Feed-in tariff

A feed-in tariff (FIT, FiT, standard offer contract, advanced renewable tariff, or renewable energy payments) is a policy mechanism designed to accelerate investment in renewable energy technologies. It achieves this by offering long-term contracts to renewable energy producers, typically based on the cost of generation of each technology. Rather than pay an equal amount for energy, however generated, technologies such as wind power and solar PV, for instance, are awarded a lower per-kWh price, while technologies such as tidal power are offered a higher price, reflecting costs that are higher at the moment and allowing a government to encourage development of one technology over another. In addition, feed-in tariffs often include 'tariff degression', a mechanism according to which the price (or tariff) ratchets down over time. This is done in order to track:25 and encourage technological cost reductions.:100 The goal of feed-in tariffs is to offer cost-based compensation to renewable energy producers, providing price certainty and long-term contracts that help finance renewable energy investments. FITs typically include three key provisions: Under a feed-in tariff, eligible renewable electricity generators, including homeowners, business owners, farmers and private investors, are paid a cost-based price for the renewable electricity they supply to the grid. This enables diverse technologies (wind, solar, biogas, etc.) to be developed and provides investors a reasonable return. This principle was explained in Germany's 2000 Renewable Energy Sources Act: As a result, the tariff (or rate) may differ by technology, location (e.g. rooftop or ground-mounted for solar PV projects), size (residential or commercial scale) and region. The tariffs are typically designed to decline over time to track and encourage technological change. FITs typically offer a guaranteed purchase agreement for long (15–25 year) periods. Performance-based rates give incentives to producers to maximize the output and efficiency of their project. As of 2010, feed-in tariff policies had been enacted in over 50 countries, including Algeria, Australia, Austria, Belgium, Brazil, Canada, China, Cyprus, the Czech Republic, Denmark, Estonia, France, Germany, Greece, Hungary, Iran, Republic of Ireland, Israel, Italy, Kenya, the Republic of Korea, Lithuania, Luxembourg, the Netherlands, Pakistan, Portugal, South Africa, Spain, Switzerland, Tanzania, Thailand, Turkey and the United Kingdom. In early 2012 in Spain, the Rajoy administration suspended the feed-in tariff for new projects.