Survival of the FITtest?
December 21st 2009 As part of the Government's National Low Carbon Transition plan it is introducing Feed-in Tariffs (FIT) next April.These will pay people for renewably generated electricity in an effort to encourage businesses and homes to invest in clean energy technology.There is a 5p/kWh export payment for any electricity generated that is exported to the grid alongside a generation tariff that varies from 4.5p/kWh to 36.5p/kWh depending on the technology employed.
Because you are paid for generation and may use all of the electricity yourself they are strictly not feed in tariffs but more renewable energy generation tariffs but nevermind that. While on the face of it this seems to be an excellent way to stimulate renewable energy use and generate low carbon energy there are a couple of problems with FIT.
FITs have been used to great effect in Germany to increase the amount of renewable energy generated by businesses and homes. However, the price Germany pays for its PV electricity (still only 0.6% of total electricity) is 8 times the price of wholesale electricity.The carbon free aspect is the equivalent of paying over 40 times the €13 per tonne at which it currently trades.The plus points are that it has created jobs and created a thriving solar industry with strong R&D.
But he chances are that the UK will buy the already available products,possibly from Germany which started its feed in payments in 1991, rather than make our own.
The other thing is aside from creating a UK industry is what are FITs there for? To generate carbon-free energy surely. If this is the case why does it discriminate between technologies. PV gets 36.5p/kWh while hydro gets 4.5p/kWh for generation.This is to encourage the less attractive option of investing in PV.Why are we encouraging technology that is uneconomic? Surely we should just pay a premium for carbon-free electricity and let the user choose the technology. If the price of carbon was higher and the emissions trading scheme was functioning effectively then this would act as a technology agnostic promoter of renewable energy as well as energy efficiency.This why the CRC Energy efficiency Scheme should include renewable energy. Because at present most businesses and homes cannot access emissions trading then carbon free generation subsidies may be an incentive that could allow the end-user to choose the renewable technology that they feel they can get the best return. Stimulate the market that you ultimately want to receive and from then on it’s survival of the fittest.
Tim McMannan-Smith More articles from WEE News Desk: | 
