Feed-in Tariff (FiT)
FiT Explained: Top-line
So what is the Feed in Tariff?
Well it's a scheme to encourage home and small businesses to install their own renewable energy, like solar panels and wind turbines. People can earn two payments for taking part: one for the energy they generate, even if they use it themselves, plus an extra one for any energy they sell back to the grid.
The FiT charge on your bill is how the cost of these payments is shared amongst all energy users. It's between 4 and 5% of your total bill.
So, why do suppliers quote different costs for Feed in Tariff?
Well that comes down to when the actual FiT cost is known. The FiT charge runs from April to March but the actual costs are only finalized the following September.
That means this cost is always based on a forecast and each supplier will have their own approach to forecasting, to predict the three key factors that drive this cost.
- One: the number of households and businesses that have installed solar panels or other tech;
- Two: how much energy will then be produced by those taking part; and
- Three: how much of the energy they produce will be sold to the grid.