The intertemporal unfairness of the feed-in tariff scheme in the United Kingdom: Catching up across regions

Abstract

The Feed-in Tariff (FIT) scheme in the UK was designed to promote residential solar photovoltaic (PV) projects by offering fixed payments for electricity generated, thereby positioning solar PV as an investment opportunity for households. This study investigates the role of income in shaping the uptake of solar PV under the FIT scheme and assesses the intertemporal fairness of the financial returns it provides. Using data from 323 local authority districts, the analysis focuses on two major installation peaks in 2011 and 2015, which correspond to significant changes in tariff rates. The findings reveal a positive relationship between income and solar PV adoption during the first peak, but a negative relationship in the second. This shift suggests that as installation costs declined, lower-income regions began to catch up in adopting solar PV. However, by estimating the expected (ex ante) rates of return across these periods, the study identifies a substantial decline in returns, both between the two peaks and following sharp reductions in tariff rates. These results indicate that early adopters in higher-income regions achieved significantly higher financial returns than those who adopted later. The study reveals a form of intertemporal unfairness embedded in the FIT scheme, confirming the need for more frequent and responsive tariff adjustments to ensure consistent investment incentives over time