Feed-in Tariff costs set to rise to an all-time high

Research from Cornwall Insight shows that Feed-in Tariff (FiT) costs for the upcoming quarterly levelisation* could reach an all-time high, covering the period April – June 2020.

The combination of extremes in sunshine hours and low energy demand resulting from the COVID-19 lockdown has created the perfect conditions to drive up FiT costs this quarter.

Electricity suppliers are due to be invoiced for FiT levelisation on 28 July, with payments due 11 August 2020. Costs are expected to be well above last year’s level of £8.0/MWh.

Tim Dixon, Wholesale Team Lead at Cornwall Insight, said:

“In the first two months of the quarter, the UK saw 39% higher sunshine hours and 18% lower demand compared to the same period last year. As solar PV dominates the capacity installed under the scheme and that scheme costs are levied on units of electricity demand during the quarter, these all point towards the prospect of higher costs than perhaps suppliers factored into their tariffs.

“Energy Third-party Charges (TPCs) have been in the limelight recently, and rightly so as less consumption from non-domestic sectors is resulting in greater recovery of money from domestic households. Several measures have been taken to date to protect domestic suppliers and consumers from the sharp rise in some costs – for example, the deferral of additional costs arising from the Contracts for Difference (CfD) scheme.

“However, there has been little mention of the FiT scheme to date. Given the expected rise to FiT costs under such unprecedented circumstances, this will be yet another challenge that struggling suppliers will have to face to make good on their obligations.

“Cornwall Insight’s Feed-in Tariff forecast scenarios for the upcoming levelisation suggests the actual outturn costs to the supplier could be well over 5% of the overall costs for typical household electricity bills. Despite this increase, most suppliers will not have had the opportunity to adjust consumer prices to reflect changes arising from the COVID-19 lockdown.”


Notes to Editors

*FiT levelisation – FiT costs are recovered from electricity suppliers through quarterly levelisations and annual reconciliation. The levelisation process spreads these costs uniformly across all suppliers so that, although FiT licensees directly make the payments to eligible generators, they aren’t the only ones bearing the costs.