Key Takeaways
- A feed-in tariff guarantees a fixed payment per kWh of solar electricity exported to the grid, typically for 15–25 years
- FiT rates are usually set above wholesale electricity prices to make solar investment financially viable
- Unlike net metering, a solar feed-in tariff pays for all exported production rather than crediting against consumption
- Most FiT programs include degression — automatic rate reductions for new applicants over time
- Germany’s Erneuerbare-Energien-Gesetz (EEG) is the most widely studied feed-in tariff model globally
- Accurate generation modeling is critical for projecting FiT revenue over the contract lifetime
What Is a Feed-in Tariff?
A feed-in tariff (FiT) is a government policy that guarantees solar system owners a fixed price for every kilowatt-hour of electricity they feed into the grid. The rate is set by the regulator, locked in at the time of installation, and remains constant (or follows a predetermined schedule) for the duration of the contract — typically 15 to 25 years.
Feed-in tariffs were the primary driver behind early solar adoption in Europe, particularly in Germany, Spain, and Italy. By offering long-term price certainty above wholesale electricity rates, FiT programs removed the revenue risk that had previously made solar investment unattractive to homeowners, businesses, and project financiers.
Feed-in tariffs are the single most successful policy mechanism for accelerating solar deployment. Between 2000 and 2015, countries with strong FiT programs accounted for over 75% of global solar installations, according to IRENA.
The core principle behind a solar feed-in tariff is simple: guarantee a price that covers installation costs plus a reasonable return, and the market will deliver capacity. This approach shifted the risk from the system owner to the ratepayer or government, which proved effective at driving rapid scale-up and manufacturing cost reductions.
Types of Feed-in Tariffs
Feed-in tariff programs vary in structure. Understanding these differences matters for financial modeling and project valuation.
Fixed-Rate FiT
The simplest structure. A single rate per kWh is locked in at the time of connection and remains constant for the full contract term. Provides maximum revenue certainty for system owners and project lenders.
Declining-Rate FiT (Degression)
The tariff rate for new applicants decreases on a set schedule — monthly, quarterly, or annually. Systems already connected keep their original rate. Designed to track falling installation costs and avoid overcompensation.
Premium FiT
Pays a fixed premium on top of the wholesale electricity market price. Total revenue fluctuates with market conditions, but the premium component is guaranteed. Used in Spain and the Czech Republic.
Auction-Based FiT
The FiT rate is determined through competitive bidding rather than administratively set. Developers bid the lowest price at which they can deliver capacity. Common for utility-scale projects in emerging markets.
A feed-in tariff pays the system owner for all electricity exported to the grid at a guaranteed rate. Net metering credits exported electricity against the owner’s consumption at the retail rate. The key difference: FiT provides a direct cash payment, while net metering provides a billing credit. In many markets, FiT rates are lower than retail electricity prices but offer long-term certainty that net metering policies do not.
Feed-in Tariff Rates by Country
Solar feed-in tariff rates vary by country, system size, and year of installation. The table below shows current and recent FiT programs:
| Country | FiT Rate | Contract Duration | System Size Cap | Status |
|---|---|---|---|---|
| Germany | €0.081/kWh (under 10 kWp) | 20 years | 750 kWp | Active (with degression) |
| Japan | ¥16/kWh (residential) | 10 years (residential) | 10 kW residential | Active |
| UK | Replaced by SEG | N/A | N/A | Closed (2019), replaced by Smart Export Guarantee |
| France | €0.13/kWh (under 9 kWp) | 20 years | 500 kWp | Active |
| South Korea | Market + REC premium | 20 years | No cap | Active (RPS-based) |
| Italy | €0.06–0.11/kWh (Conto Energia V) | 20 years | No cap | Closed to new applicants |
| Thailand | ฿2.20/kWh (residential) | 10 years | 10 kWp | Active |
| Australia | Varies by state (A$0.05–0.12/kWh) | Varies | Varies | State-level programs |
FiT rates change frequently due to degression schedules and policy updates. Always verify the current rate with the national energy regulator or relevant authority before including it in a customer proposal. Using SurgePV’s generation and financial tool helps you model accurate FiT revenue projections based on the latest rates.
FiT Revenue Formula
The revenue from a solar feed-in tariff is straightforward to calculate once you know the export volume and contracted rate.
Annual FiT Revenue = Total Export (kWh) × FiT Rate ($/kWh)Example calculation:
A 10 kWp rooftop system in Germany produces 9,500 kWh per year. The homeowner consumes 3,200 kWh on-site and exports the remaining 6,300 kWh. Under the current EEG tariff of €0.081/kWh:
- Annual FiT revenue = 6,300 kWh × €0.081 = €510/year
- Self-consumption savings = 3,200 kWh × €0.35 (retail rate) = €1,120/year
- Total annual benefit = €1,630/year
In this example, self-consumption savings actually exceed the FiT revenue — a common situation in markets where retail electricity prices have risen above the feed-in tariff rate. This is why accurate solar design software must model both self-consumption and export revenue separately.
Lifetime Revenue = Σ (Year n Export × FiT Rate × (1 − Degradation Rate)^n) for n = 1 to Contract TermPanel degradation of 0.4–0.5% per year means Year 20 production will be roughly 90–92% of Year 1. Over a 20-year contract, cumulative degradation reduces total FiT revenue by approximately 5–6% compared to a flat production assumption.
How Feed-in Tariffs Work in Practice
Application and Pre-Approval
The system owner or installer applies to the grid operator or energy regulator. The FiT rate is locked in based on the application date (or connection date, depending on the program).
