July 24, 2014

FITting renewable energy into California

Solar Energy

Solar Energy

This could be the year that California implements the best-proven technique for increasing renewable energy. A Feed-in Tariff (FIT), or renewable-power payment policy, is a guarantee: if someone generates renewable energy, a utility will buy it at a fair standard price (see March-April 2010). A good FIT will drive the rapid, cost-effective growth of small to medium-sized renewables to produce local clean power. It will create legions of local green jobs and help reduce air pollution, while avoiding environmental damage and expensive new transmission lines.

Our new governor, Jerry Brown, in his campaign’s Clean Energy Program, is calling for 20,000 MW (about 16% of California’s total electricity need) of new renewable energy by 2020. 12,000 MW of this is to be from small locally generated sources (also called distributed generation) directly connected to the local distribution grid. Importantly, he calls for implementation of a FIT.

On Oct. 21 the Federal Energy Regulatory Commission (FERC) issued a significant and surprisingly positive ruling. This ruling removes the previous federal constraint that tariffs for renewables could not exceed “avoided cost”, i.e. the cost of a new gas-fired generation plant. The new ruling allows states to implement true cost-based payment rates for renewables. This means that we can use a FIT to pay a fair price for renewables–what renewables cost plus a reasonable profit, just as the state has allowed for conventional generators for years.
This past December the California Public Utility Commission (PUC) implemented a renewable-energy payment program that will help incentivize the installation of more renewables. This “Renewable Auction Mechanism” (RAM):

  • applies to projects up to 20 MW (other tepid FIT programs in California have limited projects to 1.5 MW, and a bill approved in 2009 calls for 3 MW but has not yet been implemented);
  • is based on competitive bidding rather than a best-practices, cost-plus profit structure (probably the best the PUC could do prior to FERC’s recent ruling);
  • is capped at a low 1,000 MW over two years, although the issuing judge indicated that the PUC would be open to increasing the duration and/or cap.

This program is a step forward, but the complications of competitive bidding essentially eliminate small generators, and the program cap is way too low. It may also cause new renewables to cost more than with cost-based pricing.

All of California’s various programs for the three large for-profit utilities providing 70% of California electricity only added 653 MW of new renewable capacity in 2010. Although things are starting to pick up in 2011, our progress pales in comparison to other countries throughout the world. For example, Germany (about twice the size of California) installed 3,800 MW of solar photovoltaic alone in 2009 and is on track to install over 7,000 MW more in 2010–yes, that’s in one year!

Following President Obama’s 2011 State of the Union address, a Gallup poll reported that 83% of Americans favor “Passing an energy bill that provides incentives for using solar and other alternative energy sources.” 85% of Californians think the government should require increased use of renewable energy sources by utilities according to a July 2010 survey by the Public Policy Institute of California. Why then do we still cling to small, timid, incremental, underfunded, and ineffectively designed programs?

Success requires a bolder approach. Sierra Club California has a three-pronged program to achieve a rapid increase in renewables:

  • require utilities to use 33% renewable energy by 2020–passing this into law will send an unmistakable signal to investors, manufacturers, installers, and generators that the state is serious in its long-term commitment to increasing renewables;
  • implement a cost-based FIT, either through legislation or a new PUC regulation, in concert with Jerry Brown’s Clean Energy Plan to provide the needed financial incentive;
  • work with the PUC to remove administrative and procedural obstacles to getting renewable-energy projects designed, approved, and connected to the grid quickly and easily.

Winston Churchill once said, “You can always count on the Americans to do the right thing, once they’ve tried everything else.” I hope that the same applies to us Californians. We have tried many ineffective polices. Now, hopefully, we are ready to step up and implement a proven policy–FITs–to really grow our renewable energy and become a true leader to the rest of the nation.

Ray Pingle, Sierra Club California Energy and Climate Action Committee: chair, FIT Legislation Campaign

FITs feed explosive renewable-energy growth around the world

In more and more countries FITs are getting renewables up quickly and cost-effectively. “Feed-in tariffs (FITs) are the most widely used policy in the world for accelerating renewable energy (RE) deployment, accounting for a greater share of RE development than either tax incentives or renewable portfolio standard (RPS) policies . . . . FITs are responsible for approximately 75% of global PV [solar photovoltaic] and 45% of global wind deployment,” according to A Policymakers Guide to Feed-in Tariff Policy Design by Toby Couture et. al., released in July by the National Renewable Energy Laboratory.

Portugal used FITs to increase its renewables from 17% to 45% in just five years!

Ontario, Canada’s largest province, has the best-designed FIT program in North America. At the end of October, after just over a year in operation, the Ontario Power Authority (OPA) reported that its new FIT program had received close to 3,400 FIT applications with a combined capacity of nearly 15,500 MW. It had already signed 1,073 contracts for 2,501 MW of renewable capacity including 364 MW of community-owned projects. That is very impressive compared to the 653 MW that California investor-owned utilities added in 2010, and Ontario is only about 1/3 the size of California.

Italy introduced a system of feed-in tariffs for solar PV in February 2007, after concluding that the previous program of Tradable Green Certificates was not delivering the desired results. In a dramatic display of the power of feed-in tariffs for driving markets, Italy installed more solar PV in 2009 than the entire U.S. That year Italy, with an economy only slightly larger than California’s, installed 720 MW (nearly all on rooftops); the U.S. installed just 435 MW, according to a draft report by the Interstate Renewable Energy Council. In 2010 Italy installed and connected 3,000 MW of solar PV and installed an additional 4,000 MW waiting for paperwork approval. Again, contrast that with the 653 MW installed by California private utilities.

Germany, with an economy twice that of California, will break all records this year with a newly installed PV capacity twice as high as the 3,800 MW it installed in 2009, which was itself a full 50% above the previous record held by Spain in 2008. Germany has installed 4,900 MW of renewable energy from nearly 175,000 solar installations from January to August of 2010 and is expected to exceed 7,000 MW for the full year! That’s 7,000 MW in one year, compared with California’s new “aggressive” goal of 12,000 MW over the next nine years. Germany is installing 10 times as much solar power capacity this year as the U.S., even though its economy is only 1/5 that of the U.S.

If Ontario, Portugal, Italy, Germany, and many others can grow their renewables very fast and cost-effectively, surely California with its innovation, investor capital, and environmental leadership can. They get it; we don’t yet. We just need to get FIT.

Ray Pingle, Sierra Club California Energy and Climate Action Committee: chair, FIT Legislation Campaign

The author thanks Paul Gipe as the source for much of the information on international FIT progress.

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