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Feed-in tariff

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Feed-in Tariff is a policy requiring power utilities to buy renewable energy from third parties and includes guaranteed grid access, fixed fees, and no capping.

Description

FITs typically include three key provisions:[1][2]

  • guaranteed grid access;
  • long-term contracts for the electricity produced; and
  • purchase prices based on the cost of generation.

Under a feed-in tariff, eligible renewable electricity generators (which can include homeowners, business owners, farmers, as well as private investors) are paid a cost-based price for the renewable electricity they produce. This enables a diversity of technologies (wind, solar, biogas, etc.) to be developed, providing investors a reasonable return on their investments. This principle was first explained in Germany's 2000 RES Act:

"The compensation rates...have been determined by means of scientific studies, subject to the provision that the rates identified should make it possible for an installation – when managed efficiently – to be operated cost-effectively, based on the use of state-of-the-art technology and depending on the renewable energy sources naturally available in a given geographical environment."[3]

As a result, the tariff (or rate) may differ to enable various technologies to be profitably developed. This can include different tariffs for projects in different locations (e.g. rooftop or ground-mounted for solar PV projects), of different sizes (residential or commercial scale), and sometimes, for different geographic regions.[2] The tariffs are typically designed to ratchet downward over time to both track, and encourage, technological change.[4]

FITs typically offer a guaranteed purchase agreement for electricity generated from renewable energy sources. These agreements are generally framed within long-term (15–25 year) contracts.[5][6]

The fact that the payment levels are performance-based puts the incentive on producers to maximize the overall output and efficiency of their project.[7]

As of 2010, feed-in tariff policies have been enacted in over 50 countries, including Algeria, Australia, Austria, Belgium, Brazil, Canada, China, Cyprus, the Czech Republic, Denmark, Estonia, France, Germany, Greece, Hungary, Iran, Republic of Ireland, Israel, Italy, Kenya, the Republic of Korea, Lithuania, Luxembourg, the Netherlands, Portugal, South Africa, Spain, Switzerland, Tanzania, Thailand, and Turkey.[8] In early 2012 in Spain, the Rajoy administration suspended the Feed-in tariff for new projects.[9]

In 2008, a detailed analysis by the European Commission concluded that "well-adapted feed-in tariff regimes are generally the most efficient and effective support schemes for promoting renewable electricity".[10] This conclusion has been supported by a number of recent analyses, including by the International Energy Agency,[11][12] the European Federation for Renewable Energy,[13] as well as by Deutsche Bank.[14]

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[15]. 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[16] .

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 megawatts 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 [17].

But it is the German model, begun in 1990 ("Stromeinspeisungsgesetz")[18] and 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 wind power in Spain, Germany and 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.

Book

Organizations Promoting Feed-In Tariffs

Nations, States and Provinces Implementing Feed-in Tariffs

As of early 2008, feed-in tariffs had been implemented in 41 countries, provinces and states. In the United States, measures that would enact such a system already have been proposed in Michigan, Illinois, Minnesota, and Rhode Island.[19]

Feed-in tariffs in Germany

In 2011, 20 per cent of electricity in Germany came from renewable sources (see BDEW breakdown of electricity production by source) and 70 per cent of this was supported with feed-in tariffs.[20]

Michigan Renewable Energy Sources Act

Michigan Renewable Energy Sources Act, House Bill 5218, would guarantee long-term, fixed prices for electricity generated from renewable sources. It was introduced by Michigan State Representative Kathleen Law and is based on German's "feed in tariff" (FIT) model to help increase renewable energy use.[21]

Illinois Renewable Energy Sources Act

In 2008, Illinois Representative Karen May (D-Highland) introduced a bill calling for a system of feed-in tariffs modelled after the proposed Michigan statute. After its initial reading, HB 5855, The Illinois Renewable Energy Sources Act was reported to the House Rules Committee for initial action.[22][23]

U.S. Clean Energy Buy-Back Act

In June 2008, Representatives Jay Inslee (D-WA), Bill Delahunt (D-MA), Jim McDermott (D-WA), and Mike Honda (D-CA) introduced the Clean Energy Buy-Back Act.[24]

Modelled after European feed-in tariffs, the Clean Energy Buy-Back Act would guarantee U.S. producers of clean energy connection to the grid and predetermined rates from utilities for their power.

