What is Feed-in Tariff (FiT)?
The Feed-in-Tariff (FiT) is a government programme to support the uptake of a range of small-scale renewable and low-carbon generation technologies. FIT’s are then paid to anyone who installs a renewable energy system producing electricity. Tariffs are paid for electricity that is generated with a bonus paid for any energy exported to the grid.
The scheme requires electricity suppliers to pay into a fund, to cover the costs of those who produce energy under the scheme. The cost is then passed onto all electricity customers through their invoices. Amounts charged depend on volume consumed.
How are FiT charges calculated?
Ørsted uses latest industry information to produce an estimate of what the actual cost will be, which is translated to a £/MWh charge. This is stated in your supply contract. This estimate is then applied to your metered consumption and included in the calculation of your monthly invoice.
How are FiT charges reconciled?
Applicable to customers with FiT charges as pass through costs in their contract.
The FiT scheme operates in line with a standard financial year, 1st April to 31st March. FiT charges are regularly reconciled, and an adjustment is made once actual charges are published to accommodate any difference from forecasted costs.
Each quarter, Ofgem leads a ‘levelisation’ report on their total volume of FiT-eligible generation.
This is informed by figures from –
- FiT licensees – confirming the value of generation and export amounts
- Electricity suppliers – confirming total electricity supplied in Great Britain
This means that Ofgem can calculate the FiT charge owed by each supplier for that levelisation period. The exercise ensures that all suppliers pay the same equivalent £/MWh cost.
At the end of the financial year all parties are required to re-submit their figures to Ofgem. Ofgem then calculates whether a further levelisation payment is due and publish a final annual report.
FiT Reconciliations
The FiT reconciliation takes place following the completion of the annual levelisation process in October. Ørsted calculates any variance between the forecasted FiT £/MWh billed to date and the figure published in the annual report. Where a variance exists, an adjustment will be made to your October invoice (received in November) and a reconciliation line for FiT charges will appear.
If you change supplier prior to the annual levelisation process, the reconciliation will still take place. You will receive an invoice or credit note as appropriate, subject to your standard payment terms.
For more details on the Feed in Tariff scheme visit https://www.ofgem.gov.uk/environmental-programmes/feed-tariff-fit-scheme or speak to your Account Manager.