How Feed-in Tariffs Can Reduce Cost Of Solar Energy

While it’s no secret that solar energy can help reduce your electric bill, feed-in tariffs help further by allowing you to sell back unused energy to the grid, resulting in a credit that can offset the cost of the energy used. Provided the solar equipment has been installed correctly and is CEC-approved, small households might save several hundred dollars annually with a small system. Thousands of dollars in savings may even be possible with bigger systems and greater usage.

There is an up-front cost to solar installations, but the payoff can be enormous – upwards of $40,000 for a small household using a standard system. The amount of savings will of course depend on factors such as home location, energy usage and type of system. Feed-in tariffs can further add to savings. Instead of wasting unused energy, it can be sold for a credit on your bill. 

It’s not uncommon for an electricity bill to end up at zero or a positive balance thanks to feed-in tariffs. When you offset electricity bills with feed-in tariffs from solar panels, you will get the same type of bill you did before solar usage. However, a bill section typically called “standard feed-in tariffs” will list a credit for unused solar energy. This assumes you (like most) remain connected to the power grid.

Feed-in tariffs have been used successfully in many countries and states as both a cost-savings measure and to promote renewable energy. In such cases there will normally be two meters on a property: one that measures excess energy fed into the grid and another that measures actual energy usage. The retail kWh rate is billed while the utility company pays for power returned to the grid.

These tariffs motivate owners to install solar, which increases solar power production locally and nationally while helping to achieve clean energy goals. The added income owners receive from feed-in tariffs can help promote economic growth as well. Carbon emissions are also reduced due to less reliance on fossil fuels which helps enable a cleaner environment. 

Renewable energy goals have been mandated in many areas, which require a certain amount of energy produced by a utility to come from renewable sources. Not meeting these standards can result in large fines to the utility.

A notable example of a large scale feed-in tariff implementation is the Fukushima catastrophe. When this happened, Japan put in place a feed-in tariff to help replace lost nuclear power with solar, greatly expanding the demand for solar energy. Another example is Australia, which has widely implemented feed-in tariffs, increasing the demand for solar. Other countries such as the U.S. have also successfully implemented feed-in tariffs to varying degrees.

It should be noted that the exact amount saved from solar happens over time due to the up-front cost of the system and maintenance. A quarterly electricity bill usually shows a pro rata amount of the costs, allowing a better gauge of actual savings over time. It’s common for most systems to pay for themselves in 3 to 7 years. 

You might not avoid getting a bill for energy, but solar helps reduce the cost greatly. Feed-in tariffs might even give you a credit instead of a charge, however – something that no one can argue is a bad deal when it comes to the cost of energy. Making use of the sun to deliver energy is smart and makes the cost of a system well worth it in the long run. So don’t wait to see how much a solar installation can save you by rescuing you from those overly-high electric bills.