Feed -In-Tariffs came into being last April and were introduced by Labour to encourage householders to install solar panels or wind turbines, paying them a tax free, index-linked income for the energy they produce.
The coalition agreement drawn up by the Conservatives and Liberal Democrats promised to honour "the full establishment of feed-in-tariff systems in electricity."
The tariffs pay up to 41.3p for every KWh of electricity produced using solar panels and an extra 3p per unit on top of any surplus electricity sold back to the grid. When you cannot generate enough energy for your needs, you buy electricity from your utility company at normal rates, but you will buy less, making significant savings on utility bills.
Given that the income is tax-free, the return on a 14.000 pound investment is equivalent to 12.9% for a 50% taxpayer and 10.3% for a 40% taxpayer, with the investment recouped in as little as seven years. As the payments are linked to RPI, this equates to a real return of 18.2% and 15.6% respectively at today's RPI rate of 5.3%
