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Feed-in tariff

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A Feed-in Tariff (FiT, Feed-in Law, FiL, solar premium[1], Renewable Tariff[2] or renewable energy payments [3]) is an incentive structure to encourage the adoption of renewable energy through government legislation. The regional or national electricity utilities are obligated to buy renewable electricity (electricity generated from renewable sources, such as solar photovoltaics, wind power, biomass, hydropower and geothermal power) at above-market rates set by the government.[4]

The higher price helps overcome the cost disadvantages of renewable energy sources. The rate may differ among various forms of power generation. An FiT is normally phased out once the renewable reaches a significant market penetration, such as 20%, as it is not economically sustainable beyond that point.

History

This type of program was first implemented in the USA in 1978. President Jimmy Carter told Americans that the energy crisis was "a clear and present danger to our nation" and drew out a plan to address it.[5] As reaction to a perceived energy crisis and growing concerns over air pollution, President Jimmy Carter signed the National Energy Act (NEA) and the Public Utilities Regulatory Policy Act (PURPA). The purpose of these watershed laws was to encourage energy conservation and the development of national energy resources, including renewables such as wind and solar.[6]

Standard Offer Contracts for renewable power development were first introduced in California in the early 1980s in response to the state's investor-owned utilities behavior toward small power producers. California's Public Utility Commission ordered the utilities to offer standardized contracts and to offer one such contract, Standard Offer No.4 (SO4) with fixed prices. By the mid- 1980s, private power producers had installed 1,200 MW of wind capacity in California. Much of this capacity is still in service. For two decades these wind turbines have delivered about 1% of the state's electricity.[7]

But it is the German model, that began in 1990 ("Stromeinspeisungsgesetz")[8] and was refined in the year 2000 ("Erneuerbare-Energien-Gesetz") when it became a Federally managed program that has proven to be the world's most effective practice for boosting adoption of renewable energy technologies. Feed-In Tariffs (REFIT) have been associated with a large growth in solar power in Spain, Germany and wind power in Denmark. These countries now boast the supply of 9%, 5% and 20% of their electricity respectively. These systems involve fixed payments that are guaranteed in the long term; 20 years in the cases of Spain and Germany.

Principle

In the effort to combat climate change, the increased deployment of renewable energy sources is regarded by many as critical. One major obstacle to this adoption is the retail price of electricity generated from renewable sources, which is typically more expensive than the retail price of electricity generated from fossil fuels. A FiT is a revenue-neutral way of making the installation of renewable energy more appealing. The electricity that is generated is bought by the utility at above market prices. For example, if the retail price of electricity is 10¢/kWh then the rate for green power might be 40¢/kWh. The difference is spread over all of the customers of the utility. For example, if $100,000 worth of green power is bought in a year by a utility that has 1,000,000 customers, then each of those customers will have 10¢ added on to their bill annually.

Thus, a small annual increase in the price of electricity per customer can result in a large incentive for people to install renewable energy systems. This is the essence of a FiT: it is a mechanism to instigate a change in the way power is produced, gradually shifting from present polluting means to non-greenhouse methods. It is normally phased out once the change has occurred. In California it covers the first 500 MW of generation only.[9] In Germany the FiT for roof top solar photovoltaics is reduced by 8% in 2009 and 2010 and then by 9% annually from 2011 onwards, instead of by 5% per year.[10]

Policy Alternatives to Feed-in Tariffs

Schemes such as quota incentive structures (renewable energy standards or Renewable Portfolio Standards) and subsidies create limited protected markets for renewable energy. The supply of renewable energy is achieved by obliging suppliers to deliver to consumers a portion of their electricity from renewable energy sources. In order to do this they collect green electricity certificates. Hence a market is created in green electricity certificates which, according to the theory, generates downward pressure on the prices paid to renewable energy developers. This is based on the theory of perfect competition where there is a multiplicity of buyers and sellers in a market where no single buyer or seller has a big enough market share to have a significant influence on prices. Although, in practice, markets are very rarely perfectly competitive, the assumption is still that a relatively competitive market will produce a more efficient use of resources compared to a system where prices are set by Government fiat.[11]

The fundamental problem with the quota scheme is that there is no long-term certainty. When a quota is set either for a period of time or for a quantity of power, once that goal is reached then there is nothing to keep the green power producers from becoming uneconomic in the face of power produced from coal fired power stations and hence collapsing as businesses. This inevitability with the quota method means that there is reluctance on behalf of investors to get involved in the first place. Those that do get involved are short-term speculators rather than long-term entrepreneurs and so instability is inherent in this system.

