Feed-in Tariff (FIT)
Photovoltaics (PV), Anaerobic Digestion (AD), Wind, Hydropower projects up to 5MW and Combined Heat and Power (CHP) projects up to 2kW can apply for accreditation to receive the Feed-in Tariff (FIT). Eligible generators receive a generation tariff for any electricity generated and they also receive an export tariff for any electricity exported.
There are three types of export tariff:
- Deemed export: This applies to unmetered sites up to around 30kW. Ofgem estimates how much power is exported and applies a set tariff.
- FIT Export Tariff: The FIT Export Tariff is a single fixed tariff set by Ofgem that is adjusted with RPI every April. Generators can opt in or out of the FIT Export Tariff on a 12 monthly basis.
- Power Purchase Agreement (PPA): If a generator opts out of the FIT Export Tariff they can enter into a PPA with a third party like Statkraft. Statkraft offers PPAs for up to 20 years. Customers receive a power price reflective of the current wholesale power price, a pass-through of embedded benefits and a payment for applicable renewable benefits.
FIT payments are administered by FIT Licensees. Statkraft is not a registered FIT Licensee. However, we can offer a power purchase agreement as an alternative to the export tariff.
Renewables Obligation (RO)
The Renewable Obligations (RO) scheme was set up to incentivise suppliers to obtain more power from renewable sources. The scheme has now closed to new projects (with the exception of some ‘grace periods’) but it will continue to run until the last RO contract expires.
To meet their RO ‘obligation’, suppliers present the required number of ROCs, or pay the Buy Out price per MWh, to Ofgem (Office of Gas and Electricity Markets), the UK’s energy regulator. Ofgem sets both the ROC obligation level and the Buy Out price on an annual basis.
Suppliers purchase ROCs from renewable projects via Power Purchase Agreements or ROC Purchase Agreements, and from other market participants who are looking to trade their ROCs.
From 2027 it has been suggested that a Fixed Price ROC regime will be put in place, however, the mechanism is still to be finalised.
Contracts for Difference (CFD)
The Contract for Difference (CFD) is the newest support mechanism for renewable energy introduced by UK Government. Renewable generators participate a competitive auction to win a CFD contract, which guarantees a “strike price”, which is a fixed £/MWh price that the generator receives for its power for the duration of the contract.
The strike price provides generators with a buffer from market volatility as they receive top up payments from the wholesale power price to reach their contracted strike price. If the wholesale power price exceeds the strike price, the generator is required to pay back the difference.
The budget for the scheme is split into allocation pots, grouped by technology type. The scheme is administered by the Low Carbon Contracts Company (LCCC).