Renewable energy subsidies in Great Britain
Various mechanisms have been put in place in Britain during the 21st century to support and incentivise a switch from fossil-fuel based power generation to renewable resources. This article provides a summary of all active and inactive schemes.
Active schemes
There are three active mechanisms currently in force in Britain, supporting renewable energy resources.
Contract for Difference (CfD)
Active years: 2014–present
Purpose: The primary subsidy for supporting low-carbon generation. CfDs provide investor confidence by guaranteeing a minimum price during periods of low wholesale electricity costs. They also return excess profits to consumers when wholesale prices are high. Allocation rounds are held to award contracts. During these rounds, providers submit sealed bids known as strike prices, which represent the cost per MWh that the generator will accept over the agreed contract period (normally 15 years). These submissions are assessed, and the lowest strike prices are awarded contracts until the available CfD budget is exhausted.
Size: Typically utility-scale
Offered by: A UK government-owned company, Low Carbon Contracts Company
Smart Export Guarantee (SEG)
Active years: 2020–present
Purpose: A replacement for the Feed-in Tariff scheme, the SEG aims to support small-scale renewable resources. When a renewable generator exports electricity to the grid, the energy supplier pays an agreed rate for each unit of energy exported. Tariff rates are set by suppliers.
Size: Less than 5 MW, excluding micro-CHP, which is limited to 50 kW
Offered by: Mandatory for suppliers with more than 150,000 customers; optional for smaller suppliers
Renewable Energy Guarantee of Origin (REGO)
Active years: 2003–present
Purpose: Purchased by energy suppliers from renewable generators to demonstrate that an equivalent amount of electricity has been generated from renewable sources. REGOs certify renewable generation, allowing suppliers to claim a tariff is 100% renewable, for example. They are also used for reporting under the Fuel Mix Disclosure.
Offered by: Ofgem
Inactive schemes
Two mechanisms have been offered in the past which have now been withdrawn for new applications. For existing installations, these are still applicable.
Renewable Obligation (RO)
Active years: 2002–2017 (closed to new applicants; existing projects remain supported)
Purpose: Designed to encourage renewable energy infrastructure by requiring electricity suppliers to purchase Renewable Obligation Certificates (ROCs) to demonstrate that their energy came from renewable sources, or alternatively to pay into a buy-out fund. The administration costs of the scheme were funded through the buy-out fund, with remaining funds redistributed to suppliers in proportion to their share of ROCs.
Offered by: Ofgem
Feed-in Tariff (FiT)
Active years: 2010–2019 (closed to new applicants; existing projects remain supported)
Purpose: The FiT aimed to support small-scale renewable resources. Unlike the SEG, energy suppliers paid an agreed rate for each unit of electricity generated, whether used locally or exported to the grid. Payments were made for between 10 and 25 years, depending on technology type.
Size: Less than 5 MW, excluding micro-CHP, which was limited to 2 kW
Offered by: Mandatory for suppliers with more than 250,000 customers; optional for smaller suppliers