Quota systems favor large, vertically integrated generators and multinational electric utilities, and are more difficult to design and implement than a price system.[2]

It has been argued that FiT is the most effective way to promote the uptake of renewable energy yet devised. Only Renewable Tariffs have a consistent record of offering equitable opportunity to all willing participants in the market, offering the freedom to produce and sell the own energy and stimulating rapid rates of growth [2]. After investment subsidies it is the most widespread means of promoting renewable energy uptake in Europe.[12]

Net Metering

Main article: Net metering

The introduction of FIT is usually preceded by legislation allowing net metering. Net metering only requires one meter, whereas FIT requires two, one to measure consumption, the other to measure generation.

Green certificates

Main article: Green certificate

Activists such as Paul Gipe[13] have argued that green certificate schemes disadvantage local ownership, but local green certificates can be employed by government, electric train, electric bus tram and subway operators, municipalities and other users.

Feed-in Tariff by territory

Further information: PV financial incentives

Feed-in tariff laws were in place in 46 jurisdictions across the world by 2007.[14]

Australia

At May 2008, feed-in laws had been passed in Queensland, South Australia and the ACT. Limited provisions have also been passed in Victoria. The Tasmanian Government is considering a scheme while New South Wales, Western Australia and the Northern Territory are not currently considering tariffs.

Main article: Feed-in tariffs in Australia

Queensland

The Solar Bonus Scheme (Feed-In Tariff Scheme) commenced on 1 July 2008. Customers participating in the scheme will be paid 44 cents per kilowatt hour (kWh) for surplus electricity fed into the grid.

South Australia

Electricity (Feed-in Scheme - Residential Solar Systems) Amendment Bill 2007 inserted provisions into the Electricity Act 1996.[citation needed] Applies only to solar PV. Net export payment method (i.e. gross production – household load = net export) limits the incentive provided.

Australian Capital Territory

The Electricity Feed-in (Renewable Energy Premium) Act 2008[15] is now law with a commencement date of 1 March 2009.

The ACT scheme is a "Gross" scheme rather than a "Net" scheme. This means that the provider of grid supplied electricity must pay the small scale renewable producer the new feed-in tariff for every kilowatt-hour (kWh) generated by the solar panels or wind turbine etc., not just the excess electricity fed into the grid.

When the feed-in tariff commences in the ACT, if you enter into an agreement with an electricity network provider for the purchase of your solar generated electricity, by law you are entitled to 3.88 times the transition franchise tariff retail price[16] applying at the time for a period of 20 years. This tariff will apply until the relevant ACT Minister determines the "premium" feed-in tariff to apply in any given financial year (July-June). As of 1 March 2009 this has been determined to be about 50c/kWh AUD for systems less than 10 kW and 40c/kWh for systems between 10 kW and 30 kW.[17]

Canada

Ontario introduced a feed-in tariff in 2006, and revised it in 2009,[18] which in a draft proposal increases from 42¢/kWh to 80¢/kWh the payments for roof top solar power (≤10 kW).[19][20]

Germany

Erneuerbare-Energien-Gesetz (EEG) law, first introduced in 1990. As of May 2008 the cost of the program adds about 1.01€ (USD1.69) to each monthly residential electric bill.[21]

Israel

See also: Solar power in Israel

On June 2, 2008, the Israeli Public Utility Authority approved a feed-in tariff for solar plants. The tariff is limited to a total installation of 50MW during 7 years, whichever is reached first, with a maximum of 15 kWp installation for residential and a maximum of 50kWp for commercial.[22] Bank Hapoalim offered 10 year loans for the installation of solar panels.[23] The National Infrastructures Ministry announced that it would expand the feed-in tariff scheme to include medium-sized solar-power stations ranging from 50 kilowatts to 5 megawatts. The new tariff scheme caused solar company Sunday Solar Energy to announce that it would invest $133 million to install photovoltaic solar arrays on kibbutzim, which are social communities that divide revenues amongst their members.[24]

Spain

Current Spanish feed-in legislation is Royal decree 1578/2008 (Real Decreto 1578/2008), for photovoltaic installations, and Royal decree 661/2007 for other renewable technologies injecting electricity to the public grid. Originally under the 661/2007, photovoltaic feed-in tariffs have been recently (Sept 2008) developed under a separate specific law frame due to the rapid growth experienced by this technology since release of the original scheme.

The current Photovoltaic decree 1578/2008 categorizes installations in two main groups with differentiated tariffs:
I) Building Integrated installations; with 34c€/kWh in systems up to 20kW of nominal power, and for systems above 20kW with a limit of nominal power of 2MW tariff of 31c€/kWh .
II) Non integrated installations; 32c€/kWh for systems up to 10MW of nominal power.

