A feed-in tariff (FiT) system is a policy mechanism that promotes the generation of electricity from renewable energy sources by providing a guaranteed payment rate to renewable energy producers for every unit of electricity they produce and supply to the grid.
Under a FiT system, renewable energy producers are paid a fixed price per kilowatt-hour (kWh) of electricity they generate, which is usually higher than the market price for conventional electricity. This encourages the development of renewable energy sources and makes them more financially viable for investors.
The FiT system typically applies to small-scale renewable energy systems, such as solar photovoltaic (PV) systems, wind turbines, and biogas systems. It is designed to incentivize the installation of renewable energy systems by ensuring that producers receive a fair return on their investment over a fixed period of time.
The FiT system has been implemented in many countries around the world, including Germany, Spain, and Japan. In Malaysia, the FiT system is administered by the Sustainable Energy Development Authority (SEDA) and applies to renewable energy systems with a capacity of up to 30 megawatts (MW).