States Look to Feed-in Tariffs to Boost Renewable Energy

California is often commended in renewable energy circles for its goal of getting 30 percent of its power from renewable sources by 2020. But the first stage of that goal — 20 percent by 2010 — has yet to be reached, and some experts say the state is simply running in place.

Craig Lewis pointed to one reason for this at a briefing on Capitol Hill. Lewis is the head of the FIT Coalition, a group that hopes to lead California toward implementing a feed-in tariff that will increase the market share of renewable energy in the state. He says California's current strategy for increasing renewables' share, relying on renewable portfolio standards, is stalling progress.

Lewis says California has actually reduced the percentage of energy it gets from renewables by a percentage point since the portfolio standards were introduced in 2002. Feed-in tariffs, he says, can turn that around.

Feed-in tariffs guarantee producers of renewable energy, including such small-scale producers as homeowners with solar panels on their roofs, a long-term contract in which they will be paid a price usually above the market price for the power they feed into the grid.

Renewable portfolio standards (RPS), in contrast, try to encourage renewables from the other end by setting up a quota for energy suppliers to source a certain amount of the power they provide from renewable sources. This usually includes the opportunity to buy credits from suppliers of renewable energy in a tradable credit scheme. Under RPS, renewable suppliers sell their energy at market prices; that is, without the usual price support a feed-in tariff provides.

California did enact a feed-in tariff at the start of 2008, but the price it offers those who pump renewable power into the grid is close to the market price and is widely seen as too low to have the desired effect of encouraging more renewable generation.

In the EU, 18 member states have feed-in tariffs or similar premiums by which renewable power is incentivized with a higher price. The European countries with the most robust feed-in systems — most notably Germany, Spain and Denmark — have seen much more growth in their renewable sectors than have countries with RPS systems. In Germany, feed-in tariffs are credited with a solar power boom that saw the country, clearly not the world leader in sunlight, emerge as the world leader in solar power generation.

States, Cities Take the initiative

In the U.S. the RPS quota approach is much more prevalent. But that may be changing.

The states of Vermont and Washington have implemented feed-in tariffs, as have cities including Sacramento, Calif., and Gainesville, Fla. Feed-in tariff legislation is currently under consideration in Indiana, Hawaii, Wisconsin and Maine, and California is looking into revamping its program.

The price systems are largely targeted at small-scale producers. In Sacramento, for instance, an eligible producer can generate no more than 5 megawatts, and all the producers in the program cannot exceed 100 megawatts cumulatively. Vermont producers can be no larger than 2.2 megawatts.