How Does Solar Feed-In Tariff Work?

Solar FITs

The solar feed-in tariff (FIT), also known as net metering, is a policy that allows homeowners with panels to sell surplus solar energy back to the grid at a predetermined price. The idea behind the solar feed-in tariff is to incentivise homeowners to produce their renewable energy and reduce reliance on fossil fuels.

There are different ways the solar feed-in tariff can work, but the most common implementation is through a credit system. Homeowners are credited for every unit of energy they produce, regardless of whether they use it themselves or send it back to the grid. At the end of the month, the homeowner's utility bills are calculated based on how much energy they consumed and how much energy they produced.

Any excess energy production is essentially free power. You can also implement a solar feed-in tariff through a buy-back system. The utility company buys back surplus energy from homeowners at a set price in this scenario. This is usually higher than the retail energy price, so homeowners are still incentivised to produce their energy.

The solar feed-in tariff is a great way to reduce your carbon footprint and save money on your electric bill. If you're thinking about going solar, be sure to investigate whether your state has a solar feed-in tariff program.

Components Of A Solar Feed-In Tariff

Rate at Which Energy is Sold

The rate at which energy is sold is typically based on the amount produced. For example, a solar feed-in tariff (FIT) might pay about $0.10 per kilowatt-hour (kWh) for electricity generated from solar panels. This rate may change over time, so be sure to check with your local utility company to see the current rates.

Duration of the Program

The duration of the program refers to how long the solar feed-in tariff program will last. Most solar FITs last about 10 to 20 years, but it's essential to check with the local utility company and find out what their policies are.

Size of the Program

The program's size refers to how many people are eligible to participate. In most cases, only homeowners and businesses connected to the grid are eligible for a solar FIT. Check with a local utility provider to see if you're eligible.

Cost of Renewable Energy Generation

The cost of renewable energy generation is one of the main factors determining a solar FIT rate. In most cases, the higher the cost of renewable energy generation, the higher the solar FIT rate. This is because utilities want to encourage people to switch to renewable energy.

Cost of Grid Power

The cost of grid power is another factor that determines a solar FIT rate. The lower the cost of grid power, the lower the solar FIT rate will be. This is because utilities want to incentivize people to use less grid power and generate more renewable energy.

State or Local Renewable Energy Targets

States and local governments often have renewable energy targets that they want to meet. A solar FIT is a way for them to achieve these targets. The higher the target, the higher the solar FIT rate will be.

Carbon Footprint

Making the switch to renewable energy can help reduce your carbon footprint. By using a solar FIT, you can help reduce your impact on the environment and help promote the growth of renewable energy.

Tips For Using The Solar Feed-In Tariff

If you're thinking of going solar, it's worth looking into a solar feed-in tariff. A solar feed-in tariff is a government-backed scheme that pays homeowners and businesses for the electricity they generate from solar power. Here are some tips for using a solar FIT:

Understand Solar Feed-In Tariffs

Before you can take advantage of a solar feed-in tariff, it's essential to understand what it is. As explained earlier, solar feed-in tariffs are incentives offered by governments or utilities to encourage solar power development. To qualify for a solar feed-in tariff, you must generate electricity from a solar PV (photovoltaic) system and export that power to the grid.

Calculate Your Energy Needs

The amount of energy you need will determine the size of the solar PV system you require. An online solar calculator can help you figure out how much energy you need. Be sure to account for all of your household's energy requirements, not just your daytime usage.

Assess Your Property

Not every home is suitable for solar PV. Your roof should be facing south, have minimal shading and not be in a covered area. You'll also need to check with your local utility to see if they offer a solar feed-in tariff.

Choose The Right Solar PV System

There are a variety of solar PV systems available, so it's essential to choose the right one for your needs. Residential solar PV systems range from 1 kilowatt (kW) to 10 kW or more. Be sure to consult with a reputable solar installer to determine the best system for your home.

Get Approved for a Solar Rebate

Many utilities offer a solar rebate for installing a solar PV system. Rebates can lower the cost of your system by hundreds or even thousands of dollars. Contact your state energy or local utility office to determine if you're eligible for a rebate.

Apply for Net-Metering

Net-metering is a policy that allows homeowners with solar PV systems to sell excess electricity back to the grid. Most utilities offer net metering, so be sure to check with yours to see if you're eligible.

Establish a Line of Credit

To take advantage of a solar feed-in tariff, you'll need to establish a credit line with your utility. This means setting up an account with your utility and agreeing to pay your monthly electricity bill.

Sign a Contract with a Solar Installer

To qualify for a solar feed-in tariff, you'll need to sign a contract with a qualified solar installer. Be sure to ask the installer about their experience installing solar PV systems and find out what type of warranty they offer.

Submit Your Application

After installing your solar PV system, you'll need to apply at your local utility or state energy office. This will allow them to track the amount of electricity you're exporting to the grid.

