Examining the financial performance of micro-generation wind projects and the subsidy effect of feed-in tariffs for urban locations in the United Kingdom

This paper seeks to evaluate the effect of the upcoming 2010 UK Feed‐in Tariff (UK FIT) on decentralised small wind‐energy installations at the household and building level in urban locations. It is projected that the UK FIT will stimulate an unprecedented surge in building‐mounted turbine installation. The tariff amount must stimulate incentive but mitigate the likelihood of distortions in the competitive electricity market. To analyse these issues, measured energy output from sites in the Warwick Wind Trials Project (WWTP) is converted into revenue in a net‐present‐value (NPV) framework for assessing commercial purchases of small wind systems. Variances in project variables are examined through NPV simulations using Monte Carlo analysis to capture permutations of small wind‐project performance in the UK–with and without the UK FIT. Our research concludes that the proposed tariff amount of 30.5p/kWh will not significantly boost the economic attractiveness of mildly selective (WWTP‐based) sites in the UK. Furthermore, the fixed‐tariff rate (£/kWh generated) could cause inefficiencies applied across uneven wind‐resource distribution. The results of this study suggest further examination of policy related to micro‐generation, in particular decentralised small wind projects.