Feed-In Tariff

A policy mechanism designed to accelerate investment in renewable energy technologies. It achieves this by offering long-term contracts to renewable energy producers, typically based on the cost of generation of each technology. Rather than pay an equal amount for energy, however generated, technologies such as wind power and solar PV, for instance, are awarded a lower per-kWh price, while technologies such as tidal power are offered a higher price, reflecting costs that are higher at the moment and allowing a government to encourage development of one technology over another. FITs typically include: guaranteed grid access; long-term contracts (typically 15-25 years) and a power price which is fixed at the outset but rises in line with inflation. The goal of feed-in tariffs is to offer cost-based compensation to renewable energy producers, providing price certainty and long-term contracts which help finance renewable energy investments.