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Feed-In Tariffs Gaining Steam in California


While even the smallest attempts at energy legislation are floundering in Congress, California, in response to a study put out last month by UC Berkeley, is making progress toward a new feed-in tariff.  A feed-in tariff is a policy mechanism that encourages the adoption of renewable energy by requiring utilities to buy electricity from renewable sources and setting the rates at which utilities must pay for that electricity. 

As Green Tech Media reported:

The California Public Utilities Commission recently filed a declaratory order request with the Federal Energy Regulatory Commission (FERC). This kind of action asks FERC to decide on a legal dispute before it makes it to the courts, hopefully heading off legal action. The CPUC asked FERC to decide if a limited new feed-in tariff, applicable only to cogeneration facilities under 20 megawatts, was preempted by federal law.

FERC ruled favorably in finding that state feed-in tariffs are not preempted if they set prices at "avoided cost." The relevant federal law here is the Public Utilities Regulatory Policy Act, passed in 1978 and, ironically, responsible for the first-in-the-world and highly successful feed-in tariff policy back in the 1980s and 1990s. PURPA's feed-in tariff required that each state determine the "avoided cost" of power as the price paid to renewable energy developers. The avoided cost determination requires that each state figure out what utilities would otherwise pay for comparable power.

This is not an easy exercise and it doesn't, contrary to common belief, simply mean the cost of power from a natural gas plant or a coal plant. Rather, federal law requires that states consider the benefits of avoiding fossil fuel consumption and the benefits of reducing line losses through distributed generation. FERC also made it clear in their recent decision that it would be deferential toward states setting avoided costs.

The FERC ruling means that states should have significant leeway in implementing their own FITs, so long as their cost figures are reasonable and fair.  The UC Berkeley study showed that a robust FIT could enable California to achieve its 33% by 2020 renewable portfolio standard (RPS) on schedule and would also generate billions in revenue and investment for the state.

In addition to the California Public Utilities Commission, FITs are also finding fans among the business community in Los Angeles. Inhabitat reports that the Los Angeles Business Council's Solar Coalition is pushing for a plan that calls for a 600 megawatt solar feed-in tariff program that would help ensure private investment in solar while helping meet Mayor Antonio Villariagosa's renewable energy goals.  The proposal, which has support from local non-profit and environmental organizations such as Global Green, the Sierra Club, and the United States Green Building Council, would create an estimated 11,000 green jobs and provide about 3% of Los Angeles's electricity. It would constitute the largest feed-in tariff in the United States to date.

The proposal will undergo a 45-day review period after which the FIT program could be implemented before the end of this year.