Feed-in Tariff Levy Explained: The FiT Charge on Your Bill

Why a scheme that closed to new applicants in 2019 is still on your electricity bill

What the Feed-in Tariff levy is

Feed-in Tariff Levy Explained – The Feed-in Tariff levy is the cost of the UK scheme that paid people and businesses to generate their own small-scale low-carbon electricity. Think rooftop solar, small wind turbines and the like. That support is funded by every electricity supplier, and the cost ends up on your bill.

It is another of the green policy charges tucked inside your unit rate. If you want the full picture of where it sits, our guide to non-commodity costs lays out the whole set of them.

The scheme is run by Ofgem, which keeps the central register and makes sure suppliers pay their share.

How the Feed-in Tariff scheme worked

The Feed-in Tariff launched on 1 April 2010. It was aimed at small installations, up to 5 megawatts, covering solar PV, wind, hydro, anaerobic digestion and micro combined heat and power.

Anyone who signed up got two payments. A generation tariff for every unit of electricity they produced, whether they used it or not, plus an export tariff for the surplus they sent back to the grid.

Those rates were set by government and fixed for the life of the contract, which made small solar especially attractive for a few years. Payments run for between 10 and 25 years depending on the technology.

Why the Feed-in Tariff levy is still on your bill

The scheme closed to new applicants on 1 April 2019. You can no longer join it.

The catch is the same as with other legacy schemes. Everyone already accredited keeps their payments for the full term, most commonly 20 years. So installations signed up in 2015 or 2018 will be paid well into the late 2030s.

That means the Feed-in Tariff levy will keep appearing on business bills for years yet, slowly tailing off as old contracts expire.

How much the Feed-in Tariff levy costs

The way it is funded is worth understanding. The total cost of all those payments is shared out across every licensed electricity supplier in Great Britain, in proportion to their market share. This is called levelisation.

Each supplier then passes its share on to customers. On most business contracts the Feed-in Tariff levy is bundled into the unit rate rather than itemised, so few buyers realise they are paying it.

In cost terms it is smaller than the Renewables Obligation but still a real line, a modest amount per megawatt hour you consume.

Feed-in Tariff versus the Smart Export Guarantee

When the Feed-in Tariff closed, it was replaced by the Smart Export Guarantee for new installations. The difference is significant.

The old scheme paid for both generation and export at generous fixed rates. The newer one only pays for exported electricity, at rates set by suppliers rather than government, and they tend to be lower.

For a business weighing up on-site generation today, that changes the sums. It is worth factoring into any wider renewable energy procurement decision rather than assuming the old returns still apply.

Keeping on top of it

You cannot avoid the Feed-in Tariff levy, but as with every pass-through charge the thing to check is that your supplier is applying the correct rate.

Ofgem publishes the scheme detail and the levelisation figures. You can read its overview of Feed-in Tariffs for the current position.

If you want a clear breakdown of the non-commodity costs on your bills, the Feed-in Tariff levy included, talk to us. Catalyst checks these charges for businesses across the UK as part of energy procurement and bill validation. Get in touch with our team to have your charges reviewed.