North American feed-in tariff policies take off
by Ben Block – World Watch Institute – August 12, 2009

Clean energy advocates in Europe have long considered the feed-in tariff as an antidote to the industrial world’s fossil fuel dependency. Now, the United States and Canada are starting to catch on as well.

Feed-in tariffs (FITs) guarantee that anyone who generates electricity from a renewable energy source—whether they are a homeowner, small business, or large electric utility—is able to sell that electricity into the grid and receive long-term payments for each kilowatt-hour produced. Payments are set at pre-established rates, often higher than what the market would ordinarily pay, to ensure that developers earn profitable returns.

The FIT is credited for the rapid deployment of wind and solar power among world renewable energy leaders Denmark, Germany, and Spain this past decade. Similar policies have since been adopted by many other countries, leading the FIT to become the most prevalent tool for promoting renewables.

In North America, its adoption has been relatively slow. As public support for renewable energy increases, however, more governments are adopting FIT policies—often as a complement to the widely used Renewable Portfolio Standards (RPS) that require utilities to purchase minimum amounts of renewable electricity.

Several U.S. states and Canadian provinces began serious consideration of the FIT last year. More than a dozen states, one province, and numerous municipalities have since implemented some form of FIT.

“We’ve reached a tipping point where a feed-in tariff is no longer such an odd idea for America,” said Paul Gipe, the author of several books on wind energy and a FIT advocate. “In fact, it’s the best idea for rapid development of the massive amount of renewable energy that’s needed now.”

Renewable energy projects have often struggled to gain the confidence of investors, a problem the FIT policy addresses by ensuring that anyone with a sun-drenched roof or windy backyard may receive funding for a set period of time, normally 15-20 years.

“A lot of the charm of the feed-in tariff is solid, take-it-to-the-bank security and confidence for the investing community,” said U.S. Representative Jay Inslee, a sponsor of legislation that would establish a nationwide FIT, at a Washington, D.C. briefing earlier this month. “You get access to what is very difficult to get right now: financing.”

Not all FIT policies are created equal. The North American programs enacted to date often limit the level of economic incentive, the project size, and the renewable energy source, compared to large-scale programs enacted in Europe. Small-scale renewable energy advocates are praising FIT programs approved this year in Gainesville, Florida; Vermont; and Ontario as examples that North America should follow.

Gainesville, Florida

Florida, the Sunshine State, is blessed with bountiful solar resources to support renewable electricity. In the northern city of Gainesville, the municipal utility has helped ratepayers purchase their own solar panels since 1997. The program has partially financed some 40,000 watts of solar photovoltaic (PV) panels, but until recently there was no incentive for homeowners to install the panels properly.

“We weren’t getting energy bang for the buck,” said John Crider, an engineer with Gainesville Regional Utilities’ strategic planning department. “People could get the rebate check and put their solar panel in the shade.”

Last year, Assistant General Manager Ed Regan visited Germany, the world’s leader in grid-connected solar PV, on a trip coordinated with the Solar Electric Power Association. Impressed by Germany’s FIT policy, Regan convinced the Gainesville City Commission to approve the first FIT for solar PV in the United States. The utility promised that solar providers who signed up for the program before 2011 would earn $0.32 per kilowatt hour for 20 years, an estimated 4-6 percent return on investment.

“We assume, as time goes on, it will be cheaper to buy and install solar equipment,” Crider said. “The rate we pay goes down as well, to keep the return ideally constant.”

The utility, which is otherwise reliant on coal and natural gas for its power generation, wanted to be sure that electricity costs would not increase more than 1 percent due to the FIT, Crider said. The decision led the utility to limit the program to 4 megawatts total of solar PV each year. The program is already fully subscribed through 2015—a 24-megawatt commitment. Before the Gainesville program, the entire state of Florida had installed 2.5 megawatts of solar electricity capacity.

The FIT gained the city’s support mostly to boost the local economy. More than 220 companies in Florida produce, sell, or install solar PV products, according to the Apollo Alliance, a San Francisco-based organization that champions “green jobs” nationwide.

