Introduction

Merry Christmas everyone. In the run up to Christmas, Ofgem published its latest report on the Feed-in-Tariff (FiT) scheme. Despite falling electricity generation, payments under the scheme reached a record £1.84bn and the total cost of the scheme reached £1.86bn. This bonus article walks through the key statistics from the latest report.

Feed-in-Tariff Generation

Solar power makes up nearly 99% of the number of FiT installations and over 79% of installed capacity. Ofgem does not give a breakdown of actual generation by technology, but we can safely assume that solar produces the bulk of output. As Figure 1 shows, generation fell 6.3% to 8.34TWh in FY2023/24.

It does appear as though generation under the scheme peaked in year-ended March 2021 and is now on a gentle glide path downwards. This may be due to some 467 installations becoming inactive since 2021/22. However, even though the FiT scheme has been closed to new entrants for some time, 928 new installations have been accredited in the same period. It looks like the older installations are slowly degrading and producing less each year.

Feed-in-Tariff Payments

Payments under the scheme are split into three elements. The largest element was £1,762m paid for generating electricity. An additional £78m was paid for electricity exports and a further £18m paid to licensees for administering the scheme. As shown in Figure 2, the total value of the scheme increased 7.2% to £1,858m, new record. This is the equivalent about £65 per household. These charges disproportionately impact the poorest in society and benefit the rich who could afford to put solar panels on their roof.

Figure 2 - Total Value of FiT Scheme by Year (£m)

The total cost of the scheme has now reached £16,389m since inception. Interestingly, the second largest licensee under the scheme is Good Energy that paid out a total of over £260m in 2023/24. This means that Good Energy is probably one of the largest recipients of the FiT administration fees. By pure coincidence, I am sure, the CEO of Good Energy is Nigel Pocklington who just happens to be the brother of Jeremy Pocklington who is the Permanent Secretary at DESNZ.

Cost of Feed-in-Tariff Generation

As shown in Figure 3, increased payments coupled with reduced generation has meant that the cost per MWh of generation has soared.

The total cost of generation (generation plus export) rose 14.5% to £221/MWh. This is because the FiT payments are index-linked and go up each year in line with the Retail Price Index. The average payment peaked at £310/MWh in 2022/23, then fell to £174/MWh in 2019/20 as new installations attracted lower subsidies. However, now there are very few new installations coming online, prices are rising and are now higher than at any point since 2014/15.

This latest cost per MWh compares to the cost of currently active Contracts for Difference (CfDs) for offshore wind at about £150/MWh, onshore wind £113/MWh and solar at £110/MWh. The average market reference price so far this financial year is about £69/MWh. We are being forced to pay >3X the market rate for uncontrollable mostly solar power.

Conclusions

We can expect the cost of the Feed-in-Tariff scheme to continue at very high rates for the foreseeable future. The duration of FiT contracts is 20-25 years and if the rate of inflation stays above rate of decay of generation, then the overall cost will continue to increase.

However, we can expect the cost per MWh of generation to keep on going up and we will continue to pay over the odds for electricity until the country goes bust. We really need our politicians to prioritise cheap energy over almost everything else instead of signalling their green virtue on the world stage.

If you enjoyed this article, please share it with your family, friends and colleagues and sign up to receive more content. This week’s main article will be published on Sunday and demonstrate how plans for a net zero grid are set to send electricity prices to infinity and beyond.

This article (Feed-in-Tariff Fit to Bust the Country) was created and published by David Turver and is republished here under “Fair Use”

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