The Feed in Tariff for wind (FiT) is the major component of the total value of the renewable energy generated. However, there are also several other components which when added together become significant. They are:
- Export value
- Offset value
- Combined offsetting and exporting
- Renewable Obligation Certificates (ROCs) and Contracts for Difference (CfDs)
Feed in Tariff for wind (FiT)
By far the largest component of the value of generated renewable energy is the Feed-in Tariff. This is paid for every kiloWatt-hour (kWh) of electricity generated regardless of whether it is consumed on-site or exported.
The amount paid under the Feed in Tariff for wind is banded for different sizes of wind turbine so that smaller turbines which normally cost disproportionately more to install are not penalised. The Feed-in Tariffs applicable for farm wind turbines are:
|Wind Turbine Max. Power Output||Feed-in Tariff|
|<50 kW||8.33 p/kWh|
|50 to 100 kW||6.08 p/kWh|
|100 kW to 1.5 MW||3.92 p/kWh|
|>1.5 MW||0.83 p/kWh|
- These rates are applicable as of this update on 11th November 2016.
- For systems that sit on a tariff threshold, the higher tariff will apply.
- Once a wind turbine is registered for the Feed-in Tariff it is locked into that tariff for 20 years. In addition the tariff will be index-linked to RPI, so its value in real terms will not be eroded by inflation.
In the government’s review of the Feed-in Tariffs during 2015 a system of quarterly ‘degression’ is being introduced which comes into effect from the 8th February 2016. The degression is a combination of default degression and contingent degression, the latter being applied if deployment caps are exceeded. Contingent degression is set at 10% on a quarterly basis. Furthermore, a system of quarterly deployment caps is being introduced from 8th February 2016. If a quarterly deployment cap is exceeded the eligibility for the Feed-in Tariffs will be frozen until the deployment cap is lifted in the following quarter.
It is expected that these cuts in the Feed in Tariff for wind will result in fewer wind projects progressing which in turn will reduce the size of future degression cuts because they are dependent on how many turbines are installed, though even so such large cuts will make wind projects less attractive unless you have a very windy site or can use the energy generated on site, both of which bring financial benefits which may neutralise the Feed-in Tariff cuts. Remember that once wind turbines are commissioned they are locked-into the Feed-in Tariff that applied on their commissioning date for the next twenty years and they would not be subject to further degression.
Also worth noting is that once a wind site has planning consent and an accepted grid offer it is possible to pre-accredit for the Feed-in Tariff, which means that at the point of ordering the turbine you would know what Feed-in Tariff you should ultimately receive provided you can get the wind turbine installed and commissioned within a year of the pre-accreditation date. Note that one year is challenging but possible if the project is progressed quickly and there are no unforeseen delays.
The export value and the offset value are a slightly more difficult to explain because depending on the site either one may apply or both. For clarity each is explained individually first, followed by what happens when both apply.
This is payable for every kWh of electricity exported, and the value can vary between the guaranteed minimum amount of 4.5 p/kWh under the Feed-in Tariff, or the ‘market rate’ which is currently closer to 5 p/kWh. Very small systems (<15 kW) generally have to accept the default FiT export rate of 4.5 p/kWh, but as systems get larger it becomes easier to negotiate a higher ‘market rate’. For systems of several hundred kW’s it has been known to get an export rate of 5.5 p/kWh.
Exported means that it must pass outwards into the local electricity distribution network (what most people call ‘the grid’) through an export meter. An export meter looks the same as a normal import meter, but records the flow of electricity outwards from a site. Nowadays a single import/export meter is normally fitted.
To export all of the energy produced by a farm wind turbine it would have to be directly connected to the grid with its own dedicated electrical supply and not first pass through the site distribution board (see more details below under ‘offset value’). Under this arrangement every kWh generated by the system would be exported, and the export rate would be paid.
This is where the wind turbine connects into the site owner’s main distribution board. It is important to remember that electricity flows like water and will always follow the easiest route to the nearest load; this means that all of the site owner’s loads (i.e. lighting, sockets, machinery, air conditioners etc.) that connect to the same distribution board would be supplied firstly by the wind turbine, and only once all of these loads had been satisfied would any surplus energy from the wind turbine flow backwards through the incoming supply cables, either to the next nearest distribution board on the site, or out through the export meter to the grid.
Also, because the electricity produced by the wind turbine is fully grid-synchronised, it will mix seamlessly with grid-imported electricity. This means that if the wind turbine cannot supply all of the site’s loads, then all of the electricity from the wind turbine would go towards the loads and any deficit would be seamlessly imported from the grid.
Equally, if the wind turbine was supplying all of the local loads but then a reduction in the wind speed caused the output to suddenly drop, then the grid would instantly supply more to make up the deficit. From a consumers point of view the source of the electricity would be unknown; it could be from the wind turbine, the grid or a combination of both.
In the situation where the on-site loads far exceed what the wind turbine could ever produce, then all of the electricity generated by the wind turbine would be consumed on site. For example, if a wind turbine with a maximum power output of 500 kW was connected to a site that had a baseload (i.e. the minimum load 24/7) of 1 MW, then 100% of the energy generated by the wind turbine would be consumed on site. Financially this would be a good arrangement because the price paid for importing electricity from the grid is typically 12 p/kWh (varies between 8 – 16 p/kWh depending on the import tariff), so if the amount of import can be reduced, for every kWh it is reduced by the site owner saves 12 p. If you compare this saving of 12 p/kWh to an export price of 5 p/kWh, you can see that offsetting on-site loads is worth two to three times more than exporting the electricity.
Combined offsetting and exporting
This is actually the most common arrangement and is basically the arrangement described above under ‘offset value’ except where the on-site loads are less than the power being produced by the wind turbine. Under this arrangement the onsite loads would be supplied first, then the excess power exported.
The value would be made up of the amount of energy offset at 12 p/kWh (or whatever your import electricity price is) plus the amount of energy exported for between 4.5 – 5.5 p/kWh. Obviously the actual value would depend on the relative proportions, but these can be estimated at a feasibility stage based on existing electricity bills and forecast energy production from the wind turbine.
Generally speaking it is best to offset imported electricity first, then export any remaining surplus to get the highest revenue from a wind turbine.
Renewable Obligation Certificates (ROCs) and Contracts for Difference (CfDs)
ROC’s was the incentivising mechanism for large-scale (>5 MW) renewable energy systems which was superseded in 2014 by CfD’s, so doesn’t apply for the scale of wind turbine projects that we work on. ROC’s used to apply to sub-5 MW wind turbines but was superseded by the FiT scheme. For this reason ROCs and CfDs will be ignored here, but if you want more information see the Ofgem website here and here.
Want to install a wind turbine?
If you are in the UK then take our Wind Site Self-Assessment - Step 1 of our modular Windpower Feasibility Study. It takes about 20 minutes to work through the basic checks to see if your site might be suitable, including:
- Estimating wind speed
- Checking proximity of nearby properties
- Checking site access and approach roads
- Investigating connection with the grid