“Our primary motive is not to get the cheapest energy and keep profits high for investors, because we don’t have investors,” Crider said. “For the municipality, we have a larger vision…. Create a local, thriving marketplace for local solar providers.”

Vermont

With two-thirds of Vermont’s electricity contracts set to expire in 2012, the state was in a position this year to change its energy portfolio. Meanwhile, Vermont was far from its 2025 goal of 25-percent renewable energy—renewables were supplying less than 10 percent.

The state offered a “net-metering” program that allowed residents to feed renewably generated electricity into the grid, offsetting some or all of their electric bills. Hundreds of small-scale systems resulted, but these combined to meet a mere 0.02 percent of the state’s electricity load.

“We were trying to alter the entire energy paradigm, but we were on a very slow trajectory,” said Andrew Perchlik, executive director of Renewable Energy Vermont.

The net-metering program did not allow participants to turn a profit, a problem given that small-scale power generation projects required the same costly permits as commercial power plants. Too few Vermonters had reason to participate.

Legislators had considered adopting a FIT, but the policy lacked grassroots support until a new coalition of business leaders, environmentalists, and utility executives formed a renewable energy consensus. The group met before the state’s politicians convened in January and settled on the framework of what would become Vermont’s first FIT, which they call a “standard offer.”

“Increasingly, utilities are realizing that customers are asking for renewable energy. In the long run, it will be less expensive than the alternative,” said Robert Dostis, a former state House of Representatives energy chairman who now directs external affairs for Green Mountain Power. “By being at the table, we were able to contain the enthusiasm of some of the renewable energy advocates and have them understand the rate impact of some of their ideas.”

The legislature settled on a 50-megawatt program that limited individual projects to 2.2 megawatts each. Starting in January 2010, 20-year contracts will be available for developers of large- and small-scale wind, solar, and biogas power projects.
Opponents said the public would reject the idea of paying more for renewable energy projects—the highest rate, $0.30 per kilowatt-hour of solar energy, far exceeded the $0.04 many ratepayers were being charged at the time. “That was not the case at all,” Perchlik said. “Some 80 percent wanted renewable energy, and they were willing to pay 5 percent more.”

The energy bill cleared the Democrat-controlled legislature easily. In May, Republican governor Jim Douglas allowed the bill to become law despite his concerns about it. He said the FIT “fails to recognize the current viability of renewable energy in a competitive setting and will needlessly increase costs to Vermont consumers so as to subsidize this one favored business sector.”

Although program specifics have yet to be finalized, Vermonters are expressing growing interest. Dostis predicts that the program will fulfill its 50-megawatt limit by 2012. “I think this is really going to propel development,” he said.

Ontario

During the 2007 provincial campaign, Ontario’s Liberal party promised it would close every coal-fired power plant across the province by 2014. Premier Dalton McGuinty said the plant closures would benefit human health and meet half of the party’s commitment to reduce greenhouse gases 15 percent below 1990 levels by 2020.

Following the election, the Liberal party secured 71 of the Legislative Assembly’s 107 seats. Despite clear political support, shuttering 18 percent of the province’s power source is no easy feat. The Liberals had already pledged to close the coal plants during their previous term, only to push back their own deadline.

Since 2006, the Ontario Power Authority (OPA) began offering a FIT system that provided 20-year payments of 11 Canadian cents (US$0.09) per kilowatt-hour for small-scale hydro, wind, and biomass power projects, and 42 Canadian cents (US$0.34) for solar projects. More than 1,000 megawatts of projects were installed during the first year, but renewable energy advocates criticized the payments, particularly for solar energy, as too small.

In March, the province announced that its proposed Green Energy and Green Economy Act would establish a revised FIT modeled after Germany’s. The bill set payments for on-shore, off-shore, and community-based wind power; rooftop PV and ground-mounted PV power; small hydropower; and various biomass power options. Payments would depend on the project size for each technology.

The proposal was instantly applauded by renewable energy supporters. “The Green Energy Act is the most progressive renewable energy policy in North America in three decades,” said Gipe, who advised the Ontario Sustainable Energy Association. “There was a decision to pay what it costs to develop renewable energy. It’s clear to the public, transparent to everyone.”

