B5.2 Feed-in Tariffs
Offer feed-in tariffs to incentivize solar projects.
Feed-in tariffs – and the similar policy of “production incentives” – are guaranteed prices that producers of renewable energy receive for each kilowatt hour (kWH) of electricity they generate. Successful feed-in tariff policies ensure that renewable energy facilities have a right to connect and sell power to the grid, prices ensure a modest return on investment and long-term certainty, and no caps or limits are set on the amount of renewable energy that can be developed. Feed-in tariffs reward production from renewable energy facilities – not simply installation – which encourages more deployment of productive capacity and benefits power producers of all sizes (Pembina Institute, Feb. 2008).
In 2005, Washington established the Renewable Energy Cost Recovery Program (RECRP). In 2017, the program became the Renewable Energy System Incentive Program (RESIP) and administered by the WSU Energy Program. The program pays a renewable energy “cost recovery incentive” to the owner – individuals and businesses – of a renewable energy system that starts at $0.15 per kWh of electricity produced from solar photovoltaics and anaerobic digesters, or $0.12 per kWh from wind generators. There are various bonuses to the base rate, such as using equipment made in Washington and community solar projects, that can increase the cost recovery incentive to $1.08 per kWh. Some limiting factors of the program include a cap on the total incentive payments that projects can receive, declining value of incentive payments, incentive payments are paid for only 8 years, and the cap on total generation capacity of projects that a utility can approve. But the RESIP has had success, with over 7,400 systems certified as of January 2020 with over 105 MW of capacity.
The Los Angeles Department of Water and Power (LADWP) launched the FiT Program in 2013. Projects must use a renewable energy resources recognized in the California Renewable Portfolio Standards and have a capacity between 30 kW and 10 MW. Upon approval, projects sign a 10 or 20 year power purchase agreement with LADWP, guaranteeing prices that range from as much as 14.5 cents per kWh for small (30kW to 500 kW capacity) solar PV projects to 13.5 cents per kWh for projects with a capacity of 3 MW or larger. Today, the program is the largest feed-in tariff program in the nation with 99 in-service projects with generation capacity of over 68 MW, and another 104 projects with capacity of over 102 MW in reserve (in development and planning). In 2018, projects in the FiT Program generated 95,373 MWh of electricity. The FiT Program is limited by a 200 MW cap, and projects have to pay thousands of dollars in integration study fees, application fees, and interconnection fees. Additionally, the minimum project size would still require a large upfront investment that excludes many small power producers.
Germany’s Renewable Energy Sources Act (EEG, its German acronym) is the most renowned and successful feed-in tariff policy in the world. Germany’s first feed-in tariff dates back to the 1991 Act on Supplying Electricity from Renewables, which primarily incentivized wind generation. The 1991 Act helped the wind capacity in Germany grow by nearly 4,400 MW in under 10 years. But the 2000 EEG was much more effective in encouraging the development of all renewables across Germany. Under EEG, utilities are obligated to connect renewable energy installations to the grid and pay them the authorized rates for 20 years. The initial incentives were based on the cost of the technology, with higher cost technology, such as solar, paid a higher incentive. Beginning in 2002, producers of solar, biomass, and wind were paid incentives of 48.09 (euro) cents, 10.13 cents, and 8.96 per kWh respectively. Germany is now recognized as a leader in renewable energy, particularly solar, because of this policy.