Feed-in Tariffs Needed After Grid Parity

Date: 23 Feb 2011 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

Craig Morris has a thorough discussion of why feed-in tariffs (CLEAN Contracts) and other renewable energy policies are still necessary even when renewables get to grid parity.  It’s a direct response to an earlier piece on Renewable Energy World claiming that the best strategy for solar is to get off incentives.

First, he notes that there’s a pervasive myth that feed-in tariffs have failed:

In fact, every gigawatt market in the world for PV was driven by feed-in tariffs. Mints is right that some of these markets have gone bust, but do the other markets (like Germany) that haven’t gone bust not show us how to do it right? I can’t say that of other PV policies (think of the US or pre-FIT Britain).

Can we agree that solar feed-in tariffs have not failed in “most” countries – and that no non-solar FIT market has undergone boom-and-bust anywhere? A more accurate description would be that feed-in tariffs are the only policy that has led to major success stories for solar, but that some incompetent governments threw in the towel when they saw the price tag.

Morris also notes that the price tag is another myth – feed-in tariffs are a less expensive policy tool than most others:

Mints writes, “Here’s the golden rule of incentives: they are expensive, and someone has to pay the bill.” Actually, it’s photovoltaics that’s expensive, not feed-in tariffs. Studies have repeatedly found that feed-in tariffs are the least expensive way to promote renewables.

The bigger issue is that getting to grid parity is not an end in itself:

FITs for wind and biomass have generally always been below the retail power rate, so why should anything change when solar is no longer the exception? As Mints herself points out, conventional energy sectors also continue to be subsidized. Why should the situation ever be any different for photovoltaics?

Morris goes on to describe how solar below the retail rate will create a massive rush to solar that will actually make electricity more expensive (as solar installers take a larger cut of the favorable economics and increased solar capacity scales down baseload fossil fuel power plants during peak hours).  Instead:

But what we probably need over the long run are feed-in tariffs that pay for power production from intermittent sources (especially solar and wind) with a fluctuating premium based on power demand; when renewable power production approaches or exceeds demand too often, the premium will not be paid, and investments in such technologies will not pay for themselves as quickly. The floating cap will find itself, so to speak.

The Germans have already adopted such a policy, called “own generation“.  And a few U.S. states – where solar is already cheaper than peak electricity prices – will need a similar policy innovation.

Photo credit: David Parsons (NREL PIX)

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Solar Could Save Minnesota Schools Millions

Date: 18 Feb 2011 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

Currently, Minnesota’s public schools spend approximately $84 million per year on electricity costs, money diverted from the classroom.  But a bill to make clean, local energy accessible now (CLEAN) could help the state’s public schools use solar to zero out their electricity bills and add $193 million per year to their operating budgets.

The proposed bill would create a CLEAN Contract for public entities in Minnesota, requiring local utilities to buy electricity from solar PV systems on public property on a long-term contract and at a price sufficient to offer a small return on investment.  The program mimics the traditional model for utility power development, where the public utilities commission rewards utilities a fixed rate of return on investments in new power generation.  If schools maximize their participation in the new program, and cover their available roofspace with solar PV, the 750 megawatts of power would provide $193 million per year for school budgets, create hundreds of local jobs, and make the schools electricity self-reliant.  

The cost of the program would be negligible: adding less than two-tenths of a cent per kilowatt-hour to customer bills.  

Minnesota’s CLEAN Contract proposal is one of several programs spreading across North America, from Ontario to Vermont to Gainesville, Florida, and one that has ushered in thousands of megawatts of solar across Europe.  In Ontario, the full-scale program has contracted over 2,700 megawatts of renewable energy and is responsible for 43,000 new jobs.  Minnesota’s program is restricted to solar PV on public property, but as this analysis shows, it could still have a significant impact on school budgets without a significant impact on ratepayers. 