An OPA-conducted survey found 150 developers who were interested in the new FIT and were willing to construct 15,000 megawatts of electric capacity—enough to produce the equivalent of 20 percent of Ontario’s electricity consumption.

Gipe also solicited support from Ontario’s farmers, whom he advised would be eligible to receive payments for wind turbines on their property.

“I went to every farm group I could,” Gipe said. “This is an opportunity to revitalize the Ontario economy … not just to revitalize the rural economy, but the entire industrial economy of Ontario.”

The proposal was approved in May. It now stands as the most generous FIT policy in North America.

Let all join in renewable revolution
By Jennifer Gleason – Guest Viewpoint – Register-Guard – November 18, 2008

Every Oregonian should be able soon to generate renewable energy from the sun and sell it to their local utility at a fair price.

Gov. Ted Kulongoski’s recently announced plan to protect the climate includes a pilot project that could make it possible for everyone in Oregon — including families, school districts, farms, vineyards, businesses and nonprofit organizations — to help generate energy from the sun.

If done well, this pilot project will be modeled on policies adopted in Europe that have made Germany the world leader in solar energy production. A well-crafted production incentive policy (known as a renewable energy payment, or REP, policy [also known as a feed-in tariff, or FIT]) guarantees that utilities will buy renewable energy — in this case, solar — at a fair price for an extended period.

The price is set to ensure that people generating the electricity will make a profit, but not a windfall profit.

With this guarantee, people are willing to invest in the equipment needed to produce renewable energy. Experience in Germany has shown that REP policies are the most effective and efficient way to promote the generation of electricity from renewable sources.

The Environmental Law Alliance Worldwide (ELAW) has been studying REP policies around the world to determine what makes such a program successful. We have been helping environmental advocates around the world promote renewable energy payment policies, and we are excited to bring these lessons home to Oregon.

A well-designed REP policy would help put Oregonians to work building, installing and servicing the equipment that makes generating and selling renewable energy possible. Other states — including Michigan, Minnesota, Florida and Hawaii — are considering adopting similar programs. Oregon should move quickly and be a leader so that its businesses can get a head start in producing the equipment needed to generate renewable energy.

Oregon’s policy should give all Oregonians the opportunity to participate in this program. The Legislature may be tempted to limit the policy to investor-­owned utilities (PacificCorp and PGE) that distribute electricity to the Portland area and a few other parts of the state, but we should demand that all Oregonians can help meet our energy needs.

Those of us living in Eugene want to be able to afford to put solar panels on our rooftops, and farms and vineyards across the state should be able to sell electricity to their local utilities, too. The program should make it simple for anyone to participate. Ideally, it should go beyond solar and include other renewables as well.

[REP / FIT is different from Net Metering]

REP policies differ from “net metering,” which already is available from Oregon utilities, in several important ways. Most importantly, Oregon utilities are not required to pay for excess electricity generated by the customers under net metering, and net metering is only for electricity that is primarily generated to offset part or all of the customer’s electricity use.

Under an REP policy, Oregonians would sell all of the electricity they generate to the utility at a price that would make it profitable to generate renewable electricity, and then they would buy back from the utility the electricity they need at the regular retail price.

There are several other important benefits to REP policies not included in net metering that make the governor’s plan a great step forward. Working with partners in Europe, the Environmental Law Alliance has identified three key elements that are required to make a renewable energy payment program succeed.

The policy must ensure that people who generate solar power are able to connect to the electric grid to deliver this power back to utilities. We must ensure that the grid is maintained and that access is transparent and fair.

The policy must set a fair price for purchasing electricity and guarantee that price for an extended period, so people are willing to invest in generating solar power. The price must include built-in adjustments over time and priority purchase for renewables.

The policy must work well with the state’s renewable energy goals and programs, and it must support local industry.

More can be learned about designing a strong REP policy at Policy Action on Climate Toolkit.  ELAW is partnering with the Alliance for Renewable Energy to promote strong REP policies in North America. Visit Alliance for Renewable Energy to learn more about REPs.

Oregon has a great opportunity to lead the way in meeting climate challenges. A strong renewable energy payment policy will give all Oregonians the opportunity to generate renewable energy to meet our energy needs.