System Installation and Grid Connection
The solar system is installed and connected to the grid with an export meter. The grid operator verifies the installation meets technical requirements.
Metering and Export Tracking
A dedicated export meter (or smart meter) records all electricity fed into the grid. Some programs meter total production; others only meter exports after on-site consumption.
Payment
The grid operator or utility pays the system owner monthly, quarterly, or annually based on metered export data at the contracted FiT rate. Payments continue for the full contract duration.
Practical Guidance
Feed-in tariff policy affects system design, financial modeling, and customer conversations. Here’s role-specific guidance:
- Maximize production, not self-consumption. When FiT rates exceed the value of avoided retail purchases, maximize total energy yield. South-facing orientation and minimal shading take priority over load-matching.
- Model degradation over the full contract term. A 20-year FiT contract means 20 years of panel degradation. Use 0.4–0.5% annual degradation in your generation estimates with solar design software to avoid overpromising revenue.
- Check system size caps. Many FiT programs offer higher rates for smaller systems and lower rates (or no eligibility) above a certain capacity. Design within the optimal size bracket.
- Account for FiT rate tiers. Some programs apply different rates to different production tranches. The first 3,000 kWh might earn one rate, and production above that earns a lower rate.
- Verify connection deadlines. FiT rates are often locked by application date but require connection within a specified window (60–180 days). Missing the deadline can mean a lower rate.
- Install compliant export metering. FiT programs require certified export meters. Confirm meter specifications with the grid operator before installation to avoid delays.
- Document system specifications. Many FiT programs require proof of panel wattage, inverter capacity, and installation compliance. Maintain records for the full contract period.
- Understand transfer rules. If the property is sold, the FiT contract may transfer to the new owner. Confirm transferability and document it in customer agreements.
- Lead with revenue, not just savings. FiT programs generate actual income, not just bill reductions. Frame the conversation around annual revenue and total contract value.
- Create urgency with degression. If FiT rates are declining, every month of delay means a lower locked-in rate. Quantify the revenue difference to motivate faster decisions.
- Show lifetime projections. Use the generation and financial tool to model 20-year FiT revenue alongside self-consumption savings. Total lifetime value is the strongest selling point.
- Compare FiT vs. no-FiT scenarios. In markets transitioning away from feed-in tariffs, show customers the value difference between installing now (with FiT) and waiting (without FiT).
Model Feed-in Tariff Revenue in Your Financial Analysis
SurgePV’s financial modeling tools let you input local FiT rates and project lifetime export revenue alongside self-consumption savings — all in one proposal.
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Impact on System Design
The presence or absence of a solar feed-in tariff changes how you should approach system design and financial modeling:
| Design Decision | With FiT (High Rate) | With FiT (Low Rate / Expired) |
|---|---|---|
| System Size | Maximize capacity within size cap | Size to match consumption profile |
| Array Orientation | Optimize for maximum annual yield | Optimize for self-consumption timing |
| Battery Storage | Not needed — FiT pays for all exports | Recommended to shift consumption |
| Financial Model | Revenue-based (FiT × kWh exported) | Savings-based (avoided retail purchases) |
| Payback Period | 8–12 years (depending on rate) | 6–9 years (high self-consumption) |
| Project Financing | Bankable — guaranteed revenue stream | Depends on retail rate stability |
When FiT rates fall below retail electricity prices — as has happened in Germany and many other mature markets — the economics shift. Self-consumption becomes more valuable than export. This changes the design priority from “produce as much as possible” to “produce at the right times.” Battery storage, load shifting, and consumption-matched sizing become more important.
Sources
- IRENA — Renewable Energy Policy Landscape (2023)
- IEA — Policies Database: Feed-in Tariffs
- U.S. DOE — Feed-in Tariffs for Solar Energy
Frequently Asked Questions
What is a feed-in tariff for solar energy?
A feed-in tariff (FiT) for solar energy is a government policy that pays solar system owners a guaranteed price for every kilowatt-hour of electricity they export to the grid. The rate is fixed at the time of installation and locked in for a set contract period, typically 15 to 25 years. This guaranteed revenue stream reduces investment risk and has been the primary policy driver behind solar adoption in Europe and parts of Asia.
How is a feed-in tariff different from net metering?
A feed-in tariff pays a fixed rate for exported electricity as direct income, regardless of the owner’s consumption. Net metering credits exported electricity against the owner’s consumption at the retail rate — it reduces your bill but does not generate separate revenue. FiT rates are set by the government and guaranteed for the contract term, while net metering credits depend on your utility’s current retail rate, which can change.
Are solar feed-in tariff rates still worth it in 2026?
It depends on the market. In countries where FiT rates have dropped below retail electricity prices (like Germany), the tariff alone may not justify the investment — but the combination of FiT revenue plus self-consumption savings still makes solar financially attractive. In newer FiT markets (parts of Southeast Asia, Africa), rates remain high enough to provide strong standalone returns. The key is modeling both revenue streams accurately in your financial analysis.
About the Contributors
Co-Founder · SurgePV
Akash Hirpara is Co-Founder of SurgePV and at Heaven Green Energy Limited, managing finances for a company with 1+ GW in delivered solar projects. With 12+ years in renewable energy finance and strategic planning, he has structured $100M+ in solar project financing and improved EBITDA margins from 12% to 18%.
Content Head · SurgePV
Rainer Neumann is Content Head at SurgePV and a solar PV engineer with 10+ years of experience designing commercial and utility-scale systems across Europe and MENA. He has delivered 500+ installations, tested 15+ solar design software platforms firsthand, and specialises in shading analysis, string sizing, and international electrical code compliance.