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Glossary · Energy industry & energy transition

Feed-in tariff

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A feed-in tariff is a payment, set by law or by contract, for electricity that a generating installation feeds into the public electricity grid. In Germany the term is closely linked to the Renewable Energy Sources Act (Erneuerbare-Energien-Gesetz, EEG). Operators of installations using renewable energies, such as photovoltaics, wind, biomass or small hydropower plants, receive an amount under fixed rules for every kilowatt-hour fed in. What is paid for is the quantity of electricity actually delivered, not the installed capacity. However, the capacity does partly determine which tariff rate applies.

The reference quantity is therefore an amount of energy in kilowatt-hours. A photovoltaic installation with 10 kilowatts of installed capacity receives no money for those 10 kilowatts as such, but for the kilowatt-hours it generates and delivers to the grid. The feed-in tariff thus differs clearly from investment support, which subsidises the construction of an installation, and from a capacity payment, which remunerates keeping capacity available. It is a payment that depends on generation.

How it works and the legal framework in Germany

In the original support model, the feed-in tariff had two central functions. First, it secured operators a fixed revenue per kilowatt-hour over a long period. Second, renewable electricity was entitled to priority connection to the grid and priority purchase. For investors, uncertainty about future revenues fell considerably. Anyone planning an installation did not have to estimate what price electricity would fetch on the exchange in ten or fifteen years. Whether the installation paid off depended mainly on installation costs, location, yield, the tariff rate and financing conditions.

Under the EEG 2023, which currently applies, the fixed feed-in tariff is no longer the standard case but is limited to small installations. According to the Federal Network Agency (Bundesnetzagentur), for solar installations it is available up to an installed capacity of 100 kW. Larger installations generally market their electricity directly and receive the market premium. The level of the tariff depends on the date of commissioning and on the installed capacity. Once the applicable rate is set, it stays fixed for the support period. According to the common presentation of § 25 EEG, this is 20 calendar years plus the year of commissioning.

In terms of calculation, the feed-in tariff starts from the so-called applicable value (anzulegender Wert). For solar and wind installations, a deduction of 0.4 cents per kilowatt-hour is made from it if the fixed tariff is used instead of direct marketing. Since 1 February 2024, the applicable values for newly commissioned solar installations have fallen by 1 percent every six months. This reduction is called degression. It applies only to new installations. Existing installations keep their rate.

Current rates for solar installations (commissioned 1 August to 31 December 2026)

  • Installations on buildings or noise barriers with partial feed-in, where part of the electricity is consumed on site: 7.70 ct/kWh for the capacity portion up to 10 kW, 6.66 ct/kWh for the portion up to 40 kW and 5.44 ct/kWh for the portion up to 100 kW.

  • The same installations with full feed-in, where all the electricity goes into the grid: 12.22 ct/kWh up to 10 kW and 10.24 ct/kWh for the portions up to 40 and up to 100 kW.

  • Other solar installations up to 100 kW, such as small ground-mounted installations: a uniform 6.19 ct/kWh.

The tiers apply proportionally. An installation of 15 kW receives the higher rate for the portion up to 10 kW and the lower rate only for the remaining 5 kW. This results in a blended rate. The increase of 1.5 ct/kWh for installations of 40 kW and above provided for in Solar Package I (Solarpaket I) is not included in these values. According to the Federal Network Agency, the necessary state-aid approval from the EU Commission is lacking. A simplified example: if a 10 kW rooftop installation with partial feed-in feeds in 5,000 kWh in a year, the operator receives around 385 euros at 7.70 ct/kWh. This is purely an illustrative calculation. How much is actually fed in depends on location, orientation and self-consumption.

For newer installations the following also applies: during periods of negative exchange prices, the entitlement to payment may lapse entirely. The exact rules depend on the date of commissioning and the size of the installation. They must therefore be checked individually for each installation.

Distinction from the market premium, the electricity price and self-consumption

The feed-in tariff is not the price that households or businesses pay for the electricity they buy. This end-customer price includes, besides procurement costs, grid charges, taxes, duties, levies and sales costs. The feed-in tariff, by contrast, is the revenue of the installation operator for the electricity it supplies. The two figures are often far apart, but in public debates they are frequently mentioned side by side.

The feed-in tariff must also be distinguished from the wholesale electricity price. The exchange price is formed on the electricity market from supply and demand for specific delivery periods. It fluctuates depending on weather, consumption, available power plants, fuel costs and the grid situation. A fixed tariff shields the operator from these fluctuations. In direct marketing, by contrast, the operator sells the electricity on the market itself or through a service provider. In addition, the operator receives a sliding market premium. It compensates for the gap between the applicable value and the average market value. A basic safeguard is thus retained, but the installation is more strongly integrated into market processes.