It will put Oregonians to work and help Oregon become a leader in building a green, sustainable economy.

Jennifer Gleason of Eugene is a staff attorney at the Environmental Law Alliance Worldwide (www.elaw.org).

Ashland changes solar power policy
The Ashland Daily Tidings – September 21, 2008
 
The city of Ashland has expanded its landmark policy on selling excess power from residential solar panels in order to encourage large-scale projects.

People could receive credit on their electric bills for systems up to 25 kilowatts by feeding the extra electricity back into the city electric grid.

Now the Ashland City Council has raised the level to 50 kilowatts because more homeowners and businesses may be taking advantage of federal and state tax incentives to install bigger systems, said Ashland Electric Department Director Dick Wanderscheid.

“We’re hearing some systems may go in that are over 25 kilowatts. The largest one we’ve heard of that’s being planned is 32 kilowatts,” Wanderscheid said.

Some people may be racing to install solar systems because of uncertainty over whether Congress will reauthorize federal incentives for solar that expire at the end of this year.

Several reauthorization bills have been introduced, but none have passed so far, Wanderscheid said.

He estimated that 42 net-metered solar systems in Ashland are connected to the grid.

Ashland first passed a net metering policy in 1996, making it the first community in the Northwest to pay solar system owners for their extra electricity. Since then, other Northwest utilities have followed Ashland’s lead, Wanderscheid said.

In 2005, the amount of solar electricity connected to Ashland’s grid doubled to 66 kilowatts after the city increased the amount of money it gives as rebates to people who install solar.

The amount connected to the grid doubled again this year to at least 140 kilowatts.

People who take part will receive annual credits on their energy bills that equal the value of the electricity their panels generate.

The payback is estimated to be up to $425 over 20 years on one panel – or about half the amount a person invests.

Solar systems for the typical home range from about $13,000 to $32,000, although city rebates and state and federal tax credits reduce the final cost.

The following article is an excellent primer for any homeowner considering installing solar panels. It was especially interesting to note the understandable difference between household incomes and solar panel installations.  It makes common sense that people with higher than average incomes would own higher than average valued homes and would be those homeowners who would most likely be in the market for value-added enhancements like in-ground swimming pools AND rooftop solar electice systems.

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Home solar energy systems in (Central) Oregon become more cost-efficient
Gail Kinsey Hill – The Oregonian Staff – August 8, 2008

Rooftop solar electric systems often are associated with the rich or zealous — a green privilege.

But sky-high energy prices, a degraded environment and new aggressive government policies are changing the who and the why — so much that the field is getting level.

The incentives that come with installing solar-electric panels have never been greater. With tax breaks and cash grants, (Central) Oregon homeowners can slash the cost of a photovoltaic system by about 60 percent.

Still, a lot of numbers are in the price tag, and it’s a close call. Consumers need to know why they’d take the plunge before deciding whether a purchase makes economic as well as ideologic sense.

A 2-kilowatt rooftop system — the typical size for a Central Oregon family — carries a total cost of about $20,000. But state and federal incentives now can cut the out-of-pocket expense to $7,500.

Once those solar cells start turning sunlight into electricity, you’ll shave about $176 a year, or 20 percent, from your utility bill.

It will take 25 years to recover your investment, however, assuming an increase in electric rates of 5 percent annually. If electric rates go up more, as current trends indicate, you’ll recoup the expense sooner.

But that’s where personal values come in.

Is this for the money or the peace of mind or both?

“In terms of a simple payback, it’s hard to justify,” says Bruce Barney, a solar advocate and project manager with Portland General Electric.

He and fellow sun-worshippers suggest evaluating the investment as you would a home improvement. A solar installation will increase your home’s sale price, they say, so sit tight and reap the returns later on.

But the biggest motivators, they say, are concerns about the environment and a desire to reduce use of fossil fuels.

“The money issue is a red herring,” says Glen Friedman, who installed a 2.4-kilowatt array on the roof of his West Linn home several years ago. His only regret: He didn’t go bigger.

Friedman, an architect, could easily afford it. For others it’s a tighter squeeze.

