Small-scale electricity generation is expected to play an important role in helping meet the target.

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2 The UK has a challenging EU target to meet 15% of energy demand from renewables by Official projections suggest around 30% of our electricity must be from renewables by that year if this target is to be met. Small-scale electricity generation is expected to play an important role in helping meet the target. The Feed-in Tariff (FiT) scheme launched in 2010 Offers guaranteed cash payments to households and businesses who produce their own electricity using microgeneration technology under 5MW. FiTs also provide payments for any power exported onto the local distribution network. The scheme replaced previous government grants as the main financial incentive to encourage uptake of renewable electricity generating technologies. Technologies currently receiving subsidies - Solar Photovoltaic (PV) Panels - Wind Turbine - Anaerobic Digestion (energy from waste) - Hydro Pumps - Micro combined heat and power fired by gas.

3 The support is paid in the first instance by electricity suppliers. They collect the money to do this from the bills they send to their customers. A complicated levelisation process ensures all suppliers receive sufficient monies to pay their FiTs generators and that each supplier faces an appropriate cost based on its market share. For larger business customers the costs of FiTs can vary every quarter, with the charges in the summer likely to be higher than the cost in winter. This is because a large amount of solar panels, which are supported under the scheme, produce more electricity in summer months. For most other consumers, suppliers estimate a cost in advance that is fixed for the year. FiTs contribute around 2% of a small to medium sized business electricity bill.

4 The FiT scheme was slow to get off the ground and during the period April 2010 to March 2011 FiT costs were around 0.004p/kWh (100,000 kwhs = 4). The following year saw a significant increase in the number of microgeneration installations, a far greater amount than expected. This was due to a drop in the cost of both purchasing and installing solar panels. As a result FiT costs rose to over 0.05p/kWh (100,000 kwhs = 50). In 2012 to 2013 costs continued to rise aggressively and they are expected to triple over the year rising to around 0.16p/kWh for the year as a whole (100,000 kwhs = 160). Interestingly, seasonal patterns show that the cost of FiT approached 0.25p/kWh (100,000 kwhs = 250) during Q2 of 2012 as solar installations operated to high load factors because of warm, sunny weather in the summer. Why are the costs rising? The main driver for the rising cost of FiTs is the significant uptake of solar PV panels installed in houses and fields. Capacity has risen from a base of around 10MW in 2010 to nearly 1.4GW currently. The costs of the scheme are likely to continue to rise over the coming years. Some suppliers expects the cost for will exceed 2/MWh if high output from solar panels is maintained. This has made it difficult for energy suppliers to forecast how much to build into their electricity contract prices.

5 The government has implemented a cost control mechanism that now applies to generation tariffs under the scheme. This mechanism sees tariff reduction triggers activated at pre-determined levels of capacity for new installations added to the scheme; installations that have already entered the scheme will not be effected. It is hoped the move will stop the sudden uplifts in power bills, due to FiT costs, experienced in recent years. But as the overall volume of installations supported by the scheme will continue to increase, the costs will also continue to increase although on a much smoother path.

6 Any organisation, business, community or individual can install an eligible generation system. The first step in applying for the scheme is to check whether your installation is eligible. To ensure your project gets the FiT it must be registered with a licensed electricity supplier (if 50kW or less) or with energy regulator Ofgem (if over 50kW but less than 5MW). The licensed supplier or Ofgem will make sure the project is eligible to receive payments through the scheme and will process the generation data. The supplier will then pay you for any electricity generated and, where applicable, an export tariff for any surplus electricity put back on the local grid. These payments are recouped by the supplier through electricity bills of all customers, as described earlier.

7 FiT rates are set at varying levels for different technologies, according to costs and how much electricity is expected to be generated. The tariffs are index-linked to RPI inflation. Having your own on-site generation can help secure electricity supplies and bring other intangible benefits. There are exceptions when it comes to the installation of solar PV panels. Further information can be found on Ofgem s website. What Next? Typically schemes will receive financial support for 20 years from the point of commissioning. A comprehensive review of the FiTs scheme was carried out by DECC in and considered all aspects of the scheme. DECC will be monitoring how these changes impact the scheme throughout A further review of the scheme will be carried out at the end of 2013 or early 2014 in preparation for the end of the Spending Review period in March 2015, which may introduce further changes and amendments to the scheme.

8 About Indigo Swan We believe everyone is entitled to the truth about their energy and shouldn t be penalised because they don t have the knowhow. The information in these guides has been prepared in conjuction with Cornwall Energy who provide strategic energy market intelligence. If you have any questions please get in touch. hello@indigoswan.co.uk Indigo Swan Limited 2 Millennium Plain Norwich NR2 1TF