A feed-in tariff (FIT) is a government-backed policy that requires utilities to purchase electricity generated by distributed renewable energy sources at fixed premium rates above conventional energy costs. FIT programs guarantee long-term purchase agreements, typically lasting 15 to 20 years, providing financial certainty for solar system owners. These policies have successfully stimulated solar adoption across Europe, Australia, and select U.S. states by establishing predictable returns on renewable energy investments.
Economic Structure
FIT rates typically exceed retail electricity prices to incentivize system installation, ranging from $0.08 to $0.35 per kilowatt-hour depending on location and technology type. Rates often decline annually as installation costs decrease, encouraging early adoption. The tariff applies to all electricity generated, not merely excess power, eliminating the need for complex net metering calculations and simplifying utility billing processes.
Global Implementation
Germany implemented the first major FIT program in 2000, achieving 46% renewable energy generation by 2023. FIT programs have effectively deployed solar capacity in Italy, Spain, Denmark, and Australia, though some regions have reduced or eliminated FIT programs due to budget constraints and declining costs. Few U.S. states currently offer FIT programs, with most relying on net metering as the primary incentive structure for distributed solar development.