Countries are working to incentivize their investment in renewable energy. To this end, feed-in tariffs were created, a system that provides guaranteed grid access and long-term contracts for renewable energy producers as well compensation over a set period of time for excess energy produced by business and private properties, typically 20 to 25 years.
Over 50 countries offer some type of feed-in tariff, including the United States, Spain, France, Germany, Israel, Italy, and the United Kingdom. Eligible renewable energy sources include solar, wind, geothermal, hydroelectric, biomass and waste combustion; however, the type of renewable energy compensated varies by country. For example, solar is the primary renewable resource eligible for feed-in tariffs in the US, but Spain allows for nearly all forms of renewable energy, and the UK offers incentives for solar, hydroelectric, wind, and aerobic digestion biogas. Programs utilizing feed-in tariffs are rapidly increasing around the world for electricity produced using all types of renewable energy sources.
The ultimate goal of feed-in tariffs is to provide compensation to renewable energy producers. Also, these systems encourage further investments in renewable energy technology and incentivize home and business owners to incorporate renewable energy sources into their properties.
Perhaps the most interesting benefit is that feed-in tariffs allow residential and small business property owners to receive compensation for excess energy their renewable sources produce. Net metering allows properties to utilize electricity from the grid when necessary, and offers credits based on excess electricity produced. Power purchase agreements offer cash back to the producer based on the excess energy generated.
Compensation in the form of credits is typically set above retail price for electricity with net metering, encouraging more properties to adopt renewable energy sources. As the number of participants increase, the feed-in tariff rate slowly lowers to the retail rate. Power purchase agreements with monetary rewards are often slightly lower than retail, except in cases of solar power. Because solar energy is often produced during peak electricity use times, reimbursement is slightly higher than retail.
These programs, varying slightly by country, have been heralded by renewable energy supporters as one of the simplest means of increasing the use of renewable energy on a property-by-property basis, while helping to fund new research and technology. Relatively simplistic, and very effective, feed-in tariffs are paving the way for a world-wide move away from traditional, fossil fuel-based energy production.