What Is It?
A Feed-in-Tariff (FIT) or Clean Contract is a policy approach designed to encourage investment in renewable energy systems by allowing small scale distributed renewable energy producers to sell electricity at guaranteed rates with long-term contracts. Small distributed producers, such as residential rooftop solar panels, typically can only get credit for their electricity production on their utility bills up to the amount of electricity they use. They can offset their electricity use, but any electricity they generate beyond that amount either does not get credit or is credited at a substantially reduced rate. Under such rules, small producers have a strong incentive not to build projects that are any larger than necessary to cover their own consumption. This not only reduces the size of individual projects but also substantially reduces the incentive for projects to be deployed at all on sites where consumption would be significantly lower than production.
FIT policies offer such producers guaranteed rates over long contract terms for all the power they can produce, increasing the economical size of the projects and reducing the uncertainty about returns to investment. They typically also attempt to streamline the process of connecting distributed generators to the grid.
Under an FIT program, electricity purchases can be priced in a number of ways, potentially benefitting certain types of renewable technologies with higher rates and may include "tariff degression", under which the price paid, or tariff, reduces over time.
Palo Alto, CA
Palo Alto CLEAN (Clean Local Energy Accessible Now) is a feed-in-tariff program in which the electricity purchased is generated by solar electric systems placed within city boundaries. The City will offer contracts for up to 4 MW total of installed capacity. The price offered ranges between 12 and 14 cents per kWh depending on the length of the contract. (more information)
State of Vermont
In May 2009, Vermont adopted a standard offer program that serves as a small feed-in tariff. The Vermont program provides long-term contracts (15-20 years) for biomass, wind, hydro, landfill methane, and agricultural methane and 25-year contracts for solar power. The prices are based on the cost of production plus a rate of return equal to what Vermont utilities receive and are fixed for the contract period. Projects can be up to 2.2 megawatts (MW) in size, with a total program cap of 50 MW. (more information)
The City of Gainesville, Florida launched a feed-in tariff program in 2009. The program is available only to solar PV generators, is capped the 4 MW through 2016, and is fully subscribed. The prices paid to producers are based on the cost of generation plus a small profit, are differentiated by both size and the location (roof-mounted or free standing) and contracts are for 20 years. The initial price for a building/pavement-mounted array or freestanding arrays smaller than 25 kW was $0.32 per kWh. Freestanding solar arrays larger than 25 kW received $0.26. The prices decrease on a schedule through 2016, to $0.23 and $0.19, respectively. (more information)
State of New York
Under the Clean Solar Initiative Feed-In-Tariff, the owner of an eligible solar photovoltaic (PV) electric system is paid a fixed rate for every solar kilowatt hour generated over a 20 year Power Purchase Agreement (PPA) between the owner and the utility. As of July 2012, the rate is $.022 per kWh of electricity delivered to the utility's grid. The amount of electricity is measured using a dedicated meter for each approved project and the rate for each individual project remains in effect for the entire contract period of 20 years. (more information)
State of Maine
In June of 2009, Maine established a Community-Based Renewable Energy pilot program. The 6-year program implements a simple feed-in-tariff for qualifying projects. Total capacity is limited to 50 MW. To qualify for the pilot fee-in-tariff, 51 percent of the project must be owned locally, through residents of the state, schools, public institutions, tribes, non-governmental organizations, or corporations that are 51 percent owned by state residents. All costs will be recovered from ratepayers. (more information)