There is a LOT of misinformation and finger pointing regarding the FIT. As wind turbine developers we often get two slightly contradicting arguments used against us:
- Wind turbines are inefficient and do not produce much electricity
- Wind turbines will cause household electricity bills to rise significantly
The FIT paid is based on the amount of electricity generated, so the more inefficient and useless wind turbines are… the less the operators get paid. Conversely, if they are very efficient and generate lots of clean electricity then the payments can be large. Thus the two complaints above seem mutually exclusive.
Yes, the FIT is a subsidy, without which the UK or any part of Europe would simply not have a renewables industry.
Why is the subsidy needed? Simple, because for decades energy has been hugely undervalued. The cost of fossil fuels was predicated on an unending, ever increasing supply and the smart money now says that world oil production probably peaked a few years ago. So, today we have an energy market that is only now just starting to price in the replacement cost of the primary resource – hint… you cant just go and plant more oil and gas and there have been no new “mega fields” discovered in the last 30 years. This is why energy price inflation is in double digits and set to continue.
Because the true cost of energy is still massively undervalued it means that the cost/kWh that you can sell electricity for is still much to low to make small/medium scale projects viable. In 10..15 years time when prices have soared it might be different. In the meantime, the transition period, subsidy is required to plug the gap. Don’t be fooled into thinking nuclear is not subsidised either – if the operators had to budget for clean up costs it is unlikely that any new stations will be built.
As for how much small/medium wind projects actually add to domestic energy bills, the best estimate comes from DECC (Department for Energy and Climate Change) who predict:
Our policies would increase household electricity prices by 25% in 2015 and 30% in 2020 compared to what they would have been in the absence of policies
The contribution of individual policies to the 30% policy-driven price increase estimated for 2020 is as follows: i) A third of the total cost comes from carbon pricing policies – both HMT’s carbon price floor and the carbon price derived from the EU emissions trading scheme. ii) A third comes from the Energy Company Obligation – the successor policy to CERT, to be implemented from late 2012 alongside the Green Deal, mandating energy companies to install hard-to treat energy efficiency measures and make fuel poor households more energy efficient. iii) A fifth of the total policy cost comes from Electricity Market Reform’s new long-term contracts. iv) A fifth comes from price support for renewables under the Renewables Obligation. v) Around 5% of the total policy costs comes from small-scale feed-in tariffs.
So an average home using 4,000kWh annually at a current rate of 15p/kwh would expect to pay £600 per year. By 2020 this could rise to £780 of which the FIT will account for just £9.
So, using DECC’s optimistic figures for the take-up on all renewable technologies (including wind, solar, biomass, geo-thermal etc) under the FITS scheme, the average household will pay just £9 extra per year by 2020.
£9 a year to help save the planet – seems like very good value for money.