can claim the Feed in Tariff as normal. Because the repayments you are making are based upon the amount you are saving on your energy bill, you will not notice the repayments coming out, and in fact your payments may well go down. On top of this, you will start receiving FIT payments as soon as your system is commissioned, leaving you in pocket and in a more efficient house sooner than you thought.
An example of how it works:
The following example is provided by DECC to show how the schemes work together.
Financing under the Green Deal is limited by the “Golden Rule”. The Golden Rule basically says that for any measure to be financed under the Green Deal, its repayments must be less than the amount of energy saved. FIT payments do not count towards meeting the Golden Rule but savings on your electricity do. The impact is that the portion of your installation that can be financed under the Green Deal is limited to the predicted savings on your energy bills. The balance of the installation costs would have to be financed from other sources but could of course be repaid through FIT payments.
How to apply
Green Deal advisors are the first port of call for any householder interested in making energy efficiency improvements to their properties. A good place to start is by calling the Energy Saving Trust on 0300 123 1234.
