What are Feed-In Tariffs and How Do They Encourage Rooftop Solar?

Published February 2013 by

Feed-In Tariffs (FITs) are often mentioned when people are considering the incentives to rooftop solar, but the name certainly doesn’t make the concept clear to the public.  If you are considering a rooftop solar system, you may have heard the term but have no clear concept of its meaning.

Feed-In Tariffs are basically a guarantee that the local utility company in your area will buy the power you produce at an attractive price.  This incentive is typically associated with small-scale rooftop solar installations but applies to just about any kind of small to medium scale renewable energy generation including wind installations.

California has a limited FIT which authorizes the utilities to purchase up to 750 megawatts of power.  This is roughly the generating capacity of a medium sized coal plant and equals close to 2% of California’s peak power consumption on a typical day in the summer.  The current FIT is not even close to where it needs to be to encourage the state’s requirement of 1/3 of electrical power from renewable energy by 2020.  Some local areas are offering FITs as well to help close the gap.

Do FITs get results?  Countries like Germany and Australia have aggressive FITs which encourage solar and other renewable energy in their countries.  Germany pays producers a premium rate for any energy they feed into the grid.  Australia’s system is more like California’s net-metering policy, paying for power until the property owner’s electric bill zeros out and then paying the going FIT price for any additional energy generated.

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