What is the feed-in tariff (FIT) in general?

The idea, as the name suggests, is to “feed in” new sources of electricity into the grid, and these new sources are guaranteed a certain price for their production of electricity. That price is called the feed-in tariff, or FIT.

As in many other countries, the FIT is part of the trend to “go green” because the new sources are limited to those using renewable energy (RE), such as wind, solar, biomass, or hydro plants. There is an incentive to install RE-based capacity because the FIT is set at a level higher than the price for conventional energy, such as those from fossil fuels.

But somebody has to pay for the FIT. In some countries, the FIT is coupled with a requirement that big power distributors buy the new electricity with a certain understanding that they can pass on the effect of the higher FIT price to the consumer or end-user.

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