Feed-in tariff
Also called: FiT · Topic: Infrastructure: Transport, Communications and Energy · NCERT: Beyond NCERT
Meaning
A feed-in tariff (FiT) is a fixed, guaranteed price paid to renewable energy producers for each unit of power they supply to the grid. It is set for a long period and is often above the market price. This assured income reduces risk and draws investment into new, costly technologies. Its weakness is that a fixed price does not fall as fast as technology costs fall.
Example
India used feed-in tariffs for early wind and solar projects, including under the Jawaharlal Nehru National Solar Mission (JNNSM, 2010). They were later replaced by competitive reverse auctions, where developers bid and the lowest tariff wins.
Don't confuse with
- Net metering: Under net metering, rooftop solar owners get credit for surplus power sent to the grid, set against their own electricity use. A feed-in tariff pays a fixed price for every unit supplied.
- Reverse auction: In a reverse auction, the tariff is set by competitive bidding. A feed-in tariff is fixed in advance by the regulator.
Related concepts
- Energy infrastructure
- Energy security
- Plant load factor
- Aggregate technical and commercial losses
- Power purchase agreement
- Cross-subsidy
- Open access (electricity)
- Time-of-day tariff
- Levelised cost of electricity
- Grid parity