For more detail on CLEAN Contracts, read our 2009 report.  For more on CLEAN Contracts in Minnesota, check out Solar Works for Minnesota.

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This is How to Sell a CLEAN Contract Program

Date: 15 Feb 2011 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

Vermont’s Standard Offer: The Stories

We want a Vermont powered by clean, homegrown energy that doesn’t create radioactive waste or wreck our planet’s climate, and we want our energy dollars to stay in the state.   The pilot round of the Standard Offer moved us towards that reality.

Now we’ve put together a booklet that highlights six of these projects – from a dairy farm in Troy to a solar farm in Ferrisburgh.

Click below to get the excellent report.

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Op-ed: How States Can Maximize Clean Energy Jobs

Date: 31 Jan 2011 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

Over 30 U.S. states mandate renewable energy and are willing to pay higher prices for clean electricity.  But most states lack a jobs and economic development strategy for renewable energy, and must watch helplessly as manufacturers like Evergreen Solar move production to China.  Instead, state legislators should emulate the Canadian province of Ontario by passing a comprehensive policy to capture the jobs and economic value of their clean energy transformation. 

Ontario’s bold clean energy program – in just over a year – has resulted in the promise of 43,000 clean energy jobs in support of 5,000 MW of clean energy projects.  The centerpiece of the program is a simple, long term contract for renewable energy developers with a price sufficient to attract investment.  To qualify for a contract, developers must get 60 percent of their project’s value from inside the province.  The rule effectively means that no solar or wind project built in Ontario can obtain a contract without having some components manufactured locally.

This domestic content or “buy local” rule has spurred a fast-growing renewable energy industry in the province, with over 20 new manufacturing plants scheduled to open in the next two years.  The new plants will manufacture solar modules, inverters, racking systems, and wind turbine blades and create thousands of jobs.  The spillover effects from the new manufacturing facilities will multiply the job impacts across the province.

In contrast, the third largest solar manufacturer in the U.S., Evergreen Solar, is shifting its production to China, laying off 800 workers and closing its Massachusetts-based manufacturing plant.  This announcement is on the heels of two other solar plant closures in New York and Silicon Valley. 

The bleeding of jobs won’t stop unless state lawmakers enact new rules to make renewable energy easier to develop and manufacturing harder to outsource. 

While Ontario provides an all-in-one contract for its wind and solar producers, developers in the United States must cobble together a hodgepodge of federal, state, and utility incentives to access financing.  And while Ontario also provides a guaranteed grid connection and long-term contract for qualified projects, U.S. developers typically negotiate their interconnection and power purchase agreements with the utility individually. 

Additionally, no U.S. state has married economic development and renewable energy policy as has Ontario.  The most desirable, long-term jobs in renewable energy are in manufacturing and states do provide manufacturing job subsidies, such as the $44 million provided to Evergreen Solar’s Massachusetts facility.  But these payments are separate from the state’s renewable energy program, with no guarantee of sufficient local demand to maintain the plant. 

Only two states – Washington and Michigan – provide financial incentives for renewable energy that also encourage in-state manufacturing.  In both cases, the incentive programs are too small to have much impact. 

In contrast, Ontario’s clean energy program is built around a strong commitment to local manufacturing and it has attracted as many as 43,000 new jobs at a reasonable cost per job, according to the Institute for Local Self-Reliance.  We estimate that Ontario pays $143,000 per job created, a cost comparable to job subsidy programs in the United States and less than some recent U.S. state clean energy job creation efforts.  And unlike U.S.-based job subsidy programs, the price of Ontario’s new jobs includes thousands of megawatts of clean electricity.

Conveniently, employing the Ontario strategy in the U.S. would almost certainly cost less because of stronger renewable energy resources and higher electricity prices.  For example, Colorado’s solar resource alone would allow it to provide solar developers a similar return on investment at a 33% lower price for power and its higher retail electricity price would further reduce the marginal costs of the program and the resulting jobs compared to Ontario.

