A Feed-In-Tariff (FiT) allows residential property owners, businesses, and electric utility companies that generate electricity to sell the energy. The seller receives long-term payments for each kilowatt-hour (kWh) of energy sold. Acceptable energy technologies include wind, biomass, photovoltaic (PV), and solar thermal energy.
The Carter Administration introduced the first FiT in 1978 as part of the National Energy Act (NEA), which Congress passed in response to the Arab Oil Embargo. Feed-in-tariffs epitomizes the one global policy that has fueled the most aggressive growth of renewable energy resources over the last ten years.
At the end of 2011, world-wide photovoltaic installation totaled 67.4 gigawatts (GW). According to the website Solar Industry Magazine, more than 75% of the global installation capacity for solar energy generation has a direct correlation with the implementation of feed-in-tariff (FiT) policies, especially in Europe.
The Worldwide Institute, an organization dedicated to global environmental concerns, states that while Europe has benefited from FiT policies for years, the U.S. and Canada have finally begun implementing their own policies.
Germany’s national FIT policy, known as the 2004 Renewable Energy Sources Act, serves as a model for the FiT programs established by many national and local governments. More than 10 years of data show that FiTs provide the most efficient and least expensive policy for supporting solar energy development.
More importantly, FiTs make the solar energy (renewable energy) industry more attractive to investors because it eliminates many of the financial risks associated with the technology, which is still in its embryonic stage of development.
The key features inherent in most feed-in-tariff schemes include:
- Long-term agreements
- Pricing linked to cost of production
- Guaranteed access to the electrical grid
Germany originally implemented its FiT policy in 2000 and conduct annual reviews. The country has become the global leader for PV installation capacity. In 2011, Germany had 24.7 GW, solar installation capacity followed by Italy with 12.5 GW. China, the U.S., and France finished the year with 2 GW, 1.6 GW, and 1.5 GW, respectively.
State FIT Initiatives
Unlike other nations, the U.S. does not have a national feed-in-tariff. Currently, the federal government offers incentives for solar PV, and other renewable energy renewable energy systems, in the form of tax credits and depreciation. State and local governments have developed their own FiT policies.
California has the most aggressive renewable energy policy in the United States. The state has the goal obtaining 33 percent of its electricity from solar PV and other renewable energy by 2020. The state’s FiT allows solar power facility owners, with systems up to a specific size to enter into 10-, 15-, or 20-year agreements. Los Angeles is the largest city in the world with a FiT program. Sacramento also has a tariff.
Gainesville, Florida passed a FIT program in 2011, after the city’s Assistant General Manager Ed Regan visited Germany to evaluate their FiT model up close. Early signups for the program receive a price of $0.32/kWh for a 20-year period. Washington State’s FiT scheme pays electricity generators $0.15/kWh. The amount increases to $0.54/kWh for systems built with components manufactured in the state.
Other states that have feed-in-tariff include Vermont, Michigan, and Hawaii.