What Exactly Is a Feed-In Tariff (FIT)?
Feed-in tariffs encourage investment in renewable energy sources. In most cases, this entails paying small-scale energy sources, such as solar and wind energy, rates that are higher than the market average for grid deliveries.
A comprehension of feed-in tariffs (FITs)
Feed-in tariffs are needed to boost renewable energy sources early on, when production is typically unprofitable. Energy feed-in tariffs are generally long-term agreements with rates based on production costs. Long-term contracts and fixed pricing protect renewable energy providers from some risks, boosting investment and development.
Small-scale energy producers and feed-in tariffs
A feed-in tariff is available to all renewable energy providers, although few commercial ones use it. Private investors, farmers, company owners, and homeowners are examples. Three provisions are typical of FITs.
- They ensure energy producers have grid access.
- They provide contracts ranging from 15 to 25 years in length.
- They guarantee cost-based purchasing prices for energy producers, paying them according to the resources and capital used to create them.
Feed-in tariff history
The US pioneered feed-in tariffs. The Carter government initially deployed it in 1978 in reaction to the 1970s energy crisis, which caused lengthy gas lines. The National Energy Act’s FIT promoted energy-saving and renewable energy sources like solar and wind power.
The Rise of FITs
Since then, FITs have been utilized globally. Japan, Germany, and China have employed them effectively for the past decade, and dozens of nations have used them to promote renewable energy. Around three-fourths of worldwide solar energy comes via feed-in tariffs.
Away from Feed-In Tariffs
Feed-in tariffs have helped promote renewable energy, but some governments are moving away from them in favor of market-driven assistance and more control over renewable energy supply. That includes Germany and China, two major FIT successes. Still, FITs are crucial to global renewable energy growth.