What is a Solar Feed In Tariff (FiT)?
A Feed In Tariff (Fit) is a one of many financial incentives that can be offered in order to promote the use of renewable energy. It was first seen in Germany in 2000 and has since spread to countries such as China, Australia, and Ireland and several US states including Hawaii and Michigan.
Regions that mandate FiTs require utilities to purchase each kilowatt hour (kWh) of energy from individual residential and commercial producers of renewable energy (usually solar or wind). In essence this makes the producer a small-scale utility, selling ALL of the power you produce back to “the grid.” The person or business will sign an initial contract with the utility, locking in a certain rate for a set period of time (usually 15-25 years).
So what does this mean in terms of the power YOU, the solar producer, actually use and the energy bill you receive at the end of the month? Sine you are selling all of the electricity you produce back to the utility, you will receive a bill for the energy you use at the standard rate. However, you will receive payment for the amount of electricity which you produce, which is at a much higher rate (sometimes as much as 4 or 5 times higher than the going coal rate).
For example: If you use $80 worth of energy at the standard rate, you will be billed for $80. But you will receive a credit of, say, $300 (depending on the reimbursement rate). So your check will be for $220. Got it? You can put this straight into the cost of your solar or wind system, and once that is paid off (usually 5-10 years) it will be money in your pocket.
Feed in Tariffs are not to be confused with net-metering, which simply provides producers with a credit for unused electricity which can be applied to future bills.