Government promises cash back for clean energy installations

Businesses and households installing microgeneration technologies such as solar panels and wind farms could soon tap into a significant new revenue stream, after the government today set out long-anticipated proposals that would guarantee them financial payments for any energy they produce.

To accompany its new Low Carbon Transition Plan, the Department of Energy and Climate Change (DECC) today released a consultation on its proposals for a feed-in tariff (FIT) that would guarantee generators of renewable and low-carbon energy producing less than 5MW a year an above-market rate for the power they produce.

Under the new proposals, the incentive would provide generators with a " generation tariff", offering them a fixed payment from their electricity supplier for every kilowatt hour (kWh) they produce, and an "export tariff", guaranteeing them an additional payment for every kWh they export back to the grid.

The initiative, which is modelled on the successful feed-in tariff that has underpinned Germany's booming microgeneration industry, will be branded as a Clean Tech Cash Back scheme in an attempt to make it easier for businesses and households to understand how it will allow them to generate money from their renewable energy investments.

The government is consulting on the proposed tariffs until mid-October, but initial proposals suggest that those installing successful microgeneration technologies could generate significant revenue through the scheme – initial tariffs range from 36.5p/Kwh for certain solar photovoltaic systems to 4.5p/Kwh for the most efficient biomass, wind and hydroelectric systems.

The consultation also confirmed that microgeneration systems installed between now and the scheme's introduction next April will be able to exploit the new tariffs, and set out plans to introduce a similar scheme for renewable heat technologies to be introduced in April 2011.

The proposals were broadly welcomed by the Renewable Energy Association, which said the new scheme had the potential to "foster a local renewable energy revolution with communities, businesses and the general public all getting involved".

However, Jeremy Leggett, executive chairman of solar energy firm Solarcentury, gave the proposals a more cautious welcome, arguing that while the structure of the scheme was promising the proposed tariff levels for solar panel installations on commercial properties are unlikely to be high enough to stimulate the market.

"Today's confirmation of the clean energy cash back scheme is an important first step in delivering the enormous potential of solar power in the UK," he said. "It's unfortunate therefore, that the consultation numbers, if confirmed later this year, will do little to boost demand for non domestic solar PV in the UK."

In an additional boost for the microgeneration sector, the government confirmed it is to launch a green home loan scheme as part of its Low Carbon Transition Plan that will see up to seven million homes undertake so-called " pay as you save" makeovers by 2020.

DECC said it would now provide up to £4m to pilot the scheme, which will offer homeowners low interest loans to spend on green and energy efficient technologies that they will then repay through the savings they realise in their energy bills.

It added that it was also planning a new voluntary personal carbon incentive scheme to promote low carbon lifestyles, and is to select 15 communities to act as testing grounds for new low-carbon initiatives.