Feed-In Tariff (FIT)

What Is a Feed-In Tariff (FIT)?

A feed-in tariff is a policy device intended to advance investment in renewable energy sources. This typically means promising small-scale producers of the energy —, for example, sun powered or wind energy — an above-market price for what they deliver to the grid.

Understanding Feed-In Tariffs (FITs)

Feed-in tariffs are viewed as important to advance renewable energy sources in the beginning phases of their development, when production is frequently not [economically feasible](/attainability study). Feed-in tariffs normally involve long-term agreements and prices tied to the cost of production of the energy being referred to. The long-term contracts and guaranteed prices shelter producers from a portion of the risks inherent in renewable energy production, encouraging investment and development that in any case probably won't occur.

Feed-In Tariffs and Small Energy Producers

Any individual who produces renewable energy is eligible for a feed-in tariff, however the people who exploit it are many times not commercial energy producers. They can include homeowners, business owners, farmers, and private investors. Generally, FITs have three provisions.

1. They guarantee grid access, meaning energy producers will approach the grid.
2. They offer long-term contracts, commonly in the scope of 15 to 25 years.
3. They offer guaranteed, cost-based purchase prices, meaning that energy producers are paid with respect to the resources and capital exhausted in order to deliver the energy.

One of the first feed-in quite a while was carried out in the U.S. by the Carter administration in 1978, yet they are currently utilized around the world.

History of Feed-In Tariffs (FITs)

The U.S. was a trailblazer in feed-in tariffs. Its previously was carried out by the Carter administration in 1978 in response to the energy crisis of the 1970s, which broadly made long lines at gas siphons. Known as the National Energy Act, the FIT was intended to advance energy protection along with the development of renewable energy, for example, sunlight based and wind power.

The Growth in Use of FITs

Since then FITs have become widely utilized internationally. Japan, Germany, and China have all pre-owned them effectively over the course of the last decade or something like that, and in total many countries have utilized them to some degree to drive the development of renewable energy. It is estimated that around three-fourths of global sunlight based energy is linked to feed-in tariffs.

A Shift Away From Feed-In Tariffs

Regardless of the fruitful job feed-in tariffs have played in promoting the development of renewable energy, a few countries are turning away from relying on them, instead seeking more market-driven wellsprings of support as well as more control over the supply of renewable energy that is delivered. That includes Germany and China, two of the more prominent FIT examples of overcoming adversity. Regardless, FITs actually play an imperative job in the development of renewable energy resources around the globe.

Features

• FITs typically involve long-term contracts, from 15 to 20 years.
• FITs are common in the U.S. also, around the world, utilized most eminently in Germany and Japan.
• A feed-in tariff (FIT) is a policy intended to support the development of renewable energy sources by providing a guaranteed, above-market price for producers.