For other technologies decree 661/2007 sets up:
a) Cogeneration systems; maximum FiT of 13.29c€/kWh during lifetime of system.
b) Solar thermoelectric; 26.94 c€/kWh for the first 25 years.
c) Wind systems; up to 7.32 c€/kWh for the first 20 years.
d) Geothermal, wave, tidal and sea-thermal; 6.89 c€/kWh for the first 20 years.
e) Hydroelectric; 7.8 c€/kWh for the first 25 years.
f) Biomass and biogas; up to 13.06 c€/kWh for the first 15 years.
g) Waste combustion; up to 12.57 c€/kWh for the first 15 years.

United Kingdom

The UK Secretary of State for Energy and Climate Change announced in October 2008 that the UK would implement a feed-in tariff by 2010 in addition to its current renewable energy quota scheme (see ROCS).

United States

Further information: Renewable energy in the United States

11 U.S. state legislatures are seriously considering adopting the system as a complement to their renewable electricity mandates.[25]

California

The California Public Utilities Commission (CPUC) has approved a feed-in tariff on January 31, 2008 which is effective immediately.[26]

Florida

Gainesville, Florida, has enacted a feed-in tariff in 2009.[27]

Maine

As of April 2009, the state of Maine has pending legislation (LD1450) [28] known as "An Act to Establish the Renewable Energy Resources Program" that is closely modeled on the German law. [29] The bill was referred to the Joint Standing Committee on Utilities and Energy on April 9, 2009, and tabled on the 28th. A work session on the bill was scheduled for May 7, 2009.[30][31]

The Netherlands

The Dutch Cabinet has agreed to implement a feed-in tariff on 27 March 2009, during a renegotiation of the government agenda in response to the global financial crisis .[32]. The proposed regulation replaces a quota incentive system.

See also

References

  1. ^ Solar Premium
  2. ^ a b c Renewable Energy Policy Mechanisms by Paul Gipe(1.3MB)
  3. ^ Environmental and Energy Study Institute home page
  4. ^ Environmental Terminology and Discovery Service (ETDS)
  5. ^ [dead link]http://www.portlandpeakoil.org/discussion/aggregator/categories/2?page=4
  6. ^ Policy Options for Promoting Wind Energy Development in California: A Report to the Governor and State Legislature(159KB)
  7. ^ Renewable Energy Policy Mechanisms by Paul Gipe(1.3MB)
  8. ^ World Future Council Feed-in Tariffs (3.3MB)
  9. ^ California Feed-In Tariff
  10. ^ Revision of Germany's FIT In Progress
  11. ^ David Toke (5 February 2006). "Renewable financial support systems and cost-effectiveness". Journal of Cleaner Production. 15 (3): 280–287. doi:10.1016/j.jclepro.2006.02.005.
  12. ^ Energy Policy, 2006 An integrated assessment of the feed-in tariff system in Spain, Pablo del Rıo and Miguel A. Gualb,
  13. ^ Wind Works Feed Laws
  14. ^ REN 21 (2007) Renewables 2007: Global Status Report at p.43
  15. ^ "Electricity Feed-in (Renewable Energy Premium) Act 2008". ACT Government. 9 July 2008. Retrieved 16 Feb 2009.
  16. ^ "Feed-In Tariff Discussion Paper — Comments February 2008]" (PDF). Independent Competition and Regulatory Commission (ACT). Feb 2008. Retrieved 9 Feb 2009.(123KB)
  17. ^ "ACT ELECTRICITY FEED-IN TARIFF SCHEME" (PDF). ACT Department of the Environment, Climate Change, Energy and Water. Mar 2008. Retrieved 17 Mar 2009.
  18. ^ RESOP Program Update
  19. ^ Proposed Feed-In Tariff Prices for Renewable Energy Projects in Ontario
  20. ^ Transatlantic Climate Policy Group: Feed-in Tariffs in America: Driving the Economy with Renewable Energy Policy that Works, accessed on April 8, 2009
  21. ^ Germany Debates Subsidies for Solar Industry
  22. ^ Approved - Feed-in tariff in Israel.
  23. ^ Hapoalim offers loans for domestic solar panels, July 3, 2008.
  24. ^ Sunday Solar powers Israeli kibbutzim, Cleantech.com news, October 17, 2008.
  25. ^ Transatlantic Climate Policy Group: Feed-in Tariffs in America: Driving the Economy with Renewable Energy Policy that Works, accessed on April 8, 2009
  26. ^ CPUC Press Release(41KB)
  27. ^ Transatlantic Climate Policy Group: Feed-in Tariffs in America: Driving the Economy with Renewable Energy Policy that Works, accessed on April 8, 2009
  28. ^ HP1006, LD 1450, item 1, 124th Maine State Legislature An Act To Establish the Renewable Energy Resources Program
  29. ^ Feed-in Tariff Legislation/Midcoast Green Collaborative
  30. ^ Maine Joint Standing Committee on Utilities and Energy
  31. ^ Status In Committee
  32. ^ Crisispakket Kabinet (Dutch)(177KB)




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