To begin with, it is worth asking the question, what is a Feed-In Tariff? A feed-in tariff is a tariff system that is created by a government to encourage investment in renewable energy sources. The UK announced the solar Feed in Tariff in 2008 and entered it into law in the Energy Act of 2008. The policy became effective in the UK from April 2010. In the UK, feed-in tariff payments are tax-free.
Renewable Farming: The shift to use renewable energy by farmers has been widely embraced because it has presented diverse opportunities and benefits to business. The benefits farmers have enjoyed from renewable farming include;
- the opportunity to generate sustainable income for long period of time
- the use of resources that are readily available on the farm, such as wind, rivers etc.
- reduction in farm electricity and heating bills
- reduction in the amount of carbon dioxide emissions
It is estimated that a global adoption of renewable farming can solve the current climate change problems in a decade. The importance of feed-in tariff to renewable farming is due to the fact the Feed-in Tariff supports renewable farming through a purchase obligation and a guaranteed stable tariff payment for a long time (usually from 15 to 20 years). In the purchase obligation, the operator of the nearest grid is obliged to buy all the renewable electricity, regardless of electricity demand. The producer of the renewable energy is also guaranteed a certain sum of money for every unit of energy that they produce. Moreover, the payment is guaranteed for a long time, thereby increasing the security of the renewable energy investment and allowing cost amortization. Feed-tariffs play an important role in renewable energy applications in farming in the following ways;
- Encouraging more renewable energy installations on farms: The feed-in tariff scheme encourages farmers to install small-scale facilities that can produce electricity (up to 5MW) and thereby receive two types of payment; Generation Tariff for every unit of electricity they generate on their farm and an Export Tariff for every unit of electricity they export to the electricity grid So, as renewable energy technology continues to be more affordable for farmers, they can have renewable energy installations on their farms to take advantage of water and wind, readily available at no cost.
- Providing efficient heating sources for communities and reducing costs: As farmers are encouraged by the feed-in tariff system to engage in renewable farming, rural communities are provided more options for heating their homes, schools, and village buildings. Moreover, the local farmers no longer have to worry about electricity bills because all the electricity and heat they need are already being produced on the farm. These reduced costs then automatically translate into cheaper costs of the farm produce (e.g. dairy products, poultry products) when they are being sold.
- More possibilities for energy storage: Another reason feed-in tariff is important to renewable farming is because it opens up the possibility for energy storage to be more affordable and efficient. The consequence of this is that power will be available to end-users during peak period of demand e.g. during winter when people need to keep warm and dry. The feed-in tariff may look like a major expenditure to government because of the concessions it grants to renewable farming, but it could be argued that its benefits are compelling.