Feed in Tariff Degression

Tariffs in Germany and the UK are reduced through tariff degressions every year, which change over the range of the lifecycle of the Tariff, encouraging the driving down of cost of new technologies over time.  The tariff should therefore be continuously monitored as the technologies change.  The date at which the renewable energy is installed, however, is that rate at which the installer will receive payments for a guaranteed, predetermined period of time.  This equates to 20 years in Germany, and 20 years in the UK for renewables other than solar, with tariffs for solar continuing for a period of 25 years.  So, for example, if renewable technologies are installed in 2010 at a rate of 50 cents a kwh, then that rate will stay the same for the next 20 years.  If the same technology were to be implemented the year after in 2011, in which a degression of 10% has occurred, then the tariff will pay at 45 cents, which would again stay the same for the next 20 years or whatever predetermined amount of time the government decides upon).  Therefore, getting renewable energies installed early increases the financial rewards of doing so.  Thus, in the above example, installers in 2010 would be getting 50 cents per Kwh until 2030, while those that installed in 2011 would get 45 cents until 2031.  This encourages the reduction in the cost of production in which produces must innovate to become more cost effective.  It also means the eventual elimination of the tariff altogether through set yearly degressions.  The fact that after the installation of the renewable system is in place the return rate stays constant for the next 20 years means that customers have certainty on the rate of return of their investment, and are thus more likely to invest, while encouraging innovation in the renewable technology industry to find cheaper ways to produce renewable to remain in the market.