How Feed in Tariff Works

How Feed in Tariff Works

Since its introduction around three decades ago, the feed-in tariff scheme has garnered interest from different sectors all over the world. This article answers the most important questions regarding feed-in tariff policies and procedures.

What is Feed-In Tariff?

Feed-In Tariff, also known as FIT, is the fee paid to anyone who sells renewable energy to the grid. The FIT scheme is designed to foster renewable energy production by rewarding those who use renewable energy technologies and produce and/or sell their own energy. Renewable power sources rewarded by the FIT policy include solar PVs, hydro-power, and wind turbines.

Feed-in tariff schemes offer long-term contracts wherein the investor is given a guarantee that he can sell electricity generated from his renewable energy technologies. Energy companies purchase the energy produced from renewable energy sources. FIT contracts last between 15-25 years.

How much can you earn through feed-in tariffs?

The amount that one can earn from feed-in tariff systems varies according to the type of renewable energy technology used in generating power, though the typical returns are between 3-7% each year. For instance, wind power technologies generate lower pay per kilowatt hour in the FIT model. Solar PV’s and tidal power generation have higher costs; therefore, they are awarded higher prices.

Another factor is the size of the energy-generation system installed in the property. Larger systems typically generate more FIT income than smaller systems of the same technology.

Feed-in tariff rates vary depending on the location of the system. Rooftop mounted solar power systems typically generate more electricity than ground mounted ones.

The appliances found in the property also affect the possible amount of earnings one can get from feed-in tariff schemes. Earnings from the FIT can be optimized by making the property energy efficient through using energy-efficient appliances. For solar power technologies, adding insulations in the walls and the roof space also helps.

How do I receive compensation under the FIT system?

There are two types of tariffs under the FIT scheme. A household that has its own power-producing technology receives generation and export tariffs. Generation tariff is the fixed rate paid for every kilowatt generated by the system, while export tariff is the payment for every unit of unused power that is exported to the power company. The amount of exported power is calculated either by a smart meter or according to a 50 percent assumption.

FIT payments come in different means. Some jurisdictions in several countries do not allow residents to use the electricity they have generated, so compensations are purely payments for purchases of the power fed into the grid. Those who are allowed to generate and use their own electricity benefit from lowered electricity bills under the FIT program.

How much does FIT renewable energy technology installation cost?

The costs of various energy production systems also vary, with solar energy systems being the most expensive and wind turbines being the cheapest option. In the United Kingdom, the average solar energy systems cost around £10,000.

How can I join the feed-in tariff scheme?

Signing up for the feed-in tariff is simple, although different countries may have different processes. The Benefits of Feed-in Tariffs have several variations in the process. Basically, you just have to install a power system and have it accredited by the particular FIT energy-generation authority in your area. After getting a certificate, you can now proceed to your energy company and send them your FIT application.

Feed-in Tariff policies are being used in over 50 countries today. Among the leaders in efficient use of FIT schemes are European nations such as Germany, Denmark, and Spain. FIT is responsible for the installation of over 55,000 MW of wind power and 15,000 MW of solar PV in the European Union and 75% of all PV and 45% of wind power worldwide.

The United States is also one of the countries that efficiently utilize renewable energy sources. Although not established nationally, there are over 25,000MW of wind and 1,250MW of PV in the country. The largest European-styled fit is located in Ontario, Canada. The province is also known for its unique FIT policy that requires all PV equipment to be locally produced.

With the problems regarding global warming and the sky-rocketing prices of petroleum products, the world needs a strong and efficient clean renewable energy program. Governments from all over the world have been spending billions on researches dedicated on finding new ways of generating environment-friendly energy sources.

One such policy is the feed-in tariff. The feed-in tariff scheme’s huge potentials and many advantages and benefits make it the most favorable renewable energy policy today. According to the European Commission, the feed-in tariff regime is the most efficient and effective method of promoting renewable energy especially if it is well adapted for the needs of the nation. Among the many benefits of feed-in tariff programs are guaranteed incomes for every unit of electricity produced and/or energy fed into the power grid, creation of jobs, cut-backs on energy bills, reduced dependence on high cost oil and gas products, and lessened impact on climate change.

Reduced energy bills- The FIT scheme also works in a way wherein the more saved energy means greater income. You can cut down on your electricity bills by producing your own electricity and using it efficiently.Income generation- One of the primary means used by the feed-in tariff scheme to draw in renewable energy producers is the compensation. In the FIT program, homes, businesses, industries, and communities are paid for every unit of electricity they produce. The FIT scheme thus generates millions of new jobs and income sources for everyone. Medium-scale and large-scale power producers are all encouraged to enroll in FIT systems and join the ‘green revolution.’

Less dependence on oil and gas products- Having available means of producing renewable energy also helps lessen our dependence on the more expensive oil and gas products. The current FIT renewable energy share in the total energy consumption is still not as sizeable as petroleum energy’s, but it offers an option for a bright future.

Less dependence on oil producers- The FIT system encourages communities to tap renewable energy such as solar, hydro, and wind power sources to power homes and businesses. The possibility of harvesting electricity in the community helps strengthen domestic and global stability as the dependence on countries that monopoly oil production is reduced.

Less greenhouse gases and other pollutants- More importantly, the feed-in tariff program is an environmental-friendly alternative for our energy production needs. More renewable energy production means less dependence on petroleum and other energy products that can pollute the air. This means less greenhouse gases released to the atmosphere and less contributions to climate change and global warming.

Worldwide Impact of Feed-In Tariff Programs

The implementation of Feed-in tariff programs had a significant effect on the number of PVs, wind turbines and other renewable energy technology installations across the world. It greatly considered as one of the most efficient policies that promote renewable electricity, that by 2010 there are already 50 countries that enacted their own FIT policies.

There’s no doubt that feed-in tariffs bring about a lot of benefits to the environment and economies all over the world. However, it is just one step towards the goal of addressing the pressing demands for alternative and clean energy sources. With so much concern going on about climate change, global warming, and high prices of oil supplies, it can be expected that the world will see more policies related to the feed-in tariff system.

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