The Solar Panels Feed in Tariff has been reduced by half

The Solar Panel Feed in Tariff has been reduce by half

The government have reduced the amount of Tax Free income which can be earned by consumers who have purchased Solar Panels and opting into the Feed in Tariff Scheme otherwise known as (FIT)

Consumers have been turning to solar energy as a way of saving money on their energy bills as well as considering other benefits from solar energy such as being a good way to earn money to possibly put away for future retirement plans.  

The FIT Scheme currently pays an income of 43.3P Tax Free but it that could be reduced by half if a purchase of solar panels is made after 12th December 2011.

To understand what this means and why the Solar Panel companies are up in arms you have to understand how the Feed in Tariffs provide an income to households and businesses.

The Fit Scheme was introduced back in 2010 to encourage the United Kingdom to produce more clean energy for our energy needs and for the National Grid.

Clean energy is also known as renewable energy and is energy which comes from sunlight, wind and rain. The government hopes that by 2020 we will be producing 15% of energy from renewable sources.

The Feed in Tariffs provide a Tax Free Scheme for those customers who have solar panels fitted on to their business or residential property for which they get paid (tax free) for the energy which produced via the panels as well as benefit directly from free energy themselves.

Points to note are:

• The consumer gets paid through a “generation tariff”, which is a direct tariff from the energy supplier. The amount the consumer gets paid will be 43.3 p but as mentioned earlier it will reduce by half if the energy panels are not registered and installed by 12th December.

• In addition to the “generation tariff” there is the “export tariff” where a solar energy customer can also earn money by receiving a payment from the energy supplier for the energy they do not use; this pays the solar panel customer an extra 3p. The concept around the “export tariff” does sound a bit strange but an example is, if you have a hot day the solar panels will store more energy than you can use and because you can’t save the energy for a later date it is sold back to the national grid.

The reaction from solar energy companies has been quite outspoken and in many cases very some are angry and worried as to the effect that the reduction in the FIT will have on the Solar Energy industry. The introduction of the FIT scheme 2010 had reportedly credited 25,000 jobs and set up 3000 new enterprises.

The biggest blow would be to companies that offer solar panels for free to businesses and residential consumers.

The solar panel firms earn the money from the “generation tariff” and the consumer gets their bills reduced by approximately £90 to £180 a year. So with such a dramatic reduction from 43.3p to 21p many feel that a lot of Solar Energy companies will disappear as the free solar panel offering which they provide would simply not be cost effective enough to continue and with a 50% drop in earnings most companies not just solar panel companies would find it hard to survive.

The news of the TIF reduction is also not good news for people who can’t afford to pay out for panels as they will lose the chance to save money on their utility bills and it could become a case of being only the people with higher incomes who will benefit from solar energy in the future.