Feed-in Tariff (FiT)
A Feed-in Tariff (FiT) is a policy mechanism that guarantees solar system owners a fixed payment for every kilowatt-hour (kWh) of electricity they generate and export to the grid. FiTs were one of the earliest and most influential policies that accelerated global solar adoption, especially in Europe and parts of Asia.
Under a FiT program, utilities or governments offer long-term contracts—typically 10–25 years—where solar producers receive predictable payments for clean energy production. This reduces financial risk, increases investor confidence, and helps residential, commercial, and utility-scale projects achieve stable cash flow.
FiTs are used by installers and developers when creating financial models, analyzing ROI, and forecasting system payback—often supported by tools such as Solar ROI Calculator or proposal tools inside Solar Proposal & Sales Hub.
Key Takeaways
- A Feed-in Tariff (FiT) pays solar owners a fixed rate for electricity they export to the grid.
- FiTs offer stable, long-term revenue—typically 10–25 years.
- They accelerate solar adoption by reducing financial risk.
- FiTs rely heavily on accurate energy modeling and shading analysis.
- FiT-based proposals benefit from strong ROI tools and automated design workflows.
What Is a Feed-in Tariff (FiT)?
A Feed-in Tariff (FiT) is an incentive structure where the government or utility pays a fixed rate for renewable energy exported to the grid. Unlike net metering—where customers offset their own consumption—FiT programs pay for every exported unit, making them especially beneficial for:
- High-production solar systems
- Rural grid-tie installations
- Utility-scale solar farms
- Solar investors seeking stable returns
Payments are typically higher than wholesale electricity prices, ensuring renewable energy becomes financially competitive.
FiTs are deeply linked to concepts like Production Guarantee, ROI Estimation, and Payback Period Calculation.
How a Feed-in Tariff Works
1. A solar system produces electricity
The system generates power based on irradiance, tilt, shading, and design quality—often analyzed with Shading Analysis.
2. Electricity is exported to the grid
Any energy not consumed onsite flows through a bidirectional meter.
3. The utility measures exported kWh
Smart meters track how much solar electricity is sent to the grid.
4. The solar owner receives a fixed payment
This payment is pre-set by the FiT contract—typically a fixed rate per kWh.
5. FiT payments continue for the contract term
Most FiT programs guarantee payments for 10–25 years, creating stable revenue.
This makes FiTs highly valuable in financial modeling using the Generation Financial Tool.
Types / Variants of Feed-in Tariffs
1. Fixed Rate FiT
A constant price per kWh for the entire contract duration.
2. Stepped-Down FiT
Rates decrease over time as solar becomes more affordable.
3. Technology-Specific FiT
Different rates for:
- Rooftop solar
- Ground-mount
- Bifacial systems
- Battery-integrated systems
4. Size-Based FiT
Rates vary by system size (e.g., higher for small residential systems).
5. Time-of-Day FiT (Premium FiT)
Higher payments during peak demand hours.
How FiT Payments Are Calculated
Payment is typically:
Total FiT Earnings = Exported kWh × FiT Rate
Where:
- Exported kWh = Energy delivered to the grid
- FiT Rate = Guaranteed price per kWh (set by the policy)
Developers often calculate this alongside system yield estimates from tools like:
Typical Values / Ranges
FiT rates vary widely by country, policy year, and market maturity:
- Europe (historically): €0.20–€0.60 per kWh
- Asia: $0.08–$0.25 per kWh
- Australia (state-dependent): $0.05–$0.20 per kWh
- Developing markets: $0.10–$0.30 per kWh
Rates often decline as solar adoption increases and hardware costs fall.
Practical Guidance for Solar Designers & Installers
1. Perform accurate yield calculations
Use tools like Solar Designing and Shadow Analysis to forecast production.
2. Model FiT returns in proposals
Use the Solar Proposal & Sales Hub to present clear financial projections.
3. Understand the local FiT policy
Many regions offer tiered or declining rates.
4. Evaluate DC/AC ratio and inverter clipping
Higher DC/AC ratios may increase export potential—see Inverter Sizing.
5. Consider system orientation
FiTs reward generation, not self-consumption—west or south-west orientations may improve earnings.
6. Factor in degradation
Panels lose ~0.5%–0.8% annually; model this in financial tools.
7. Include FiT terms in customer proposals
Clear financial modeling increases customer confidence and conversion rates.
Real-World Examples
1. Residential FiT System
A homeowner exports 6,000 kWh/year at $0.20/kWh.
Annual earnings = $1,200 → Payback in 6–8 years.
2. Commercial Rooftop Under FiT Contract
A 250 kW rooftop system exports 90% of its energy.
Long-term FiT guarantees stable revenue for 15 years.
3. Utility-Scale Solar Farm
A 20 MW project participates in a national FiT program, generating consistent revenue streams that secure bank financing.
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