The feed-in tariff also differs from self-consumption. Electricity that is consumed directly on site, for example in a household with a solar installation, does not enter the public grid and is therefore not remunerated. Self-consumption pays off when the electricity one thereby does not have to buy costs more than feeding it in would earn. With today's tariff rates of under 8 ct/kWh for surplus electricity, this is usually the case for small rooftop installations. This gap creates incentives for storage, for shifting consumption and for better coordination of generation and consumption within the building.

Significance and limits in the electricity system

The feed-in tariff accelerated the expansion of renewable energies because it changed the conditions for investment. Wind and solar installations have high upfront costs, hardly any fuel costs and generation that depends on the weather. An instrument that secures long-term revenues suits this cost structure. Small operators in particular, citizen energy cooperatives, farms and homeowners were thus able to invest without having to trade on the electricity market themselves.

However, the instrument promotes generation, and not automatically grid connection, storage, flexibility or grid-supportive operation. It rewards kilowatt-hours fed in, while many costs of the overall system arise elsewhere. If a great deal of solar power is fed in at midday, the market value of each additional solar kilowatt-hour in those hours falls. Experts speak of the cannibalisation effect. A fixed tariff protects the individual operator from this price decline; the difference is then borne by the support system. In addition, grid bottlenecks can arise when installations are spatially concentrated. Periods of negative electricity prices and the curtailment of installations are therefore no longer peripheral topics. The Federal Government puts redispatch costs alone, that is, the costs of interventions to resolve grid bottlenecks, at more than three billion euros per year.

Common misunderstandings

  • A subsidy for all green electricity: More precisely, the feed-in tariff is a rule-based entitlement for quantities of electricity fed in from certain installations under certain statutory conditions. Whether it is classed politically as a subsidy, as a safeguard for investments or as an instrument for market introduction depends on the perspective. For analysis, what matters more is which risks it allocates and which incentives it creates.

  • Old rates as today's costs: The high tariffs for early photovoltaic installations reflect the investment costs and support decisions of the time. New installations receive significantly lower rates. Anyone who mixes up the burdens from earlier tariffs with current levelised costs of electricity gets a distorted picture.

  • Remunerated kilowatt-hours equal security of supply: Many kilowatt-hours fed in over the year say little about how much capacity is reliably available in a scarce hour. On a windless winter evening or at night, wind and solar installations deliver little or nothing. For security of supply, additional concepts are needed, such as firm capacity, residual load, storage, dispatchable generation and adjustable demand.

From a deployment instrument to a question of integration: planned reform from 2027

With the growing share of renewable energies, the role of the feed-in tariff has shifted. At the beginning, the aim was to bring new technologies to market and to set learning curves in motion. Today the emphasis is more on how generation, consumption, grid capacity and flexibility can be brought together in time and space. For small installations, the fixed tariff has so far been an important simplification. A household does not take part in the wholesale market like a power plant operator. Uniform rates and simple billing reduce transaction costs.

According to the Federal Network Agency, the EEG 2023 is applicable to newly commissioned installations until 31 December 2026. A successor regime is under parliamentary deliberation. On 29 July 2026, the Federal Cabinet adopted an EEG amendment and a grid connection package. According to the Federal Ministry for Economic Affairs, the feed-in tariff is to end for new wind, photovoltaic and biomass installations. All new installations are to be gradually brought into direct marketing so that price signals from the electricity market reach them. A time-limited transitional payment is envisaged for the transition. Small PV installations below 25 kW are no longer to receive permanent support. Existing installations keep their guaranteed support for the entire term.

The draft also provides for contracts for difference (CfDs), under which excess revenues in high-price phases are skimmed off. In regions with persistent grid bottlenecks, compensation for curtailment is to cease in future; a time limit and a cap apply for this. As of mid-November 2026, the draft is not yet applicable law. The Bundestag debated it in a first reading in September, and the Bundesrat adopted an opinion. Changes during the procedure are possible, and the EU Commission must give state-aid approval.

The feed-in tariff is thus more than a sum of money. It is an interface between the installation, the grid and the regulatory framework. It determines which electricity is paid for, who bears the price risk and which generation becomes economically viable. It does not, however, explain whether the kilowatt-hours generated are available at the right time, in the right place and with the necessary system services.

Sources

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Edited by eCMS on 11.11.2026 19:43

© 2026 Erik Schmidt. All rights reserved. Quotations with a link to the source are welcome.