Nov 20, 2009

Feed-in Tariffs

We borrow heavily from Wikipedia for an explanation on this very important interface with traditional energy producers called a Feed-in Tariff.

A Feed-in Tariff (FiT, Feed-in Law, FiL, solar premium[1], Renewable Tariff[2] or renewable energy payments[3]) is an incentive structure to encourage the adoption of renewable energy through government legislation. The regional or national electricity utilities are obligated to buy renewable electricity (electricity generated from renewable sources, such as solar thermal power, wind power, biomass, hydropower and geothermal power) at above-market rates set by the government.[4]

The higher price helps overcome the cost disadvantages of renewable energy sources. The rate may differ among various forms of power generation. A FiT is normally phased out once the renewable reaches a significant market penetration, such as 20%, as it is not economically sustainable beyond that point........

This type of program was first implemented in the USA in 1978. President Jimmy Carter told Americans that the energy crisis was "a clear and present danger to our nation" and drew out a plan to address it....................[8]


In the effort to combat climate change, the increased deployment of renewable energy sources is regarded by many as critical. One major obstacle to this adoption is the retail price of electricity generated from renewable sources, which is typically more expensive than the retail price of electricity generated from fossil fuels. A FiT is a revenue-neutral way of making the installation of renewable energy more appealing. The electricity that is generated is bought by the utility at above market prices. For example, if the retail price of electricity is 10¢/kWh then the rate for green power might be 40¢/kWh. The difference is spread over all of the customers of the utility. For example, if $100,000 worth of green power is bought in a year by a utility that has 1,000,000 customers, then each of those customers will have 10¢ added on to their bill annually.

Thus, a small annual increase in the price of electricity per customer can result in a large incentive for people to install renewable energy systems. This is the essence of a FiT: it is a mechanism to instigate a change in the way power is produced, gradually shifting from present polluting means to non-greenhouse methods. It is normally phased out once the change has occurred. In California it covers the first 500 MW of generation only.[12] In Germany the FiT for roof top solar photovoltaics is reduced by 8% in 2009 and 2010 and then by 9% annually from 2011 onwards, instead of by 5% per year.........

It has been argued that FiT is the most effective way to promote the uptake of renewable energy yet devised. Only Renewable Tariffs have a consistent record of offering equitable opportunity to all willing participants in the market, offering the freedom to produce and sell the own energy and stimulating rapid rates of growth [2]. After investment subsidies it is the most widespread means of promoting renewable energy uptake in Europe.[15]

A few American States and cities have begun to consider and implement Feed-in Tariffs but not near as many as is needed to move away from conventional power production and into more personal home power

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