Feed-in tariffs—by which renewable power suppliers are guaranteed grid access and premium, long-term rates—are the surest, most effective and least costly regulatory means of stimulating the adoption and use of renewable power in the U.S., according to a policy paper published by the Heinrich Boell Foundation’s Transatlantic Climate Policy Group.
With the recent change in administration and subsequent Congressional initiatives, the international community is looking to the U.S. government to enact policies that will transform the US into a leader in, and leading market for, the development and adoption of renewable power and energy.
“Unfortunately, American renewable energy policy consists of a byzantine mix of tax incentives, rebates, state mandates and utility programs,” according to the report, hampering “the ability of states and communities to maximize the benefits of their renewable energy resources.”
A Byzantine Mix
Compared to actions at the federal level, US states have been much more active when it comes to enacting policies aimed at spurring development and use of renewable power resources. Currently, 26 states have renewable power, or portfolio, standards, that mandate that a certain percentage of electrical power come from renewable sources.
Along with these have come a variety of other incentives: renewable energy certificates, tax credits and rebates common among them. All of this has led to a more costly, less efficient, time consuming and bureaucracy-heavy “system” that renewable power industry participants have to negotiate in order to see projects through to reality.
Feed-in tariffs offer a simpler, more effective, beneficial and less costly means of spurring development and use of renewable power, but to date only one municipality in the US has a feed-in tariff–Gainesville, Florida.
The US government could do very well for itself if it took a page from some EU members’ renewable power policies, according to the Boell Foundation paper. The establishment of feed-in tariffs in EU countries such as Denmark, Germany and Spain has proved extremely effective in stimulating development and adoption of renewable power resources, as well as producing positive economic, social and environmental benefits.
Feed-in Tariffs: Coming to US States
The US need look no further than the experience of Denmark and Germany for evidence that feed-in tariffs can work, according to John Farrell of Minnesota’s Institute for Self-Reliance and the Boell Foundation’s New Rules Project, the author of “Feed-in Tariffs in America: Driving the Economy with Renewable Energy Policy that Works.”
Employing feed-in tariffs, renewable electricity generators now supply more than 15% of each country’s power. Moreover, these policies have also resulted in local ownership of energy resources on a large-scale: Nearly half of Germany’s and more than 80% of Denmark’s wind turbines are owned by local residents.
The tide may be shifting in favor of employing feed-in tariffs in the US, at least at the state level, Farrell points out in the Boell Foundation paper. Eleven US state legislatures are considering adopting systems based on feed-in tariffs as a complement to existing renewable power incentives.
Minnesota Case Study
In his paper, Farrell goes on to consider the case of Minnesota, where legislators began considering a feed-in tariff in 2008. An effort to adapt a system based on feed-in tariffs that has proved successful in Europe is part of such a bill slated for the legislature’s 2009 session.
“Minnesota already has a nascent wind industry, with over 1,200 MW of wind projects in the ground and many hundreds more planned. Additionally, the state has shown a strong commitment to encouraging locally owned, community-based renewable energy projects,” Farrell writes. “Development of community-based projects has lagged as incentives continue to favor absentee ownership and larger scale projects and discriminate against locally owned and smaller projects,” he notes.
Key elements of the feed-in tariff up for consideration would address these issues, he continues. These include the following:
- Local ownership – only locally owned projects can use the feed-in tariff incentive (as defined by the Community-Based Energy Development law);
- Smaller wind projects –the revised FIT bill will only support wind projects under 20 MW in size;
- Program cap: the Minnesota legislation includes a capacity cap, set at 20 percent of the 25 percent Renewable Energy Standard by 2025 (approximately 5 percent of retail sales).