Matthew Denton, a software engineer who makes about $50,000 a year, put almost $10,000 of his own money into a solar purchase because he viewed it as a hedge against escalating energy prices.

“It will be a good financial decision in the long run,” he says.

Christine Borchert came to a different conclusion. Environmental worries prompted Borchert and husband Greg Socolofsky to look into solar, but financial concerns pushed them away. Borchert is a group leader for Weight Watchers, and her husband a commercial claims adjuster.

“I have this dream of being off the grid as much as possible,” Christine said, “but it just didn’t make sense. If I had an indiscriminate amount of money, I’d do it. . . . But holy cow.”

Oregonians with household incomes between $75,000 and $150,000 account for about half the solar electric systems in the state, according to the Energy Trust of Oregon, a nonprofit offering cash grants for solar installations. Those with incomes between $25,000 and $75,000 account for another one-third of the purchases.

“It used to be the only ones who did it were people with big houses, plenty of money,” said John Patterson, the president of Mr. Sun Solar, one of the Portland area’s leading installers. “The profile today is a close-in, smaller home, one-car garage, maybe they bike to work.”

If you’re in the market for a photovoltaic system, here are a few things to consider:

Location. Central Oregon, in fact, is a good place for solar, despite the winter. But the roofline of your home should have a solid southern exposure, although a little off-kilter is OK. Shade is a negative, especially during midday hours. Don’t forget to consider newly planted trees; they can grow into future problems.

Consider a consultant. For about $100 an hour, an independent consultant will tell you whether your home is solar-compatible, whether you can afford it and, if so, how much energy you’ll save.

Contact several contractors. You can find a list of solar contractors on the Energy Trust’s Web site, energytrust.org.  Ask several for bids so you can compare details, including the size of the system and projected energy savings. Contractors will evaluate your roofline and provide a detailed analysis as part of the estimate, so you may feel an independent consultant isn’t necessary.

Costs. They vary between $8 and $11 per watt. That means a 2,000-watt installation (2 kilowatts) will cost –everything included — between $16,000 and $22,000. Solar experts say prices likely aren’t going to come down because inflation is pushing the costs of materials up. Neither should solar-wannabes wait for a big technological breakthrough anytime soon, experts say, at least not one that’s going to slash costs.

Add up the incentives. Make sure the tax credits and cash incentives apply to you. If you don’t have taxable income, the credits won’t do you much good. The federal tax credit is taken in a single year; the Oregon credit stretches over four. Both are capped, at $2,000 and $6,000, respectively.

Take note: The 30 percent federal tax credit drops to 10 percent at year’s end unless Congress passes an extension. Remember, too, a hefty grant from the Energy Trust applies to PGE and Pacific Power customers only (because customers of those utilities pay into the nonprofit’s kitty through a charge on their monthly utility bills). And, you qualify for the trust incentive only if you use one of its approved contractors; do-it-your-selfers are out of luck.

Energy savings. Rule of thumb for a Central Oregon homeowner: You’ll reap 1,000 kwh of solar electric generation annually for every 1 kilowatt of installed capacity. Most residents put in a 2-kilowatt system because that’s the way to max out the tax credits and reduce energy bill by a respectable 18- to 20 percent.

Battery-free, grid connected. Under the state’s net metering law, your home remains hooked to your utility’s electricity network, so there’s no need for battery storage and no need to go off-grid — unless you want to. Once you sign a net metering agreement with your utility — your contractor will have the form — you’re set. When your system produces more power than you use, the power feeds into the utility’s power lines, and you’re credited for the amount generated.

Maintenance. Once your system is up and running, there’s little you need to do. Warranties on the modules generally cover a 25-year period, but the array likely will last considerably longer, experts say, with a slight loss of efficiency. Oregon rains help keep the panels clean, but if there’s a long dry spell, wash them off because accumulated dust can affect production.

Clouds cast over 2 solar projects
Public-private partnerships in Bend, Redmond caught up in inquiry
By Peter Sachs / The Bulletin - June 13, 2008

Two Central Oregon solar power projects could find themselves in the dark now that a power company has asked the state to clarify laws related to such ventures.

