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A “feed-in tariff” is a law which requires utilities to enter into long-term contracts with any energy supplier willing to sell them renewable power and to pay that producer a fixed (and usually declining) rate sufficient to design, build, and operate the generating facility, along with a reasonable profit.

It’s called “feed-in” because it involves “feeding in” renewable energy to a utility’s electric grid through a connection at the producer’s location. One meaning of “tariff,“ according to the American Heritage Dictionary is “a schedule of prices or fees.” Hence, a “feed-in tariff” is a schedule of fees to be paid by a utility for the electricity that distributed renewable energy generators feed into it.

Creating the possibility of a predictable, legally-binding, long-term revenue stream for the construction and operation of a photovoltaic, wind, bio-mass, geothermal, or other renewable energy production facility, with a minimum of administrative overhead, is generally thought to be enough of a financial sure thing to attract significant funds for this purpose, and therefore likely to lead to a significant acceleration in the rate of deployment of distributed systems for the production of renewable/green, energy, on residential and commercial buildings, on farms, and on otherwise unused, or underutilized, property, thereby generating local jobs, conferring greater energy self-sufficiency through increased immunity to energy price shocks coming from outside the jurisdiction, increasing local economic competitiveness, and reducing the local emission of green house gases (GHGs), helping to mitigate the potentially disastrous effects of global climate change.

The incremental cost to utilities for electricity generated under feed-in tariff laws is typically borne by that utility’s rate-payers, incrementally increasing their electricity charges. Taxpayers, as such, are usually not affected by a feed-in tariff.

Using feed-in tariffs, Germany has doubled its renewables production as a proportion of its total energy use since 2000 and helped create a renewable energy sector with more than 200,000 “green-collar” jobs.

Efforts are now underway to legislate feed-in tariffs at the federal level and in a number of individual states, such as California, Illinois, Michigan, Minnesota, and Rhode Island