A feed-in tariff pays renewable energy producers a set price for the electricity they feed into the grid. The rate is usually above the market price to make projects viable. The payment is guaranteed for a long period, often 15 to 25 years. It is a policy designed to attract investment by reducing risk.

Germany pioneered the modern feed-in tariff in 2000. The policy sparked a boom in solar and wind. Similar programs followed in Spain, Italy, and dozens of other countries. Feed-in tariffs drove down the cost of solar panels faster than almost anyone predicted. They were expensive in the early years and are now largely phased out in mature markets.

Critics say feed-in tariffs can overpay producers and burden ratepayers. Supporters argue they provide the certainty investors need. Auction systems have replaced them in many places, letting governments set a capacity target and buy the cheapest bids. Both approaches can work. The choice depends on market maturity and policy goals.

Key features

• Guaranteed price for renewable power
• Long-term contract
• Priority grid access
• Cost passed to ratepayers
• Often replaced by auctions