Ofgem has announced the latest Feed-in-Tariff (FiT) Export tariff at up to £71.40 per MWh (or 7.14p per kWh). This tariff will come into effect from the 1st of April 2024 and will be valid until the 31st of March 2025. With power prices below 2022 levels and continuing to decrease, the FiT export could now be a better route-to-market than a PPA.
What is the Feed-in-Tariff (FiT) and why is it relevant?
The FiT is a subsidy scheme introduced in 2010 with the aim of encouraging small-scale renewable energy deployment in GB. It provides financial support to individuals, businesses and communities looking to develop renewable generation assets. The scheme closed to new applicants in April 2019.
There are two elements to the FiT scheme, the FiT generation tariff and the FiT export tariff.
FiT generation
If you are accredited to the scheme then you are always entitled to FiT generation payments. This is a means to compensate you for generating renewable energy, so whether you use the power yourself or export it to the grid you will be paid a set amount for each unit of generated power. This requires you to submit quarterly meter readings to let your FiT licensee know how much power you have generated.
FiT export
The FiT export tariff is an alternative to a Power Purchase Agreement (PPA). You are paid for the power exported to the grid, at a fixed price per MWh. This rate is adjusted according to RPI each year, with the new rates being announced around 2 months prior to the 1st of April. The rate from the 1st of April 2024 will be 5.15% higher than the current rate (increasing from £67.90 to £71.40 per MWh).
PPA price levels have sat comfortably above what you could achieve via the FiT export over the last few years. However, given the recent bearish market conditions, it’s important to review the FiT export as an alternative route-to-market.
Below is a graph showing the forecasted value for a PPA versus the FiT export tariff for a typical 500 KW Wind turbine since the beginning of 2021.
Since the start of 2021 the PPA forecast price for this site has been comfortably above the FiT export rate. However, over the past few months there has been a smaller and smaller gap, with the FiT export now comfortably ahead of the PPA price. While the PPA price includes REGOs (and embedded benefits) the FiT export doesn’t.
Key considerations when thinking about switching to the FiT export
Date you joined the FiT scheme. Depending on when you joined the FiT scheme, you may have a different FiT export rate. Initially the scheme had a higher rate for generation payments and lower for the export tariff. To find out which tariff will be available to you, either register or log into your Renewable Exchange PPA platform account, or visit the Ofgem website.
Your site is unique. Whilst generally the market is lower, every PPA is unique to the specific site in question. Log in to the Renewable Exchange platform and view your unique PPA forecast to see a direct comparison.
Quarterly payments. If you decide to switch to the FiT export tariff, it’s important to know that you will receive payments quarterly, as opposed to monthly. Every FiT licensee has their own terms, but most will pay quarterly due to their administrative processes with Ofgem processing the data.
12 month commitment. FiT export contracts have a minimum duration of 12 months, and it is not possible to commit to a shorter timeframe or opt out during this contractual period. After this initial period you will move to a rolling contract and are free to switch back to a PPA at any time.
Check your FiT licensee. Not all FiT licensees are mandatory, some of them are voluntary. This means that you may need to switch licensees if your current licensee says they cannot support you for the FiT export. Visit the Ofgem website for FiT licensee contact details and to see if yours is voluntary or mandatory.
FiT+ Renewable Exchange’s FiT+ service ensures completely understand what option are available for your assets, maximise the value of your power and certificates, and continuously monitor and optimise the sale of your electricity. To find out more please contact [email protected].
What now?
Log in to our platform to check your site’s PPA forecast, to see if the FiT export or a PPA is your best route-to-market.
Don’t have a platform account, or would like to discuss your best option with one of our experts?
Email us at [email protected].
