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European FITs made it possible

Feed in tariffs (FITs) are a policy tool that promote the use of renewable energy. Germany was the first European country in which the generation of solar electricity was heavily and sustainably promoted. In 1990 Germany adopted the "Law on Feeding Electricity into the Grid” which was revised in 2000 with the Renewable Energy Sources Act to oblige electricity suppliers to buy electricity from renewable energy sources at a fixed price for the next 20 years.

 

The Renewable Energy Sources Act is now regarded as the world's most successful promotion of a new technology. As a result, a vibrant new and broad-based industry emerged from the development of manufacturing equipment to silicon, wafers, cells and modules.

 

The German photovoltaic boom has had two positive outcomes for other European countries. First, Germany successfully demonstrated that PV actually works. Secondly, the high demand for photovoltaic modules in Germany resulted in strong competition which in turn led to innovation and significant price reductions.

 

Italy, Spain, France and other EU countries also wrote their own success stories based on FITs. In 2011 Italy became the world’s biggest solar photovoltaics installer, taking this title over from Germany. Not only European solar companies benefited from this development, but also companies in China who sell nearly all of their products to Europe thanks to European funding for solar technologies. Since China offers neither a functional or profitable market, European support measures helped build a solar industry in China.


FITs Explained

A feed in tariff is a premium rate paid for electricity generated from renewable sources and fed back into the electricity grid by the system owner. It is an incentive to make a considerable investment into the renewable energy installation which will then pay back for itself. With FITs, a solar power system owner will be paid for the amount of electrical energy (kilowatt-hours or kWh) he generates. Hence, the solar system will first cover the capital cost of the installation, and then generate profit for the installation owner.

 

For example, a house owner installs a 5 kW (Kilowatt) solar system on his roof in Germany. Every year his installation produces 5.000 kWh (kilowatt hours) of solar energy which can be sold to the grid . The local energy company is required to pay for the energy produced from the renewable energy sources through a feed in tariff. If the feed in tariff is 20 cents per kWh, the house owner will receive 5.000kWh x 0.20 Euro or 1000 Euros per year. Depending on the law in force, FITs might be paid either for all the energy produced, or only for the excess energy not used by the household’s own consumption.