What is a feed-in tariff?

Electricity from renewable energy sources is supported by EU governments in different ways, known as “support mechanisms’”. The most common support mechanism for electricity from renewable energy sources is the feed-in tariff (green electricity quotas in combination with tradable green certificates are also used in countries such as Belgium, Sweden, and Romania).

Under a feed-in tariff, electricity utilities must buy renewable electricity at a price that reflects what it cost to generate it. Under this system, the renewable electricity is dispatched in priority to the grid and producers generally sign long-term contracts (12-25 years) for the energy produced. These instruments allow renewables to be developed, and investors to get a reasonable return on renewable energy investments.

From 2010, feed-in tariffs were in place in Austria, Cyprus, the Czech Republic, Estonia, Finland, France, Germany, Hungary, Ireland, Latvia, Lithuania, Luxembourg, the Netherlands, Portugal, Slovakia and Switzerland.

Certain countries (Denmark, Spain) use a feed-in premium. This is where green electricity producers get the market price plus a fixed premium. This system, which exposes green electricity producers to market dynamics, is well adapted to countries with a large penetration of wind power. Germany gives green electricity producers the possibility to choose between a feed-in tariff and a feed-in premium.