Feed-in tariffs

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Feed-in tariffs are a (state) market regulation measure to promote investments in renewable energy. With feed-in tariffs, fixed remuneration for the electricity fed into the grid is guaranteed over a long period of time; they thus eliminate the marketing risk, regulate easy access to the electricity market and, thus, create incentives for private (and public) investors to invest in renewable energies.

 

 

The feed-in tariff model is regarded as a very good incentive that encourages renewable energy investment because the stable long-term revenue streams minimise or even eliminate the marketing risk. It, thus, ensures a high degree of investment and financing certainty.

 

Operators of power plants are given the following statutory guarantees:

  • Secured long-term revenue streams from the sale of electricity; the period is between 10 and 20 years. In some countries (e.g. Iran), this may even include inflation adjustment
  • Guaranteed grid access (= guaranteed export to the grid)
  • Fixed remuneration for electricity (independent of energy price developments on the electricity market) from the start of the operation of the power plant

 

Market players are:

  • Homeowners
  • Entrepreneurs
  • Farmers
  • Private investors
  • In summary: any legal entity can become a renewable energy producer; the market potential is, thus, significant. 

 

In most cases, the rate of the remuneration depends on the type of technology, the size of the power plant and time of commissioning. Rates and timings of degression are determined in line with capacity additions for a specific technology on the electricity market or chronologically so as to ensure that technological progress and the resulting decline in the levelised cost of energy are reflected also in the legal framework. Furthermore, feed-in tariffs are deemed to be a good measure for introducing into the market innovative technologies that have not yet reached market maturity.

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