'One in 10 homes' could generate own green energy - Miliband

One in 10 households could be generating their own green energy by the end of the decade, the Government said today as it unveiled levels of cash payments for small-scale renewables.

Energy and Climate Change Secretary Ed Miliband said 10% of homes could be fitted with solar panels or get power from small-scale wind turbines and other low-carbon energy technology by 2020.

Under the "feed-in tariff" scheme, which comes into effect in April, people will be paid a fixed rate for electricity from small renewable power sources - as well as saving money on their bills.

The programme aims to boost renewable energy, cut carbon and support green jobs in the UK.

Homeowners who install photovoltaic (PV) solar panels - which generate electricity - could earn £900 a year when they first put in the technology, along with saving £140 a year on their bills.

Providing cash for people who generate green electricity for their own use and feeding it back into the grid will add around £11 on the average energy bill by 2020, the Government estimates.

The scheme covers a number of different small renewable technologies, including hydro-power, solar, wind and anaerobic digestion - a biological process which uses organic matter to make energy.

The funding for anaerobic digestion could allow farmers to use farm waste to generate electricity and make money, officials said.

Small-scale renewable power installations below 5MW - the size of two average wind turbines - could meet 2% of UK electricity needs by 2020.

Overall, renewable electricity needs to increase to meet 30% of the UK's demand, up from 5.5% today, to achieve targets set to cut greenhouse gases and boost green power.

Incentives for small-scale combined heat and power (CHP) units which generate heating and electricity at the same time are also being piloted in the programme.

Proposals for how a second incentive scheme for renewable heat, which will pay people to install technology such as ground source heat pumps and biomass boilers, were also published today.

Mr Miliband said the feed-in tariff scheme had a "very significant scale of ambition" which rivals similar programmes in countries such as Germany - where 300,000 solar panel units had been installed.

He said the Government hopes to see 700,000 solar PV units - likely to be the most popular micro-renewable technology - installed by the end of the decade, as the tariffs boost uptake.

"The guarantee of getting an income on top of saving on energy bills will be an incentive to householders and communities wanting to make the move to low carbon living.

"The feed-in tariff will change the way householders and communities think about their future energy needs, making the payback for investment far shorter than in the past.

"It will also change the outlook for a range of industries, in particular those in the business of producing and installing small-scale low carbon technology," he said.

The scheme will offer returns on the investment in green technology of around 5% to 8%, making it attractive to companies who want to invest in micro-renewables - for example on social housing.

Companies such as eaga, which is fitting free solar PV systems on council houses, can claim the feed-in tariff as a return, while the tenants benefit from energy bills which are up 15% to 20% cheaper.

John Swinney, eaga's director of strategy, said: "By utilising the feed-in tariff and installing free solar technology, this programme can cut energy bills for thousands of social housing tenants in the first year alone."

The new tariffs for electricity were welcomed by the industry.

Jeremy Leggett, executive chairman of solar company Solarcentury said: "Home energy generation and associated jobs have been given a huge boost today. The Government's financial incentives for homes, communities and businesses to generate clean electricity marks the start of a solar revolution in the UK."

Phil Bentley, managing director of British Gas, said: "Paying households for the renewable energy they generate makes the installation of microgeneration - such as solar panels - more cost-effective.

"We hope this scheme, together with the roll-out of smart meters across the country, will transform domestic energy use in Britain, helping households cut their fuel costs and their carbon emissions."

The Renewable Energy Association (REA) welcomed the proposals for incentives for heat, which is responsible for 47% of the UK's carbon emissions.

REA policy director Gaynor Hartnell said: "The UK may be languishing behind the rest of Europe on renewable heat, but the proposals launched today are an important world first.

"The industry is confident these proposals give the UK pretty much the best chance of generating over 10% of its heat from renewables by 2020."

Friends of the Earth said higher tariffs, particularly for larger systems which companies or communities might install, could greatly increase the uptake of green technology.

The green group's Dave Timms said: "The introduction of cash incentives to boost small-scale green electricity generation is welcome. However, ministers have been far too timid with a policy that could make a significant contribution to cutting emissions and boosting energy security."

John Sauven, executive director of Greenpeace UK, said: "Feed-in tariffs turn being green into an economic opportunity for households, and create skilled jobs building and installing the new technologies.

"The Government is starting to emulate best practice from countries which have been much more successful than Britain in encouraging renewable energy.

"However, the level of ambition set by the Government's feed-in tariffs is still far too low if we are to reach the full potential of small-scale renewables."

In a statement, Roger Webb from the Heating and Hotwater Industry Council (HHIC) welcomed today's announcement.

He said: "HHIC has been prominent in campaigning with other bodies for the inclusion of microCHP in the Feed-in Tariffs and welcomes this crucial development.

“We welcome today’s government’s announcement about Feed-in Tariffs and in particular the support that is being provided for microCHP within the mechanism. This will provide a useful boost for the industry and should lead to the accelerated take up of this important market transforming technology.   

"MicroCHP has the greatest mass market potential of any emerging low carbon domestic heating technology. As a simple low carbon replacement for a central heating boiler, the benefits of microCHP will be able to be realised in the majority of UK homes.

"Consumers will benefit from lower utility bills and widespread adoption of these products will provide a major contribution to reducing household carbon emissions.

"The UK is the technology leader in the development of world class microCHP products.

"Ongoing government support is essential to ensure domestic market growth to ensure that the UK maintains this position and continues to benefit from the resulting investment and employment opportunities.”