A feed-in tariff (FIT) is a system wherein producers of solar energy sell the energy they produce to the local utility, at a price based on the cost of generating that energy.
The feed in tariff program originated in Germany in 2000 with the aim of encouraging the uptake of solar energy by assuring investors – whether it be a business or a homeowner – a guaranteed return on their investment. Feed-in tariffs are usually designed to wind down over time.
A solar feed in tariff is often accompanied by a long-term (15-25 year) purchase contract. Payments are performance-based, offering an incentive for producers to maximize how much they sell back to the grid.
FIT policies exist in over 50 countries. In the United States, only a few states offer FITs: California, Hawaii, Oregon and Vermont. These programs have restrictions on participation in net metering or other incentives, and also have caps on the amount of energy that will be bought by the utility.