Enjoy the Benefits of Solar

After approval of your application, you'll start receiving credits on your electricity bill for the excess energy you're exporting to the grid. You can continue to receive these credits as long as you have a solar PV system installed.

Benefits Of Using The Solar Feed-In Tariff

Solar feed-in tariffs are among the most important solar incentives in place today. They allow homeowners and businesses to sell excess electricity generated from their solar panels back to the grid at a premium rate. A solar feed-in tariff is a policy mechanism used by governments to encourage the deployment of solar energy.

FITs typically involve the payment of above-market rates for electricity generated from solar PV systems to provide a financial incentive for investors and homeowners to install solar panels. There are many different roles that a solar FIT can play in supporting the growth of solar energy.

Stimulating Investment in Solar Energy

One of the critical functions of a solar FIT is to stimulate investment in solar energy projects. By offering higher rates for solar-generated electricity, FITs provide an attractive incentive for investors and homeowners to install solar panels.

Reducing the Cost of Solar Energy

A well-designed solar FIT can also help reduce solar energy costs. By providing a stable, long-term price for solar electricity, FITs offer certainty and stability for investors, leading to lower costs for consumers.

Encouraging Grid Parity

FITs play an important role in encouraging grid parity – the point at which solar energy is as affordable as traditional energy sources. When grid parity is reached, more people will be able to switch to solar energy, which will help to accelerate the transition to a sustainable, low-carbon economy.

Supporting Renewable Energy Targets

Many governments have set ambitious targets for the percentage of energy from renewable sources. A well-designed solar FIT can help achieve these targets by encouraging the growth of solar energy.

Reducing Greenhouse Gas Emissions

Solar energy does not generate greenhouse gas emissions. By supporting the growth of solar energy, FITs can play a key role in reducing greenhouse gas emissions and tackling climate change.

Creating Jobs and Stimulating Economic Growth

The deployment of solar energy creates jobs and stimulates economic growth. FITs can help to support this by providing financial incentives for investors and homeowners to install solar panels.

Helping to Meet Electricity Demand

As solar photovoltaic technology continues to improve, FITs can help meet increasing electricity demand levels from solar energy.

Reducing the Need for Subsidies

As solar energy becomes more competitive, the need for government subsidies will decline. A well-designed solar FIT can play a crucial role in reducing the need for subsidies over time.

Encouraging Innovation and Technology Development

A healthy solar industry requires a constant stream of innovation and technology development. FITs can play an important role in encouraging this by providing financial incentives for investors and homeowners to install solar panels.

Reducing Air Pollution and Improving Public Health

Solar energy is a clean, renewable source of electricity that does not produce air pollution. By supporting the growth of solar energy, FITs can help improve public health and reduce air pollution.

Demerits Of Using A Solar Feed-In Tariff

Solar feed-in tariffs were introduced to incentivise people to adopt solar energy by offering them a premium for the electricity they generate and export back to the grid. While this may sound like a feasible idea, in theory, you should be aware of several drawbacks to using a solar feed-in tariff before making the switch. Here are some of them.

Can be Pretty Expensive

The cost of implementing a solar feed-in tariff can be high, particularly if your state or country has a high electricity rate. When solar generators are paid a premium for their electricity, it can increase electricity rates for everyone.

Reduces How Much You Earn from Your Solar Panels

If the grid is paying more for your exported power than you would make selling it yourself, you may lose money.

Can Create Congestion on the Grid

When too many people generate solar power for the grid to handle, it can cause congestion and lead to blackouts or reduced power quality.

Limits Your Ability to Sell Excess Power Back to the Grid

If you have a solar feed-in tariff, you may not be able to sell all of your excess electricity back to your grid at the current market rate.

Can Discourage People from Investing in Solar

If people know they can make more money by exporting their solar energy directly to the grid, they may be less likely to invest in solar panels.

Can be Difficult to Cancel

Once you have a solar feed-in tariff in place, it can be difficult to cancel, even if you decide you no longer want it.

May Reduce the Value of Your Solar Panels

If you later decide to sell your home with solar panels installed, the solar feed-in tariff may lessen the value of your system.

Can Create Red Tape and Bureaucracy

The process of setting up a solar feed-in tariff can be complex and bureaucratic, requiring negotiation with state and federal governments as well as energy companies.

Might Not be Around for Very Much Longer

With the advent of rooftop solar and solar batteries, solar feed-in tariffs may not be around for much longer. However, in the present day, they are great to own.

Get A Solar FIT Today

By offering higher rates for solar-generated electricity, FITs provide an attractive incentive for investors and homeowners to install solar panels. FITs can also help reduce solar energy costs, encourage grid parity, support renewable energy targets, and reduce greenhouse gas emissions.

The deployment of solar energy also creates jobs and stimulates economic growth. A well-designed solar FIT can play a key role in meeting these goals. You, too, can benefit from a solar FIT by contacting a professional solar installer today.