Ontario’s strategy is not without controversy, and the buy local rule has drawn a World Trade Organization complaint filed by Japan and the United States.  However, other countries have found ways to favor local manufacturing and production without the trade dispute, including Turkey, whose policy offers higher incentive payments for locally-produced projects, rather than requiring domestic content.  Such a policy would likely also pass interstate commerce muster in the United States. 

U.S. states forgo jobs and economic development because their clean energy policies lack sufficient coordination.  The Canadian province of Ontario has demonstrated the power of comprehensive clean energy policy, and their lesson should be replicated by American legislators.

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FERC Affirms that CLEAN Contracts (Feed-in Tariffs) are Legal

Date: 27 Jan 2011 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

Overruling a utility challenge, the Federal Energy Regulatory Commission (FERC) affirmed today that states have the right to set prices for mandated renewable energy purchases and that these prices may vary by technology:

“[W]here a state requires a utility to procure energy from generators with certain characteristics,” the state may set the wholesale rate (known as ‘avoided cost’) for that specific type of energy.  Id. at para. 30. Therefore, a state can require utilities to purchase electricity generated from differentiated technologies (wind, solar, wave, etc.) and set the rate for purchases from each of these generators.


Photo credit: Flickr user KeithBurtis

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Turkey Adopts Feed-in Tariff with Buy Local Provision

Date: 18 Jan 2011 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

The country of Turkey recently adopted a new feed-in tariff policy for several renewable energy technologies including wind and solar.  What’s notable is not the base rates (the prices are likely too low) but the bonus payments for “made in Turkey” projects.  For a solar PV project, for example, a fully local solar PV system could increase their payment per kilowatt-hour by over 50%.

The policy mimics the highly successful FIT Program in Ontario, where a buy local rule requires participating projects to source at least 60% of their content in the province.  The rule has meant that the 5,000 megawatts of projects in the pipeline have generated the promise of 43,000 jobs.  For more on Ontario’s program, see our recently released report: Maximizing Jobs From Clean Energy: Ontario’s ‘Buy Local’ Policy.

Turkey’s policy is noteworthy for using bonus payments, a strategy that is more likely to pass legal muster for U.S. states looking to emulate Ontario’s job creation success.

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Britain to Abandon RPS & Move to Feed-in Tariffs

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

In a potentially precedent-setting move for the English-speaking world, Great Britain’s ruling coalition proposes abandoning its long-running experiment with so-called “market reforms” of the 1990s. Included in the proposal released by Chris Huhne, Energy and Climate Change Secretary December 16, 2010, is wholesale revision of the country’s Renewable Obligation, the British version of Renewable Portfolio Standards (RPS).

While the renewable targets will remain, the government proposes abandoning the mechanism for reaching the targets, the Renewables Obligation (RO). Instead the coalition government of the Conservative and Liberal parties proposes implementing a system of feed-in tariffs for “low carbon generation”.

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A Feed-in Tariff Means More Market Competition

Date: 7 Dec 2010 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

The world’s most effective clean energy policy – the feed-in tariff – isn’t a government program, but rather reshapes the electricity market to favor renewable energy production.  And it increases competition, as well. 

An even more appealing outcome of this innovative program is that it has decentralized Germany’s energy market. Whereas four major utilities used to control all of the electricity production in the country, the guaranteed access to the grid and the fixed credit have opened up the electricity market, rapidly decentralizing the country’s energy oligarchy. The shift has been so dramatic that utilities only account for a tenth of the entire renewable electricity market in the country. Instead, it is small businesses, families and farmers that are responsible for producing the vast majority of the clean energy used in the country. This has ensured that the economic benefits of clean energy have been broadly distributed – helping to ensure that more Germans will benefit from the boon and creating even greater support for the industry. [emphasis mine]

Decentralizing renewable energy production means more widely shared economic benefits and more political support for renewable energy. 

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