Feed-in-Tariff (UK) - Export Tariff

Within the UK Feed-in-Tariff scheme, in addition to the main generation based tariff an additional payment is included to value electricity which is not used in-house but exported to the electricity grid. In effect the export payment is made by the energy supply industry who in turn deliver and sell the electricity to other customers.

The export payment was originally considered necessary to incentivise those with microgeneration systems operated within the FiT scheme to continue to strive towards energy efficiency as opposed to becoming complacent and wasteful of self-generation by placing a value on unused & exported energy. Additionally, export payment was considered to be consistent with a government strategy to leverage micro-generation technologies to introduce further competition into what was perceived to be a closed UK generating sector controlled by a very limited supply-base.

To achieve this an index linked (RPI) Export Tariff was laid down in the FiT legislation as a 'floor price', effectively setting a minimum price to be paid by the energy industry, with no upper limit. For details on the current 'floor price' see related post 'FiT - Current Tariff Rates (UK)'

The FiT scheme was originally developed with a view to integrate microgeneration export metering with the roll-out of smart-metering technologies, both programmes being developed in parallel from 2009 onwards. The smart-meter roll out schedule would obviously have a major effect on the renewable energy project timeline if metering became a pre-requisite, however, with microgeneration integration being a major justification for the project, a FiT requirement for additional export metering obviously raises a cross-project issue. The FiT scheme therefore allows for registered systems with a total installed capacity (TIC) below 30kWp to not meter energy exports and receive Export Tariff payment based on a fixed percentage of energy metered at the installation's total generation meter (TGM). This fixed percentage is 'deemed' to represent the 'typical' split between self consumption and export for a 'typical' system in a 'typical' domestic environment. The 'typical' export was 'deemed' to be 50% of total energy generation for CHP, Anaerobic Digestion, Solar Photovoltaic systems and Wind, whilst Hydro was deemed at 75% exported. Those generating electricity who believe their exports are substantially higher than the 'deemed' percentage are theoretically allowed to install suitable export meters and receive payment on actual metered exports, however this is rarely referenced by the energy supply industry.

The application form for the FiT scheme includes an option to receive 'deemed export' or not. The FiT scheme entitles each registered micro-generator to review the decision to receive payment based on the 'floor price' on an annual basis, theoretically providing the opportunity to negotiate a better price for exported energy based on competitive market conditions, whilst always having the protection of the established 'floor price'. This approach was originally conceived to encourage export tariff competition within the energy sector through using export tariffs set above the 'floor price' in the hope of attracting renewable energy based microgeneration partnerships to meet corporate targets.

The 'typical' domestic PV system installed in the UK over the past few years has an installed capacity of around 4kWp, with general consensus amongst UK system owners being that somewhere around 25-30% is used in house where automated diversion technologies aren't employed, rising to 50%-60% where energy is diverted to heat domestic hot water (DHW) . Considering that there would be little direct relationship between installed system size and the percentage which can be exported. It would be reasonable to conclude that, irrespective of installed capacity, self consumption would likely remain in the range of 800-1000kWh/annum for systems without diversion and in the region of 2000kWh/year when automatically diverting excess generation to DHW, therefore 'deeming' export based on 50% works to the energy sector's advantage for Solar PV, thus providing little incentive to compete for microgeneration market share or install accurate metering.

As can be concluded from the above, 'deeming' export is considered to be an inaccurate and flawed concept, however, many with vested interests utilise the deemed percentage to their advantage. Both marketing details and cost justifications within the quotation process and have tended to employ the deemed 50% export to overestimate electricity bill reductions and has done so since the FiT scheme was released in 2010. Along with a breakdown of system pricing, many system quotations include a cost/benefit justification which often resolves to a 'payback' or 'break-even' point in time, however, these often include in house energy savings on the 'deemed' export percentage, potentially doubling the energy-saving benefit of a typical system and artificially improving the perceived payback. There are additional ways to overstate potential savings, however, as it is intended to focus on these in a later post, all we need to recognise at the moment is that it is extremely easy to overestimate the cost benefits of self consumed energy, therefore in lieu of more accurate information related to a particular household's energy usage pattern, it may be best to value energy reduction based on figures in the previous paragraph.

Seeing that Ofgem is the responsible party for overseeing both the administration of the FiT scheme and the Smart-Meter project whilst continuing to ensure that the UK energy sector operates a competitive, open & transparent market, there are obviously questions raised as to how the competitive levers which were considered to be an integral design requirement for FiT scheme operation and the required integration of microgeneration with a standardised smart-metering solution have largely been overlooked.