Definition: A policy mechanism designed to encourage the adoption of renewable energy sources by providing long-term contracts and guaranteed pricing to producers for the electricity they generate and feed into the grid.
Key Components:
- Guaranteed Payments: Producers receive fixed payments per kilowatt-hour for renewable energy supplied.
- Long-Term Contracts: Agreements typically span 15-20 years, providing financial stability.
- Grid Access: Ensures renewable energy producers can connect to the electricity grid.
Use Cases/Industries:
- Residential Solar Installations: Homeowners receive payments for excess solar power fed into the grid.
- Commercial Wind Farms: Wind energy producers secure stable revenue through fixed tariffs.
Advantages:
- Promotes Renewable Energy: Encourages investment in clean energy technologies.
- Market Certainty: Provides predictable returns, reducing investment risk.
Challenges:
- Financial Burden on Utilities: Fixed payments may lead to higher costs for utilities and consumers.
- Market Distortion: May lead to overcapacity or misalignment with actual energy demand.
Related Terms:
- Renewable Portfolio Standard (RPS): Mandates that utilities source a certain percentage of energy from renewable sources.
- Net Metering: Allows consumers to offset their electricity costs by feeding excess renewable energy back to the grid.
Example: A country implements a feed-in tariff program offering solar energy producers $0.10 per kilowatt-hour for electricity fed into the grid over a 20-year contract, leading to a significant increase in solar installations nationwide.
Visited 1 times, 1 visit(s) today
Synonyms:
Renewable Energy Payment, Clean Energy Cashback​
