What Is a Feed-In Tariff, and Does Your Solar Installation Qualify?

what-is-a-solar-feed-in-tariff

In a previous article, we discussed a popular solar incentive known as net metering. Under this program, solar customers are allowed to sell their excess clean electricity to the utility company at a profit (usually as credits—not cash).

Many states offer a similar type of solar incentive known as a feed-in tariff (FiT). It works in much the same way as net metering, with a few important differences.

How the Solar Feed-in Tariff Works

With net metering, you’re only responsible for the “net” difference in electricity bought and sold every month (using a bi-directional meter). But with a feed-in tariff:

How the solar feed-in tariff works

  • At night, you buy electricity at the standard retail rate (when costs are already at their lowest).
  • During the day, you sell your excess solar electricity at above retail prices (when rates are already much higher).

This process requires 2 separate electricity meters that can measure inflows and outflows independently.

The real difference, however, is that you’re financially compensated for the clean power that your system generates. In some states, you accumulate credits, but in others, you receive actual cash.

What Are the Benefits of a Feed-in Tariff?

Feed-in tariffs carry several important advantages:

1. Shorter Payback Periods

The moment your solar panels become operational, your monthly utility bills go down. And over a long enough time, those extra savings exceed the upfront cost of your solar photovoltaic (PV) installation. This is known as the breakeven point or “payback period.”

But because a feed-in tariff allows you to monetize your extra electricity, you enjoy much shorter payback periods (and much higher solar returns).

2. Free Nighttime Storage

Another great benefit of feed-and tariffs is that you don’t have to worry about storing your daytime solar energy for nighttime use. Your PV system is already connected to the grid. So when you need to use appliances at night, you’re always covered.

3. Actual Money in Your Pocket

The solar feed-in tariff is actual money in your pocket.

Arguably the biggest advantage of the feed-in tariff is the passive income you generate with each sunrise. Remember that you’re:

  • Buying relatively cheap grid electricity (at night)
  • Selling your much higher priced solar electricity (during the day)

It’s worth noting that the feed-in tariff is a regressive solar incentive, meaning that all cash payments grow smaller over the 15 to 20 years of your agreement with the utility company. But even with this regression, feed-in tariffs can be extremely lucrative for solar customers—sometimes too lucrative, which is why this program isn’t available in all 50 states.

Does Your Solar Installation Qualify for a Feed-in Tariff?

Qualifying for this solar incentive isn’t automatic:

  • You must live in a state where feed-in tariffs are available. Roughly 10 states and a handful of municipalities currently offer this solar incentive. To find out if you’re in a qualifying region, contact us today.
  • Your solar PV system must be installed by a licensed contractor (all Direct Energy Solar installations fit this criterion).
  • You must actively enroll in the program. This service comes standard with our installations.

If you meet the above criteria, we encourage you to take advantage of this solar incentive ASAP. Even though feed-in tariff contracts last 15 to 20 years, the program won’t be around forever. Like all incentives, early adopters get grandfathered in and latecomers get locked out (once the program expires).

If you don’t qualify for a feed-in tariff, don’t despair. Net metering is available in almost every state and offers some pretty powerful benefits.

And lastly, if you have questions about feed-in tariffs or need help enrolling in the program, contact us today for a free consultation.