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Feed-in Tariffs – Why do we need them?

by Neville Williams on September 27, 2009

feed-in-tariff-meterThe idea is great, and it works, but the name is terrible.  It came out of Germany in English translation.  We should call it “clean energy purchase” or “solar buy back” or at least Feed-in Rate, since we pay electric utility rates, not tariffs.

“Feed-in,” of course, refers to homeowners and businesses feeding solar electricity into the utility grid.  This is what grid-tied solar is all about, selling home-generated electric power to your utility.   But the difference between net metering and a feed-in rate is that the price paid by the utility for solar electricity fed into its grid is much higher, reflecting the true cost of clean alternative energy and the avoided cost of dirty fuels.  Net metering merely means a credit against your bill for the power you produce.

Get paid for the energy you create

With feed-in tariffs the utility pays a higher rate for clean power than they charge for their dirty power, and the rate, or tariff, is set for 20 years, guaranteed.  In Germany, where all this started, the Federal law, voted on by a national referendum, created a huge marketplace for solar power.  Financing followed.  Feed-in tariffs are now widely used in a number of European and Asian countries.

In Germany, companies quickly emerged to finance solar on everyone and anyone’s roof-top or field, from apartment houses, to homes, to barns, to business and industries.  For the past 5 years, more solar PV was installed in Germany each year than in all the rest of the world combined.  And they barely have any sunshine!

US taking baby steps

The first North American feed-in tariff law was enacted in Ontario, Canada, last year, another place with less than optimum sunshine, and the solar business has taken off.  The first true feed-in tariff program in the U.S. was launched in the City of Gainesville, Florida earlier this year, and the 4 MW cap was fully subscribed in minutes.   (There was originally no cap in Germany.  Spain’s 500 MW cap was reached last year, quickly slowing the world’s 2nd largest solar market.)

Gainesville Regional Utilities is paying 32 cents a Kilowatt hour for solar electricity! (average residential price per Kilowatt in Florida is 12 cents).  Cheaper for them than building new generating plants, and a quicker source of power.  And they are doing the right thing.

Just because it’s a great idea, and just because it works, doesn’t mean it’s going to be widely adopted in the U.S.  Even though a carbon tax is a much better idea than “cap and trade,” we are going with the latter, which probably won’t work very well, but it’s a start, as they say.  Just because feed-in tariffs have been proven to work, doesn’t mean the environmental lobbyists and congress will abandon their cherished “renewable portfolio standards” policy approach to clean energy incentives.

The good news is that despite resistance by utilities and policy makers, feed-in tariffs are catching on worldwide, and inevitably will have a role to play here, in towns, states, and various regional and municipal utility service areas. Municipal electric utilities can be forced to do it by progressive city councils, but how to fund it is the difficult question.

What is the cost to the public?

How does Germany pay for this?  After the government, corporations and the utilities opposed the idea, activists (and Bundestag member Hermann Scheer – see the video) took it to the people.  Germans voted to pay a $1 per month surcharge on their electric bill to finance the program.  In America, $12 a year – the price of 3 Starbucks lattes — would be opposed by Republicans as an outrageous tax, so it can’t happen here.

But Germans think it’s a modest contribution to help fight global warming and make Germany the leading solar player on the planet.

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A Feed-in WHAT?! « US Renewable Energy Advocates in Germany
January 21, 2010 at 10:44 am

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