Feed-In Tariffs: The pros and cons every business should know!

Navigating energy options for your business can sometimes feel like steering a ship through unpredictable waters. Complex, shifting, and full of potential peril. Among these choices, one that often comes up is the feed-in tariff. But what exactly is it, how does it work, and is it the right option for your business?

No matter the nature or size of business, energy remains a constant concern. Managing costs, maintaining a stable supply, and finding ways to lower your carbon footprint are all essential considerations. 

This guide will take you through everything you need to know about feed-in tariffs, including what they cost and who stands to benefit the most.

More importantly, it will show you why tem energy’s RED might be a smarter, simpler alternative.

What is a feed-in tariff? 

In simple terms, a feed-in tariff, or FiT, is a government-backed scheme designed to encourage businesses to generate renewable energy on-site. Think of it as a system where you get paid for the energy you generate and “feed back” into the national grid. 

Whether you’re using solar panels, wind turbines, or other renewable energy sources, you could earn money for every unit of electricity you produce.

How do feed-in tariffs work? 

The process is straightforward. Your business generates renewable energy, let’s say through solar panels on your business’s rooftop. Any energy you produce but don’t use is exported to the national grid. In return, you receive payments, which are usually calculated based on the amount of energy you generate and the rate set when you join the scheme.

What are the pros and cons of feed-in tariffs for businesses?

When considering feed-in tariffs for your business, it’s essential to weigh both the advantages and the potential drawbacks. These schemes can offer financial and environmental benefits, but they also come with responsibilities and costs.

The pros of feed-in tariffs: 

Income Generation 

Earn money for every kilowatt-hour (kWh) of energy you generate. This can provide an extra revenue stream for your business, turning sunlight or wind into financial gain.

Energy Savings 

Reduce your reliance on the grid and lower your energy costs. Generating your electricity means you’re less exposed to fluctuating energy prices.

Environmental Impact

Contribute to a lower-carbon future. By using renewable energy sources, your business can actively reduce its carbon footprint.

These advantages can be significant, especially for businesses committed to sustainability or those looking for new ways to reduce operating costs.

The cons of feed-in tariffs: 

• Initial Costs: Setting up renewable energy systems like solar panels can be expensive. The upfront investment might be a barrier for most smaller businesses.

• Ongoing Maintenance: You are responsible for maintaining your energy-generating equipment. Regular upkeep is essential to keep your system running efficiently.

• Limited Eligibility: Not all businesses may qualify for the most favourable rates. Some schemes may have restrictions based on system size or renewable energy type.

What are the costs associated with feed-in tariffs? 

Feed-in tariffs (FiTs) come with hidden costs linked to on-site energy generation. The technology needed isn’t free. There are upfront costs and ongoing monthly expenses.

Businesses need to understand these costs before choosing FiTs. Absolutely, you can earn income from renewable energy, but you also need to consider what you’ll spend.

Those costs should be included in your time-to-profit planning.

Labour and installation expenses 

You don’t just buy the technology, you also have to pay for installation, a fact people often forget. 

Labour costs can account for 25-30% of the installation cost of renewable systems like solar panels. For example, a 4 kW system may incur labour costs of £600 to £1,000.

Ongoing maintenance costs 

Maintenance is essential to keep your renewable systems running efficiently. For solar panels, this may involve cleaning, inspections, and occasional repairs. Regular upkeep ensures that your system performs optimally, maximising both energy generation and income.

Administrative and compliance costs 

Participating in the feed-in tariff scheme means managing paperwork, submitting meter readings, and ensuring compliance with scheme rules. While these tasks may not always have direct costs, they require time and resources away from other business priorities.

Future considerations: Zonal electricity pricing 

The government is currently exploring zonal electricity pricing, which could mean different regions of the UK face different energy costs. 

While Feed-in-Tariffs currently offer a fixed rate for generated energy, this change might affect the overall value of generating power. Depending on where your business operates FiTs may become a more attractive option, or you may start to see fewer savings. 

This potential development could add another factor to consider when deciding if a Feed-in-Tariff system is the right choice for your business. 

Main considerations before proceeding with feed-in tariffs 

Deciding whether to invest in a feed-in tariff scheme isn’t just about the potential income. It’s about weighing that income against the commitment you’re making. Think of it like planting a tree, you need the right soil, the right conditions, and the patience to see it grow.

• Upfront Investment: Are you prepared for the initial costs of installing renewable energy equipment?

• Space and Location: Do you have enough suitable space for solar panels or other installations?

• Energy Needs: How much energy do you generate compared to what you consume?

Beyond these basics, it’s also worth considering any future changes to government policies, energy prices, or your business’s energy needs.

Which businesses benefit most from feed-in tariffs? 

Feed-in tariffs are most beneficial for businesses with reliable access to renewable energy sources. But which specific industries stand to gain the most?

• Agricultural Businesses: Large open spaces for solar panels or wind turbines make them ideal candidates.

• Manufacturing and Warehousing: Vast roof spaces allow significant energy generation potential.

• Hospitality Sector: Hotels, resorts, and holiday parks can reduce energy costs and generate income.

• Educational Institutions: Schools and universities can leverage renewable energy as a teaching tool.

• Retail Complexes: Large rooftop areas make solar a viable option.

• Rural Enterprises: Off-grid businesses benefit by generating their own energy.

These are just a few examples, but the key is having suitable space for renewable energy installations and a business model that can benefit from either using or exporting that energy.

Why tem energy’s RED is a better alternative

While feed-in tariffs can offer some benefits, they aren’t always the best solution for businesses. tem energy’s RED offers a more flexible, direct, and transparent way for businesses to access renewable energy.

Why choose Renewable Energy DirectTM?  

• Direct Access: Source clean energy directly without the need for expensive on-site generation equipment.

• Cost Control: Avoid the upfront costs and maintenance responsibilities associated with generating your energy.

• Flexibility: Access a wide range of renewable energy options without being locked into a single type of generation.

Let’s make business energy affordable, together.  

Feed-in tariffs can be a useful tool for some businesses looking to generate their own renewable energy. They offer a way to turn sunlight, wind, or other renewable sources into a direct income stream while also supporting sustainability goals. But they come with costs, complexities, and responsibilities.

For businesses that want a simpler, more flexible way to access clean energy, tem energy’s RED is a smarter choice. 

Skip the setup costs, skip the maintenance—just access renewable energy directly and efficiently.

Ready to explore a more efficient way to power your business? Find out how Renewable Energy DirectTM can deliver clean, cost-effective energy, without the need for your renewable installations. Contact us today for more information!