Feed-in Tariff

A feed-in tariff (FIT) is a policy mechanism that pays solar system owners a guaranteed, fixed rate for every kilowatt-hour of electricity they feed into the utility grid, typically through a long-term contract of 15-25 years. Unlike net metering (which credits exports against consumption), a feed-in tariff pays for all exported electricity at a set price regardless of the owner's consumption patterns.

Feed-in tariffs were instrumental in driving early solar adoption in Germany, Spain, Japan, and other countries during the 2000s and 2010s. By guaranteeing a profitable rate for solar generation over a long contract period, FITs eliminated investment risk and made solar financially attractive before panel prices dropped to current levels.

In the United States, feed-in tariffs are rare at the state level but exist in some utility and municipal programs. Several cities and utilities have offered limited FIT programs as alternatives to net metering, typically at rates that make solar investment attractive without the complexity of SREC markets or time-of-use optimization.

The FIT rate is usually set above the wholesale electricity price but may be above or below retail rates depending on the program's goals. Early European FITs offered very generous rates that created solar booms but also led to high costs for ratepayers. Modern FIT programs typically set rates closer to grid parity, balancing solar incentives against ratepayer impact.

As solar costs have plummeted and net metering has become widespread, feed-in tariffs have become less common in new policy design. However, they remain active in many countries and some US jurisdictions. The concept is experiencing a partial revival in the form of value-of-solar tariffs that set export rates based on the calculated grid benefit of distributed solar generation.