A Call for a Federal Feed-in Tariff

Date: 24 Nov 2010 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

The CEO of a leading Indian solar energy firm issues a call for a U.S. federal feed-in tariff in yesterday’s New York Times:

Two things happened last month to give us pause to reflect on clean energy. First, Germany added the equivalent of nearly 1 percent of its electricity supply with solar energy between January and August. The first 1 percent took 10 years to achieve; the next 1 percent just 8 months. Second, the author of this revolution, Hermann Scheer, died.


The United States is one of the two top energy consumers in the world (along with China), so the world cares how fast America becomes convinced that there is a viable replacement to fossil fuels. The domestic American market should reach 1,000 megawatts next year. But to put that in perspective, Germany next year could add 1,000 megawatts in just 1.5 months.

To catch up, President Barack Obama needs to push for a federal feed-in tariff, or a mandate for states to have one, and fund it with a surcharge on conventional power — small enough to pass, but big enough to move solar away from cumbersome grants and tax incentives that come and go with the annual budget circus.

I recently wrote about the legacy of Hermann Scheer, and you can also read our comprehensive explanation of a feed-in tariff.

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Feed-in Tariffs in America

Date: 24 Nov 2010 | posted in: Energy | 0 Facebooktwitterredditmail

figure 1American renewable energy policy consists of a byzantine mix of tax incentives, rebates, state mandates, and utility programs.  The complexity of the system results in more difficult and costly renewable electricity generation, and hampers the ability of states and communities to maximize the benefits of their renewable energy resources.

Evidence from Europe suggests that a simpler, more comprehensive policy achieves greater renewable energy development, but at a lower cost and with greater economic and social benefits like local ownership.  It is called a feed-in tariff, a price for renewable energy high enough to attract investors without being so high it generates windfall profits. The tariff can be varied to spur new emerging technologies or to achieve social ends.  

Denmark and Germany both used a feed-in tariff to drive renewable electricity generators to more than 15 percent market share.  This policy also resulted in large-scale local ownership, with near half of German wind turbines and over 80 percent of Danish ones owned by the residents of the region.  

In 2009, one Canadian province (Ontario) and one US municipal utility (Gainesville, FL) have enacted a feed-in tariff.  As many as 11 U.S. state legislatures are seriously considering adopting the system as a complement to their renewable electricity mandates.   State and federal policy makers should strongly consider turning to a feed-in tariff as the key mechanism for encouraging renewable energy development.  It’s fairness, simplicity, and stability can help the United States maximize the benefits of the renewable energy revolution.

Update January 2011: A new name for this policy has been adopted in the U.S.: CLEAN contracts, for Clean, Local, Energy, Accessible, Now.

Related Resource:

ILSR’S FEED-IN TARIFF CONFERENCE – 2009

ILSR held a feed-in tariff conference in Northfield, MN, in January 2009 to help bring visibility to this policy tool to people and organizations in the Midwest.  The meeting was attended by approximately 120 people – from regulators and legislators to renewable energy developers and activists.

  • We learned how cities, counties, non-profits and more individuals can become owners of renewable energy projects
  • We saw how renewable energy can promote more economic development
  • We discovered how developing renewable energy can be made more simple

View the presentations and video clips from the conference

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PACE Lawsuits Up for Decision on December 2nd

Date: 23 Nov 2010 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

In mid-October, yet another municipality joined the growing list of lawsuits against the Federal Housing Finance Agency, Fannie Mae, and Freddie Mac over the popular Property Assessed Clean Energy (PACE) program.  Arguments in the court case will be heard next week.

A federal judge will consider next week whether to dismiss lawsuits questioning the Federal Housing Finance Agency’s decision to effectively shut down a White House-supported home energy efficiency program.

In a closely watched case, U.S. District Judge Claudia Wilken of the Northern District of California will hear arguments Dec. 2 over whether to dismiss several lawsuits against the agency, including one filed by the state of California.

I’m hopeful that the plaintiffs can win – PACE could really open the door to major improvements in home energy efficiency and expansion of distributed renewable energy.

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Increasing On-Site Consumption of Distributed Solar

Date: 22 Nov 2010 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

It’s rarely mentioned that a home with a solar array still gets most of its electricity from the grid.  In fact, without storage, a typical home solar array might only serve one-third of a home’s electricity use, even if the system is big enough to meet the home’s peak needs. The problem is a mis-match in … Read More

(Almost) Best Practices for Community Solar and Wind Generation Projects

Date: 18 Nov 2010 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

Yesterday, the Interstate Renewable Energy Council (IREC) released their model program rules for community renewable energy projects [pdf]. IREC’s new model rules consider many of the basic issues facing community renewables programs.  These include: renewable system size, interconnection, eligibility for participation, allocation of the benefits flowing from participation, and net metering of system production. IREC developed … Read More

Community Solar Should Save Money, Not Just Trees

Date: 18 Nov 2010 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

IN this environmentally conscious college town, thousands of bicyclists commute each day through a carefully cultivated urban forest whose canopy shields riders and their homes from the harsh sun of this state’s Central Valley.

