Published on December 23rd, 2012 | by Zachary Shahan4
Feed-In Tariffs 101
December 23rd, 2012 by Zachary Shahan
One of our readers, a top clean energy analyst/expert, dropped an excellent little document about feed-in tariffs into the comments of one of our posts the other day — Feed-in Tariffs: The Proven Road Not Taken… Why Not?. For anyone not that familiar with feed-in tariffs, this is the document to get caught up on them. It also includes some useful nuggets of information (and a good example of how to talk about feed-in tariffs) to those more familiar with the world-leading clean energy policy.
I highly encourage checking out the doc, but two charts or salient pieces of information not included in it that I think are worth a view are these from John Farrell:
While checking it out, I decided to just pull out a few of the key points for those who won’t take the time to read the full doc (it’s really not very long, but I know how tight time is). Here are those points:
What Are Feed-In Tariffs?
First of all, a quick summary of what these awkwardly named babies are:
“Feed-in tariffs (FIT) are a policy mechanism designed to accelerate investment in renewable energy technologies. Producers of renewable energy are paid a set rate for the electricity they produce, usually differentiated according to the technology used (wind, solar, biomass, et.al.) and the size of the installation. 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.”
Germany: 24x More Solar PV
Germany is the clear global leader for installed solar PV, and FITs have been key to its success. “To illustrate the effectiveness of the FIT in Germany, the installed capacity of solar PV in Germany has increased from approximately 1 GW in 2004 (1 billion watts—the rough equivalent to the output of one nuclear power plant) to over 24 GW at the end of 2011. While at the same time the price of the FIT has decreased from over .50 to .60 euro’s cents per kWh to less than .20 eurocents per kWh, which incidentally, is actually cheaper than the average retail electricity rate in Germany….
“Germany, a country that receives half the average insolation that the US receives, set a 2010 target of 12.5 percent share of renewable energy in electric generation in 2000. In 2007, they surpassed that goal with 15.1 percent, 20 percent better and two years ahead of schedule. Since Germany has launched their FIT program, approximately 35 to 40 countries have followed suit and implemented their own FIT program.”
They Ain’t Just In Germany
“More than 80 jurisdictions around the world now use or have used FITs to pay for new renewable generation. In fact, FITs now dominate policy for renewable energy worldwide, with 60 percent more jurisdictions—states, provinces and entire countries—using FITs than are now using quota systems such as Renewable Portfolio Standards or Renewable Energy Standards.”
“It is an interesting note that in 2006 China avoided implementing a FIT, taking the view that FITs triggered too rapid market growth…. In 2011, however, the Chinese implemented a FIT program, and their domestic market is now booming, with Chinese solar manufacturing having scaled up to the point where it can address this huge new market without reliance on imports.”
FITs Save Money
“In 2008, Germany’s additional cost for their national FIT was $3.2 billion euros. The return for the cost of the FIT calculated by the German Federal Ministry for the Environment was:
» $7.8 billion euros from reduced amounts of fossil and nuclear fuels purchased
» $9.2 billion euros saved from the avoidance of external costs”
So, Who’s Opposed To FITs?
“The number one opponent to FITs is the local electric utility. These utilities argue that FITs work contrary to the market, but most utilities are not driven by the ‘market’—they are monopolies, and monopolies, by definition, do not respond to market forces. Positive results in a developed country like Germany show that FITs are far more market-oriented than monopolies.
“Furthermore, powerful contributors, such as utilities and fossil fuel companies, do not want infringement on their businesses, and will oppose efforts to kick-start an industry that will compete against them. But, there is no economically valid opposition to FIT’s if the primary consideration is the welfare of the country and the long-term health of the planet.”
One of my top Christmas wishes (or dreams) is that FITs will get a lot more attention and implementation in the US in the coming year. One can dream…