Market News

 December 06, 2007
Feed-in tariffs for California renewable energy

 Sacramento, California (GLOBE-Net) - A new report released by the California Energy Commission (CEC) on State energy goals has recommended a feed-in tariff system to help make the state a world leader in renewable energy.  This turnaround in policy became necessary due to less than desired growth in renewable energy capacity in the State.

In 2005 California set an aggressive target of 33% of electricity generation from renewable technologies by 2020.  To date, progress has been slow, with only 242 MW capacity of renewable energy being installed since then. This prompted California to look at other more successful renewable energy models, particularly in Spain and Germany, which have the strongest feed-in tariff systems in the world and yield renewable energy growth rates of 9% and 12% respectively.

California is home to 37-million people (one eighth of the US population) is also the 12th largest greenhouse gas (GHG) emitter in the world. In 2004 the state produced almost 500 million metric tonnes of carbon dioxide. Electricity accounts for 28 percent of the state’s CO2 emissions and demand for electricity is forecast to grow along with the population at a steady pace. 

In the past, the state has looked to energy efficiency through improved building and appliance standards to help flatten the state’s per capita electricity use.  The standards have saved California residents more than $56 billion in electricity and natural gas costs since 1978 and averted building 15 large power plants. It is estimated the current standards will save an additional $23 billion by 2013.

While progress in this regard has been positive, overall electricity use and resulting GHG emissions are projected to grow at 1.25 percent annually.  California is now looking to advance the statewide rollout and adoption of renewable energy through the use of feed-in tariffs, i.e. fixed incentive tariffs for the acquisition of energy from renewable sources. 

Feed-in tariffs "turn homes, farms, and businesses into entrepreneurs who will accelerate our path to clean energy," says Terry Tamminen about the Energy Commission’s recommendation. Tamminen is a former Secretary of the California Environmental Protection Agency and was the Chief Policy Advisor to California Governor Arnold Schwarzenegger.

Under these schemes the government would sell electricity generated by a renewable source to a utility company at a price above the market rate of current utility fees.  The difference is then divided amongst all utility customers and is added to the monthly utility bill as a tax. For example, if $100,000 worth of green power is bought in a year by a utility that has 1,000,000 customers, then each of those customers will have 10 cents added on to their bill annually.   

Under the German model, renewable energy producers also are paid a fixed-price for feeding their electricity into the grid. This has led to a boom in the construction of wind turbines, rooftop solar systems, and on-farm biogas plants.  In 2006 Germany installed 4,000 MW of renewable energy capacity.  Since Germany began legislation on renewable energy, the industry has created 214,000 new jobs.

In addition to feed-in tariff legislation, the CEC made several other recommendations for the advancement of renewable technology in the state, including leveraging its power plant licensing and transmission corridor designation authority and establishing a more cohesive approach for renewable development.

"We have no time to lose if California is going to meet its renewable energy goals. The Energy Commission has called for a dramatic change in direction. The Sierra Club supports their call for feed-in tariffs. This policy has been remarkably successful elsewhere. It’s being used in Ontario, Canada and Michigan is considering it as well. We need this kind of policy leadership in California too," says Carl Zichella, the Sierra Club’s regional field director for California, Nevada and Hawaii.

In North America the adoption of feed-in tariffs has been slow.  California’s likely adoption of the system would be the latest of a growing number of large North American emitters to create feed-in tariff policy.

In the spring of 2006, Ontario introduced a stripped-down version of feed-in tariffs referred to as Standard Offer Contracts. The Ontario program has been called the most progressive renewable energy policy in North America in two decades. Currently, Ontario’s program pays the highest tariffs (prices) for wind and solar energy on the continent.

In September, Michigan State Representative Kathleen Law introduced HB 5218 (2007) that calls for a full system of Advanced Renewable Tariffs modeled after those in Germany. HB 5218 (2007) would pay substantially more for solar energy and biogas generation than that in Ontario.

In October this year BC Premier Gordon Campbell’s Technology Council recommended the province adopt feed-in tariffs for new sources of renewable energy.

Strategies for Growing Renewable Energy will be a major topic of discussion at GLOBE 2008. Many countries have set ambitious targets to increase their renewable energy portfolio and reduce greenhouse gas emissions, such as is the case in California. What strategies are being used to advance the role of renewables in the overall energy ‘mix’ of these countries will be examined by leading experts in the industry. For More Information: California Energy Commission