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Feed in Tariff for hydro, and other sources of income

The Feed in Tariff for hydro (FiT) was a government subsidy contributing to the cost of renewable energy projects in the UK. Unfortunately the scheme was closed on 31st March 2019. There are other components which when added together become significant.  They are:

  • Export price
  • Offset value
  • Combined offsetting and exporting

Export value

This is payable for every kWh of electricity exported, and the value can vary, however the current ‘market rate’ which is close to 6 p/kWh.

Exported means that it must pass outwards into the local electricity distribution network (what most people call ‘the grid’) through an export meter. An export meter looks the same as a normal import meter, but records the flow of electricity outwards from a site. Nowadays a single import/export meter is normally fitted.

To export all of the energy produced by a small hydro or micro hydro system it would have to be directly connected to the grid with its own dedicated electrical supply and not first pass through the site distribution board (see more details below under ‘offset value’). Under this arrangement every kWh generated by the system would be exported, and the export rate would be paid.

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Offset value

This is where the small hydro or micro hydro system connects into the site owner’s main distribution board. It is important to remember that electricity flows like water and will always follow the easiest route to the nearest load. This means that all of the site owners loads (i.e. lighting, sockets, machinery, air conditioners etc.) that connect to the same distribution board will be supplied firstly by the hydropower system, and only once all of these loads have been satisfied will any surplus energy from the hydro system flow backwards through the incoming supply cables, either to the next nearest distribution board on the site, or out through the export meter to the grid.

Also, because the electricity produced by the hydropower system is fully grid-synchronised, it will mix seamlessly with grid-imported electricity. This mean that if the hydro system cannot meet all of the site owners loads, then all of the electricity from the hydro system will go towards the loads and any deficit will be seamlessly imported from the grid.

Equally, if the hydro system was supplying all of the local loads but then a reduction in the river flow rate caused the output to suddenly drop, then the grid would instantly supply more to make up the deficit. From a consumers point of view the source of the electricity would be unknown; it could be from the hydro system, the grid or a combination of both.

In the situation where the on-site loads far exceed what the hydropower system could produce, then all of the electricity generated by the hydro system would be consumed on site. For example, if a hydropower system with a maximum power output of 100 kW was connected to a site that had a base load (i.e. the minimum load 24/7) of 500 kW, then 100% of the energy generated by the hydro system would be consumed on site. Financially this would be a good arrangement because the price paid for importing electricity from the grid is typically 12 p/kWh (varies between 8 – 16 p/kWh depending on the import tariff), so if the amount of import can be reduced, for every kWh it is reduced by the site owner saves 12 p. If you compare this saving of 12 p/kWh to an export price of 6 p/kWh, you can see that offsetting on-site loads is worth two times more than exporting the electricity.

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Combined offsetting and exporting

This is actually the most common arrangement and is basically the arrangement described above under ‘offset value’ except where the on-site loads are less than the power being produced by the hydropower system. Under this arrangement the on site loads would be supplied first, then the excess power exported.

The value would be made up of the amount of energy offset at 12 p/kWh (or whatever your import electricity price is) plus the amount of energy exported at around 6 p/kWh. Obviously the actual value would depend on the relative proportions, but these can be estimated at a feasibility stage based on existing electricity bills and forecast energy production from the hydro system.

Generally speaking it is best to offset imported electricity first, then export any remaining surplus to get the highest revenue from a hydropower system.

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Are you considering a hydropower project ?

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The first step to develop any small or micro hydropower site is to conduct a full feasibility study.

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Once complete, you will understand the site potential and be guided through the next steps to develop your project. You can read more about hydropower in our Hydro Learning Centre.

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