Feed-in Tariffs
A feed-in tariff (FIT), also known as a renewable energy payment (REP), is one policy option used to encourage the deployment of renewable energy by making it a more secure long-term investment. Under a feed-in tariff, renewable energy producers are guaranteed a connection to the electric grid and a payment rate set above market price by the government. These structured payments usually last for 15 to 20 years, with cost recovery commonly obtained through a charge on all electric customers of that utility. The FIT is typically phased out over time, or once the qualifying renewable energy sources reach a certain share of overall energy production. Large scale deployment of renewable energy systems generally brings production costs down and should make renewable energy competitive with fossil fuels by the end of the FIT.

FITs have been very successful in increasing renewable energy production in Germany and several other countries. Germany passed its Renewable Energy Sources Act in April 2000, guaranteeing privileged grid access and a premium rate to generators of renewable energy for 20 years. The German government set different rates for different types of renewable energy according to how costly it is to produce, and the rates decrease annually. Germany more than doubled its production of renewable electricity between 2000 and 2007 and met its 2010 target of 12.5 percent renewable electricity three years ahead of schedule. Spain also passed legislation in 2007 creating national feed-in tariffs, one for photovoltaics and another for a variety of energy technologies, including wind, geothermal and hydroelectric power. In countries such as Australia and Canada, FITs have been established in several regions, though legislation has not yet been passed to create a national feed-in tariff.

Policymakers in the United States have begun looking at incorporating FITs into energy legislation. The first state to enact a feed-in tariff was California, whose Assembly Bill 1969 established a FIT law in 2006 for public water and wastewater utilities that produced up to 1.5 megawatts (MW) of renewable electricity. In 2008, this program was expanded to include other sources of renewable energy, with qualified technologies including biomass, wind, solar thermal, photovoltaic and geothermal, among others. The city of Gainesville, Florida, became the first U.S. municipality to adopt a feed-in tariff for solar photovoltaic systems in 2009. In June 2008, U.S. Rep. Jay Inslee (D-WA) and six cosponsors introduced the Renewable Energy Jobs and Security Act of 2008, the first national FIT bill that would establish priority interconnection to the grid for renewable energy systems producing less than 20 MW and would require utilities to enter into 20-year fixed-rate contracts with these facilities.

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