Feed-in Tariff (FiT) costs explained

The information in this video and article was accurate as of 1 April 2025. We update our TPCs Explained hub every Spring to reflect any changes.

What’s the Feed-in Tariff (FiT)?

The FiT supports small-scale (typically <5MW) renewable power generation via a fixed price support mechanism that Ofgem administers. It opened in 2010 and overlapped with the Renewables Obligation (RO) scheme and the early Contracts for Difference (CfD) scheme. The scheme closed to new contracts in March 2019.

Contracts could last up to 25 years, meaning that the support costs are still being paid.

How does FiT work?

Under FiT, households, businesses and developers that installed eligible renewable generation systems received two types of payments:

• A generation tariff for every unit of electricity they produced
• An export tariff for the electricity they didn’t use and exported to the grid

The rates were guaranteed for up to 25 years and were set at the time of registration, with payments adjusted annually for inflation.

Although the scheme closed to new applicants in 2019, those already registered continue to receive payments for the duration of their agreement.

What’s Ofgem’s role regarding FiT?

Ofgem ensures that suppliers comply with the FiT scheme’s requirements. It also runs the central databases and the levelisation process, making sure that all licensed electricity suppliers pay the right amount, according to their market share.

How are FiT costs recovered?

FiT costs are recovered through a levy on electricity suppliers, which is passed on to electricity consumers via their bills.

How much of your energy bill does FiT account for?

The FiT is the smallest renewable cost – and we expect it to account for around 4% of the typical electricity bill. Although the charge can be volatile, it’s not growing significantly because it has closed to new applicants.

Will you know about FiT costs in advance?

No, the charge isn’t known in advance. Instead, Ofgem shares an invoice with suppliers after each quarterly period.

The cost can vary substantially from one quarter to the next, mainly due to the seasonality of both demand and generation (from wind and solar sources). The lowest per unit costs tend to be in the winter, with the higher costs in the summer.

What are the key drivers for this charge?

The Feed-in Tariff charge depends on:

• The amount of renewable generation during the quarter
• The total eligible demand in the quarter
• Inflation – this is an enduring upward influence that adds to costs

To learn more about the other TPCs in your energy bill, head to our TPCs explained hub using the button below. Or, to understand more about electricity prices, download our latest bi-annual Electricity Prices Explained guide.

Disclaimer

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