FiT the Bill
Overall cost of Feed-in-Tariffs and electricity generation down but unit costs up.
Introduction
As regular readers will know, there are three subsidy schemes for renewables: Renewables Obligations, Contracts for Difference and Feed-in-Tariffs (FiTs). In the run up to Christmas, Ofgem published its latest report on the FiT scheme covering the period to end March 2025. Both electricity generation and the total cost of the scheme fell, but the cost per MWh generated went up. Let’s dig into the details.
Feed-in-Tariff Generation
As Figure 1 shows, generation continued the downtrend established since the period up to March 2021 and fell a further 4.5% to 7.97TWh in FY2024/25.
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 partly due to some 25.5kW of installed capacity becoming inactive during the year, bringing the total to 506.9kW since FY2021/22. However, despite the scheme being closed to new installations since FY2019/20, 98 new installations were accredited in 2024/25.
Feed-in-Tariff Payments
Payments under the scheme are split into three elements. The largest element was £1,732m paid for generating electricity. An additional £94m 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 fell 0.8% to £1,844m. This is the equivalent about £65 per household.
The total cost of the scheme has now reached £18,233m since inception. Interestingly, the second largest licensee under the scheme is Good Energy that paid out a total of over £265m in 2024/25. 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, the total cost of FiT generation per MWh has gone up again this year. This is because total generation fell more quickly than total costs.
The total cost of generation (generation plus export) rose 3.9% to £229/MWh. 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 2012/13, 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.
Note the Government will change the indexation to CPI from April 2026.
This latest FiT cost per MWh compares to the cost of Contracts for Difference (CfDs) in 2024/25 for offshore wind at about £150/MWh, onshore wind £113/MWh and solar at £92/MWh. The average market reference price so far this financial year is about £64/MWh. We are being forced to pay >3X the market rate for uncontrollable mostly solar power.
Administration Costs Up
Despite declining generation and a smaller number of active installations, the administrative costs incurred by Ofgem to manage the FiT scheme are soaring as shown in Figure 4.
Administrative costs have more than doubled since FY21/22 to £4.8m in 2024/25. They say this is because of increased spending on audit and compliance work. However, in 21/22 they carried out 70 generator audits, 50 in FY23/24 and only 33 in the latest FY24/25. In 2021/22 they conducted 12 audits of FiT licensees (electricity suppliers who process FiT payments), 10 in 2023/24 and only 5 in 2024/25. Number of audits down and costs up: it is beginning to look like Ofgem is out of control.
Conclusions
We can expect the cost of electricity from the Feed-in-Tariff scheme to continue to rise for the foreseeable future. It is more difficult to judge how the overall costs of the scheme will develop. If the rate of inflation stays below rate of decay of generation, then the overall cost will drop slightly. We already have the highest industrial electricity prices in the IEA and Europe and domestic electricity prices are close to the highest too. We simply cannot afford to keep this scheme running in its present form.
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An aspect of this that always blows my mind is that yes we (bill payers) are paying £229 / MWh but the users who have this generation installed are paying nothing to use the electricity. This is like if a big factory had it's own power plant and the public paid (over the odds) for the electricity it made, the factory used the electricity and paid nothing! People would be outraged! The average cost of electricity supplied to your house was around £250 / MWh last year so I think that should be added to the FiT cost "to the public who aren't FiT generators" because without it we wouldn't be paying the FiT and the current FiT users would actually have to pay full bills for their use. So £479 / MWh... (I accept I have ignored the export aspect). I admit I'm not 100% on this thought so please let me know where I am wrong - I accept I could be mistaken. It would be appreciated.
The big success that FiT always claims is driving down the cost of solar power by creating a demand. Well maybe but this also has to be tempered with the reality that one country benefited, China, and they are more than willing to restrict access to critical goods if it serves their interest. It also glosses over the massive technology theft (and other morally difficult things) that led them to drive costs down. I worked for a company that partially owned another company called Hemlock Semiconductor that opened a large polysilicon for solar factory in Clarksville, Tennessee. The story I have heard is that the factory never opened because 1. The Chinese stole the tech and built their own copies and 2. Whilst building up the efficient factories they put tariff protection in place to prevent the import of polysilicon into china to be assembled into panels. So not 100% a good news story.
There is also the unfairness of this within UK society where generally younger poorer people with smaller houses are transferring cash to older richer people with bigger houses which doesn't sit too well.
Thanks again for a read Sunday morning Dave
Here is byzantine structure of just one of these FiT entities Guston C Solar Farm Limited (5MW solar accredited in Dec 15 located in East Kent). Originally setup in 2013 and owned by Wirsol UK Ltd a German solar farm developer. German owners file for insolvency and it ends up with a Singaporean backed company Conergy West Sussex Ltd. They then offload it in 2015 to Magnetar Solar (UK) Ltd an entity controlled from Luxembourg. Come 2016 Magnetar Solar creates a new entity Perpetual Power (UK) Ltd to hold its UK SPV assets. This is then sold in 2017 to RFE Gen Co Ltd an entity controlled by Rockfire Resources an investment company. RFE Genc Co gets renamed Toucan Gen Co as does the controlling entity to Toucan Energy. Toucan Gen Co gets put into a Toucan Holdings Energy 1 Ltd in 2022 prior to its sale to a Schroders Greencoat entity as a result of administration. By this time this little FiT co is part of big holding company owning 53 solar parks and being financed by the inept West Thurrock BC.
Anyhow back to our Fit which cost c5M to construct has managed to rack up losses most of the years its been trading. As is usual with these entities there's more financial engineering than real engineering where upon the owning companies charge exorbitant admin and finance charges to keep them in loss. All financed by consumers to enrich others.