Friday, October 15, 2010

US Should Adopt "Feed-In Tariff" To Expand Solar Power Installations

Germany has used feed-in tariffs to great success in order to expand solar power installations. Utilities in the US are balking at similar proposals, claiming it would result in higher costs to rate-payers.

I think that the utilities don't want to lose out on the income that could be generated from major wind and solar powered installations since the feed-in tariffs would enable businesses and individuals to receive due compensation from installing their own micro solar power arrays on their own properties.
Under a feed-in tariff program, renewable power installations, including those on residential and business rooftops, are connected to the electricity grid. This allows the owners to sell energy to utilities at long-term, fixed rates.

If such a program is adopted, proponents say, the benefits could be enormous for California as well as for individual producers, who could profit from the sale of the energy and pay off the cost of the installations sooner.

The state could benefit from having smaller, more flexible alternative energy sources than the massive, expensive installations waiting to be built in remote deserts and mountains, green-tech analysts said.

At the same time, such requirements could boost demand for solar panels and small wind-turbine projects, leading to a surge in new clean-tech companies. A July study by UC Berkeley researchers estimated that a feed-in tariff program could create 28,000 clean-tech jobs each year for a decade, as well as generate more than $2 billion in tax revenue and pump more than $50 billion in new private investment to the state.

But critics say although the program is compelling on the surface, the devil is in the details. In addition to coming up with a fair rate structure and determining who would regulate the program, utilities must figure out ways to easily connect the individual producers to the electricity grid, which is sprawling and disjointed.

"It's a bit like talking about the color of the second-floor bedroom before we build the foundation of the house," said Austin Beutner, general manager of the Los Angeles Department of Water and Power, who recently met with experts from Germany. "The direction is a good one, but we have to go about it in a sober and measured fashion. It's a lot more complicated than anybody wants to acknowledge."

Even the name — inherited from Europe — has been confusing.

"When people hear the word 'tariff' they think 'tax,' " said Mary Leslie, president of the Los Angeles Business Council, which is backing a local proposal that the DWP would administer. "It should be 'reward' or 'rebate' or something. The term is undermining the benefits of the program."
The name of the proposal does need work, but the fact is that such a system would enable homeowners to benefit far more from solar power installations and utilities would have access to a wider range of alternative energy facilities, driving down their energy acquisition costs for distribution. To date, that has been one of the drawbacks on alternative energy projects - the cost for alternative energy like wind and solar has been higher than coal or gas. This proposal would help balance the field, and would bring more power sources on line.

It would spur more homeowners and businesses to consider installing solar power systems of their own.

As to the utilities' concerns over figuring out rates for these new providers, a tiered rate system could be imposed based on rated energy output per installation. Someone with a 50-100kw installation would get X, a 101-200kw installation would get Y, etc. The rates would be tiered in such a way that it would encourage larger solar installations - higher rates for progressively larger installations.

This proposal shouldn't just be confined to California, where the idea is under consideration, but should be made a national policy so as to spur production and technological innovation around the entire country. This is an opportunity for utilities to upgrade their infrastructure and build additional redundancy and robustness into their power systems.

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