Households and communities who install generating technologies such as small wind turbines and solar panels will from April be entitled to claim payments for the low carbon electricity they produce.
Energy and climate change secretary Ed Miliband today announced the feed-in tariff (FITs) levels and also published a blueprint for a similar scheme to be introduced in April 2011 to incentivise low carbon heating technologies. The renewable heat incentive (RHI) is thought to be a world first.
The schemes are designed to bring about a significant increase in the amount of locally produced green energy, as a contribution to the wider shift of the energy mix to low carbon.
Miliband said: "The guarantee of getting an income on top of saving on energy bills will be an incentive to householders and communities wanting to make the move to low carbon living. The feed-in tariff will change the way householders and communities think about their future energy needs, making the payback for investment far shorter than in the past. It will also change the outlook for a range of industries, in particular those in the business of producing and installing small scale low carbon technology."
From 1 April householders and communities who install low carbon electricity technology such as solar photovoltaic (pv) panels and wind turbines up to 5 megawatts will be paid for the electricity they generate, even if they use it themselves. The level of payment depends on the technology and is linked to inflation.
They will get a further payment for any electricity they feed into the grid. These payments will be in addition to benefiting from reduced bills as they reduce the need to buy electricity. The scheme will also apply to installations commissioned since July 2008 when the policy was announced.
A typical 2.5kW well sited solar pv installation could offer a homeowner a reward of up to £900 and save them £140 a year on their electricity bill.
Miliband was speaking as he visited low income homes in Dagenham being helped by eaga's Clean Energy for Social Housing project to make the move to microgeneration. The scheme offers free clean energy technology to tenants in social housing which will lower their electricity bills and carbon emissions.
John Swinney, eaga director of strategy and corporate services, said: "By utilising the feed-in tariff initiative and installing free solar technology this programme can cut energy bills for those most in need. We are also recruiting and training renewable energy engineers directly from the local communities where the green technology is being installed.
"This innovative development can be offered right across the UK. We expect thousands of households to benefit in the first few years and up to 300 additional green energy jobs could be created as part of this programme."
The Department of Energy and Climate Change also published today plans for a scheme to incentivise renewable heat generation at all scales. This will come into effect in April 2011 and guarantee payments for those who install technologies such as ground source heat pumps, biomass boilers and air source heat pumps.
Under the proposed tariffs the installation of a ground source heat pump in an average semi-detached house with adequate insulation levels could be rewarded with £1,000 a year and lead to savings of £200 per year if used instead of heating oil.
The heat incentive could help thousands of consumers who are off the gas network lower their fuel bills and gain a cash reward for greening their heating supply.
Details of funding for the scheme will be published in the Budget 2010.