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Solar News

Feed -In Tariffs California Style


The feed-in-tariffs, under which the consumer may sell excess energy back to the utility, have been both praised and demonized in Europe. They have been at the center of the debate in the leading solar countries of Germany and Spain. And they are beginning to creep into the United States, slowly but surely. California became the latest state to adopt some form of a feed-in tariff, as reported by a Dow Jones wire story published on California Governor Schwarzenegger signed the legislation this past Sunday. The Dow Jones article describes the measure:

The measure seeks to expand the market by requiring California utilities to buy power from solar-panel generators of up to 3.0 megawatts in size, at set rates above what the utilities would pay for wholesale power from conventional sources.

Utilities would have to purchase a certain amount of solar power from customers using the feed-in tariff until a statewide total of 750 megawatts was reached. They could count the purchases toward a state requirement that they use renewable sources for a third of the power they sell by 2020.

Some solar companies said the bill's pricing scheme would create a feed-in tariff of about 15 to 17 cents a kilowatt-hour . . . Supporters of the legislation, including the California Solar Energy Industries Association, said the bill's feed-in tariff will be high enough for schools, local governments, farms, warehouses and other low-cost property owners to take advantage of it.

The Dow Jones report distinguished the state legislation from the effort within the California Public Utilities Commission. According to the Dow Jones article, the CPUC proposal would require the state's utilities "to collectively buy 1,000 megawatts of power from solar-panel generators sized between 1 MW and 20 MW over four years through ‘reverse auctions' in which they would pick the projects with the lowest bids to meet their requirements. The agency is still reviewing proposals for the program and could make a decision sometime next year."

Although over 40 states have net metering legislation, which allows consumers to offset their energy bills by the price of the energy that they produce, the legislation has not allowed consumers to sell back to the utility any excess energy.  But there are many homes that could become little power generators with the right incentives in place through a feed-in tariff. California is one of the first states to address this problem, as reported by the Solar Industry Magazine.

Schwarzenegger signed A.B.920, which amends the Public Utility Code to "permit incentives for green energy by allowing homeowners with residential solar and wind renewable energy systems to be paid by their electric utility for any excess power generated at their home," according to the office of the bill's sponsor, Assemblymember Jared Huffman.

"By giving solar system owners fair compensation for the surplus electricity they generate above and beyond their own on-site electricity needs, A.B.920 removes a perverse incentive for solar system owners to waste electricity so as not to give any way or 'lose' any to the utility," adds Environment California, which supports the bill.

The major issue for feed-in tarffs is the rate structure for selling energy back to the utility. Overly generous rates can cause havoc as they did last year in Spain. And in Germany, the government will be scaling back the rates as reported by Reuters.  The German government is cutting the rates for solar power. Currently, according to Reuters, "Utilities are now obligated to pay 43 cents per kilowatt for 20 years for photovoltaic for systems installed in 2009. That rate has been falling by roughly 8 percent per year and is scheduled to drop by 9 percent in 2010 to 39 cents per kilowatt." There had been discussion of cutting the feed-in tariffs by as much as 30 percent, but a government source indicates that the amount will be about 15 percent.

Allowing customers to sell energy is a sound policy, because they are already connected to the grid, and the technology is available and relatively easy to implement to measure how much energy the consumer produces in excess of his or her usage. The major issue is at what price. For all of the feed-in tariff structures in the U.S., policymakers will have to grapple with what rates the customer will be allowed to sell back to the utility the excess energy, and whether these rates are subject to annual adjustment.