While Pacific Power says it just wants to ensure customers are being treated fairly, environmental groups and solar companies say the appeal casts dark clouds over an industry that’s just starting to get plugged in.

Solar panels are slated for the Redmond Airport and the downtown Bend parking garage in deals between the respective cities and private companies.

Since governments don’t pay taxes, the federal and state tax credits available for installing new solar systems aren’t particularly helpful. But by partnering with private companies, everyone can win, said Jeremiah Baumann, the program director of the nonprofit group Environment Oregon.

The cities provide space for the solar panels and get reduced-cost electricity from them without having to come up with money for the panels. The solar companies get the tax breaks.

But lucrative federal tax credits could expire at the end of the year. And even if the state Public Utilities Commission rules in favor of the projects, it could take up to two months to reach that decision. That could make it hard for solar companies to finish by the end of the year to get the tax credits before they expire.

“It’s unfortunate timing and, as far as we can tell, there is no problem, so we’re wondering what problem PacifiCorp is trying to solve,” said Rachel Shimshak, the director of the nonprofit Renewable Northwest. PacifiCorp is the parent company of Pacific Power.

So far the public-private model has worked well in fostering solar projects around the state, Baumann said.

“Threatening that model makes everybody just get scared to death,” he said.

Pacific Power has asked the state PUC to make sure the public-private arrangements between local governments and solar companies are following the laws. Art Sasse, a Pacific Power spokesman in Portland, said the current rules need to be more clear and no projects should be jeopardized as a result of the PUC’s review.

“We are going to have clarity here in a really quick fashion,” Sasse said.

The underlying issue for Pacific Power relates to what’s known as “net metering.” Solar installations, if they generate enough power, can actually turn a home or business electric meter backward, in effect letting that person sell electricity back to the power company. But some power companies are growing concerned that with too large of an installation – solar or otherwise – that begins to look like another, less-regulated private utility, Baumann said.

Sasse said with private companies involved, a host of new questions need to be answered.

“The law doesn’t cover them so there’s no clarity around service and price,” he said.

The Bend solar array, slated for installation across the entire top of the parking garage, would generate 200 kilowatts of electricity. The city is partnering with Bend-based SunEnergy to provide and install the panels.

Bend Downtown Manager Jeff Datwyler said while he knows little about Pacific Power’s concerns, he didn’t expect it to have much of an effect on the parking garage solar project.

“We’re shooting for this construction season to get it built, so I sure hope there’s nothing to put the project at risk,” Datwyler said.

Doug Parsons, the CEO of SunEnergy, was hesitant to comment on the issue, though he said he believes the state laws Pacific Power is calling into question are already perfectly clear.

“The unfortunate short-term consequences of this issue on the Oregon solar industry are substantial,” Parsons wrote in an e-mail Thursday.

Redmond Airport’s array will be installed as part of the terminal expansion. It would generate about 57 kilowatts.

Redmond City Manager Mike Patterson said the city has already received grant money from Pacific Power for the airport solar project.

Bend’s parking garage project also is getting money from Pacific Power to help fund its construction.

“We’re anxious to make sure that they succeed,” Sasse said.

But Baumann said the uncertain fate of federal tax credits is already having a “chilling effect” on companies wanting to partner with local governments for solar projects.

“To make a solar power project, you’ve got a bunch of different financing pieces that have to happen,” he said. “(Solar companies) also don’t want to install the project and have the rug pulled out from them and not get paid.”

Although this project has been talked about for some time, city officials say they have finalizing the design of the city of Bend’s first solar energy project.

Work is expected to begin next spring on the project that will sit on top of the Centennial Parking Plaza at 61 NW Oregon Avenue. The city is using a $400,000 grant from Pacific Power’s Blue Sky Projects the city and is partnering with Bend-based SunEnergy Power Corporation to set up the 200 kW project.

With nearly 20 rows of solar panels mounted to steel trusses above the entire top level of the garage, the system will be one of the largest solar installations in Oregon.

SunEnergy, who will own the system, will bear the entire cost of buying, installing and maintaining the solar array, which will produce about 280,000 kilowatt-hours of electricity per year. That energy, enough to power about two dozen homes continuously, will be sold directly to the city.