Inslee claimed support for his bill from almost 70 companies and organizations, including the Biomass Coordinating Council, Environmental and Energy Study Institute, 2020 Vision and Washington-based AltaRock Energy, Infinia Corporation and Living Shelter Design Architects.[25]

Articles and Resources

Related SourceWatch Articles

References

  1. Mendonça, M. (2007). Feed-in Tariffs: Accelerating the Deployment of Renewable Energy. London: EarthScan.
  2. 2.0 2.1 NREL, "A Policymaker’s Guide to Feed-in Tariff Policy Design," 2010 Report.
  3. Germany, Renewable Energy Sources Act (RES Act) (2000). "Act on Granting Priority to Renewable Energy Sources," Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU), Accessed 15 May 2009 at: http://www.wind-works.org/FeedLaws/Germany/GermanEEG2000.pdf
  4. Couture, T., Gagnon, Y., (2010). An analysis of feed-in tariff remuneration models: Implications for renewable energy investment. Energy Policy, 38 (2), 955-965, Template:Doi
  5. Couture, T., Cory, K., Kreycik, C., Williams, E., (2010). "Policymaker's Guide to Feed-in Tariff Policy Design," National Renewable Energy Laboratory, U.S. Dept. of Energy, www.nrel.gov/docs/fy10osti/44849.pdf
  6. Lipp, J. (2007) "Lessons for effective renewable electricity policy from Denmark, Germany and the United Kingdom," Energy Policy, Volume 35, Issue 11, pp.5481–5495.
  7. Klein, A.; Pfluger, B. Held, A.; Ragwitz, M.; Resch, G. (Fraunhofer ISI) (October 2008). Evaluation of Different Feed-in Tariff Design Options: Best Practice Paper for the International Feed-in Cooperation, 2nd Edition. Berlin, Germany: BMU. Accessed 1 November 2008 at: http://www.feed-in-cooperation.org/wDefault_7/wDefault_7/download-files/research/best_practice_paper_2nd_edition_final.pdf
  8. REN21 Global Status Report, 2010, pp.37-8, Tab.2
  9. REN21 Global Status Report, 2012, p.70
  10. European Commission (COM), 2008. Commission Staff Working Document, Brussels, 57, 23 January 2008. Accessed 17 November 2008 at: http://ec.europa.eu/energy/climate_actions/doc/2008_res_working_document_en.pdf
  11. International Energy Agency (IEA) (2008). Deploying Renewables: Principles for Effective Policies, ISBN 978-92-64-04220-9.
  12. de Jager, D., Rathmann, M. (2008). Policy Instrument Design to Reduce Financing Costs in Renewable Energy Technology Projects. Work performed by ECOFYS, Ultrecht, The Netherlands. Paris, France: International Energy Agency – Renewable Energy Technology Deployment, Accessed 9 March 2009 at: http://www.iea-retd.org/files/RETD_PID0810_Main.pdf.
  13. European Renewable Energy Federation (EREF 2007). Prices for Renewable Energies in Europe for 2006⁄2007: Feed in tariffs versus Quota Systems – a comparison. Doerte Fouquet, editor, Brussels, Belgium, available at http://www.eref-europe.org/dls/pdf/2007/eref_price_report_06_07.pdf.
  14. http://www.dbcca.com/dbcca/EN/_media/Global_Climate_Change_Policy_Tracker_Exec_Summary.pdf
  15. http://www.portlandpeakoil.org/discussion/aggregator/categories/2?page=4
  16. http://web.gsm.uci.edu/~navarro/windfinal110899.pdf
  17. http://www.worldfuturecouncil.org/fileadmin/user_upload/Miguel/Gipe_RE_Policy_Mechs.pdf
  18. World Future Council Feed-in Tariffs
  19. "Feed in Tariff" website, accessed July 2008
  20. HM Treasury (2006). Stern Review on the Economics of Climate Change p. 367.
  21. "Feed in Tariff" website, accessed July 2008
  22. Timonthy B. Hurst, Illinois Renewable Energy Feed-in Tariff Introduced in House, sustainablog, 2/21/08
  23. Full Text of HB 5855, Illinois Renewable Energy Sources Act
  24. Timothy B. Hurst, House Democrats Introduce National Feed-in Tariff for Renewable Energy Projects, Red Green and Blue, June 27, 2008
  25. U.S. Feed-In Tariff Legislation Introduced, Sustainable Business, March 13, 2008

External Resources

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