The intensity of that sunshine also makes Davis an attractive place to generate clean green energy from rooftop solar panels. And therein lies a conundrum. Tapping the power of the sun can also mean cutting down some of those trees.

Enter community solar.  Individuals can invest in a nearby, common solar PV installation, saving kilowatt-hours and trees.

But the article provides some poor examples: the Sacremento Municipal Utility District’s Solar Shares and SunSmart in St. George, UT.  In the case of the former, participants pay extra for their solar power.  In the case of the latter, participants pay extra for solar and – worse – pay up front for 20 years of more expensive power. 

In our recent report – Community Solar Power: Obstacles and Opportunities – we provide a case study of nine operational community solar projects – five of them provide a payback on investment rather than asking a premium price for clean power.

Community solar can save trees, but it can also save participants money.   

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Why tax credits make lousy renewable energy policy

Date: 17 Nov 2010 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

For two years, solar and wind energy producers seeking federal incentives have been able to take cash grants in lieu of tax credits.  The stimulus act program helped keep the renewable energy industry afloat as the credit crunch and economic downturn dried up the market for reselling tax credits to banks and other investors with large tax bills.

The cash grant program is set to sunset at the end of this year, but solar and wind energy advocates are hoping it will be extended, for good reason:

In fact, the tax credits were always an awkward tool, some argue. Rhone Resch, the head of the Solar Energy Industries Association, said that many of the companies doing the installations were not making a profit either, so these tax credits were sold as “tax equity,” a secondary market, at a loss of 30 to 50 cents on the dollar to the seller. [emphasis added]

The tax credits were worth 30% of a project’s value, so the transaction costs of reselling the credits meant that renewable energy projects without sufficient internal tax liability were 13 to 21% more expensive than projects that could use the credits themselves.

This is dumb policy.  Ratepayers pay a higher price for renewable energy because incentives filter through the tax code instead of the general fund.

But the cash grant v. tax credit issue is just one symptom of a larger disease affecting American renewable energy policy.  Transaction costs are increasing the cost of renewable energy in nearly every state with a renewable portfolio standard (RPS).

Under most state RPS policies, utilities put out requests for proposal to acquire renewable energy to meet the state mandates.  These solicitations attract thousands of developers who all have to front their project development costs.  But in California, for example, 90% of projects don’t make the utilities’ shortlist for the solicitation, stranding over $100 million in development costs.

Some of those projects may eventually get online, but most of that money is flushed because the U.S. prefers to let utilities act as gatekeepers to clean energy rather than open the market to any potential producer. It’s not the only way.

There’s a renewable energy policy that’s responsible for 75% of the world’s solar and half its wind power.  It has the lowest transaction costs because there’s no fiddling with the tax code and no parasitic costs from auctions or solicitations.  Instead, utilities are required to interconnect and take the power from any developed renewable energy project, and to provide a price sufficient to provide a reasonable return on investment (just like the utilities enjoy in rate regulated states).

The policy is funded entirely through the electricity system, so renewable energy doesn’t have to compete with other budget priorities.

It’s called a feed-in tariff.

The U.S. can extend the cash grant program, but it merely treats a symptom of the disease.  A better policy awaits.

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Minnesota Wind Project Brings Local Control; SD PUC Commissioner Doesn’t Understand Economies of Scale

Date: 16 Nov 2010 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

A new 25 megawatt wind project in southwestern Minnesota will feature greater local ownership than most, using a model that Project Resources Corporation calls “Minnesota Windshare”.  The project should be online by early 2011:

Construction crews this fall are assembling 11 turbines that will make up the $51 million Ridgewind project near Lake Wilson, about 20 miles east of Pipestone. The project also will come with a new endeavor for its developer, Minneapolis-based Project Resources Corp., that the company hopes will increase the economic influence wind projects can have on a community.

The PRC project will use the familiar “Minnesota Flip” model of wind project development, where a large equity investor provides the capital and holds majority ownership for 10-15 years, along with any landowner who hosts a turbine.  The interesting twist is in the flip, where more community investors can come into the project when the equity investor departs.  This WindShare program [pdf] could allow many people who don’t have land suitable for wind or significant capital to nevertheless participate in a wind power project. 

The news story is featured in a South Dakota paper, the Argus Leader, which quotes a South Dakota Public Utilities Commissioner saying that the Minnesota-based PRC project won’t capture the economies of scale of a larger, 100 MW project in South Dakota. 

“Frankly, the South Dakota model is better,” Johnson said. “If you take a large wind farm, you get economies of scale. You carve out a piece of that where local South Dakota investors can put their money into that,” he said.

Except that the data show wind power plant economies of scale are maximized for projects in the 5-20 MW range, not 100 MW and over. 

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Date: 16 Nov 2010 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

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