Feed-in Tariffs (FITs) Schemes Explained

Because of the rise in need for renewable energy technologies and the vulnerability of the nonrenewable energy sources that we are using today, governments of many countries around the globe are making use of feed in tariffs - a form of incentive scheme that helps promote and reward homeowners and business owners who have made the shift to renewable energy sources like solar energy, wind energy, hydroelectricity, among others.

Feed in tariffs are called by many different names elsewhere in the world; the UK predominantly use the term “feed in tariffs” or “feed in tariffs scheme” but it is also called renewable energy payment and advanced renewable tariff in others. However way it is called, it shares generally the same concept.

What Feed in Tariffs Are

Feed in tariffs are a cash-based incentive that are afforded to households that invest in alternative sources of energy. Topping today’s options for these renewable energy sources is solar energy, with solar panels now becoming more easily accessible in the market than when it was ten or so years ago. Feed in tariffs are the governments’ and power supply companies’ way of promoting the use of these types of energy for both ecological and economical purposes.

How FITs Work

When a home installs alternative power sources, their regular grid-power consumption naturally reduces. This decrease in consumption will reflect in the smart meters and some of the subsidized energy that you do not get to use goes back to the power generator. Happy as they are for the amount of energy that has gone back to them, power companies pay you per units of electricity that you did not use.

With these feed in tariffs, not only do homeowners get to save up on the cost of their electric bill, but they get to take home something for making the choice of using alternative energy at home.

In some cases, like in the UK, homeowners can also sell their excess energy to another user and earn from it through their export tariffs. The amount that gets billed is calculated using smart meters provided for by the power companies.