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Solar Feed-in Tariff

Feed in Tariffs are a way to earn income from the electric utility for the power produced by a solar energy system. In the U.S., Feed in Tariffs are available for very large power producers and some commercial or rental property owners. A FiT solar system can be economically attractive where conventional net-metering is not available, such as at large sites with relatively low usage or properties that have multiple tenants who each pay for their own electric usage via a separate meter. In other words, if you own rental property or an apartment building, FIT allows you to install solar panels and get paid for the power. The tenants will still have their own electric bill.

What is a Feed-in Tariff?

A feed-in tariff requires utilities to pay for the power produced by solar panel or other renewable energy system. Rates are set by a state public utility commission for the electricity over a certain period of time. A Feed-in Tariff is a program by which a utility pays the owner of a solar power system for every kilowatt hour of energy the system produces. The law requires utility companies to negotiate a long-term contract with a property owner, company or any renewable energy producer. Contracts usually last 15 to 20 years. Although they’ve been used for several years in Europe, Canada and Australia, feed-in tariffs are newer in the United States. They are now available in a growing number of locations including California, Indiana, Hawaii, New Jersey, New York, Wisconsin and Vermont.

What are Feed-in-Tariff Rates for Solar Power

The price the utility will pay you, known as the Feed-in-Tariff rate, can vary greatly by state and market. The rates and rules are established by the state public utility commission. Rates are generally considered wholesale rates for electricity. For example in the California FIT program, the Los Angeles utility (LADWP) announced rates of $0.17 per kilowatt hour (kWh) for contracts starting in 2013, then declining to $0.13 per kWh for contracts starting in 2015.

The owner of a solar power system with a FiT will have a contract with the utility for an extended period of time. During that period, the utility will pay the system owner a Base Price for Energy (BPE) which may or may not be subject to Time-of-Delivery multipliers. To accurately predict the revenue stream associated with a FiT-supported solar system, the developer may have to forecast the expected system output on an hour-by-hour basis over the course of an entire year. A special revenue-grade meter and monitoring system may also be required to measure actual results.

Feed-in Tariffs vs. Net Metering

A FiT program contrasts with a net-metering agreement in that the owner of a FiT system does not first consume the energy locally (e.g. to power the home) and then provide any excess to the utility. Rather, the FiT system feeds, or sends power to, the utility directly and the system owner does not offset any of their existing usage. A FiT system does not receive a rebate from the utility, but it does qualify for tax incentives like the 30% renewable energy tax credit.


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Fair Pricing

Feed-in tariffs guarantee fair pricing for producers. A governing body (like the California Public Utilities Commission) decides how much utilities will pay for renewable power. The rates are intended to help the producer earn back their investment and reasonable rates of return. They’re set so that producers using different types of technology can all recoup their money in about the same amount of time– so someone using solar panels will earn a higher rate than someone using a technology like biomass that has a lower initial investment. The rates that are offered change as technology becomes less expensive. In some cases, tariff rates are set to encourage small and local producers by paying them more than large companies. This helps decentralize power so that the grid becomes more stable.

Easier Investing

Since feed-in tariffs offer guaranteed rates and long-term contracts, they make it easier for homeowners to get a loan at the bank. It’s a fairly low-risk investment for the bank, so they can offer lower interest rates.

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