On 1 February 2010 the Department of Energy and Climate Change (DECC) announced the introduction of the Feed-In Tariff scheme (FITs) across the UK. From 1 April 2010 households, organisations, businesses and communities that install renewable energy systems can apply for a “feed-in tariff” from their electricity supplier, which provides a payment for the electricity they generate. This new scheme will largely replace the current Renewable Obligation Certificates (ROCS) system across the UK for small scale renewable projects. 
 

Purpose of FITs
The aim of the tariff is to encourage smaller scale renewable energy production. FITs are intended to provide higher levels of guaranteed income than the current ROCS system, as they are based on the electricity generated by the renewable energy system with an additional bonus for any energy which is exported to the grid. This means that clients get paid more for the energy they do not use, than for that which they do, thereby encouraging energy efficiency. FITs are not the same as the ROCS scheme: ROCS will continue to apply to large scale centralised renewable generation such as landfill, hydro power and windfarms.

How they work
The scheme provides for a guaranteed fixed rate for every kilowatt of electricity generated by renewable technologies of up to 5MW in size. This level of payment will depend on the technology used and is linked to inflation. A further payment, proposed to be a further 5p/kWh, will be made for any surplus electricity fed into the national grid. Feed-in Tariffs are only available for the following technologies:

• Wind
• Solar PV
• Hydro
• Anaerobic digestion
• Biomass and biomass CHP
• Non-renewable micro CHP

The level of FITs has now been fixed and can be viewed at page 47 of the DECC document “Feed-In Tariffs: Government’s Response to the Summer 2009 Consultation”. (http://www.ownergy.co.uk/dox/Policy/GovernmentResponsetotheFITsConsultation.pdf)

 
Implications
 

Tax
The tax treatment of the tariffs (i.e. income tax and VAT) has yet to be confirmed. The Treasury introduced a special measure in 2007 to make income exempt from ROCS tax, so there is a clear precedent which could be followed regarding the new FITs scheme. 

Planning
In announcing the recent FITs proposals, the UK government has stated that the UK planning system “will not prevent households installing micro-renewables”. Installation of micro-renewables is currently governed by the Town and Country Planning (General Permitted Development)(Domestic Microgeneration)(Scotland) Amendment Order 2009 which enables certain microgeneration equipment to be installed, subject to restrictions, on existing domestic buildings without the need to apply for planning permission. This applies to solar, biomass, and combined heat and power systems for generation of electricity up to 50 kW.

Regarding small scale wind turbines, the Scottish Government has this month launched a consultation seeking views on the proposal that one micro turbine will be permitted per dwelling if installed over 100 metres from neighbouring domestic curtilage. Until then, planning authorities will decide such applications taking into account the size, location and surrounding of the proposed turbine.

Commercial clients looking to carry out micro renewable projects will require to apply for planning permission in the normal way.

Comment
At these early stages it remains to be seen whether more applications for these smaller renewable technologies will be made, and how planning authorities will deal with any increase in such applications. However, we do expect to see increased activity as landowners and companies become attracted to the incentives for small scale projects.  

Further information
Anderson Strathern LLP have many years experience in dealing with a wide range of renewable projects. For further information on any of these aspects, please contact Jim Drysdale or Gail Clarke (land, environment and renewables), Alastair McKie (planning) and Bruce Farquhar (corporate renewables), or your usual contact within the Land Resources, Planning and Environment or Corporate Team. 

This bulletin is for general information only and does not constitute legal, investment or other professional advice. Please contact us should you require advice on any particular legal issue. Anderson Strathern LLP accepts no responsibility for any loss that may arise if reliance is placed on any information or opinions expressed in this bulletin.