Solar FIT program was the first of its kind in the US

November 6, 2009

The Solar Electric Power Association (SEPA) announced Gainesville Regional Utilities as the winner of the SEPA Award for Solar Business Achievement in the area of Community Outreach and Public Awareness last week. GRU was recognized during SEPA’s Annual Membership Meeting in Anaheim, Calif.

SEPA selected GRU and the other award nominees from the 700 SEPA member utilities and solar companies. SEPA Executive Director Julia Hamm applauded GRU’s tireless work in raising awareness of the solar feed-in-tariff program locally and among the utility and solar industries.

GRU’s Solar FIT program was the first of its kind in the US. Based on highly successful models in Europe, it offers GRU electric customers a chance to invest in solar photovoltaic (PV) systems and sell electricity directly to the utility under a contract for 20 years at a fixed price.

“Gainesville Regional Utilities has moved itself to the forefront of photovoltaic development in the Southeast with its new feed-in-tariff program, which required both customer and solar industry involvement and ‘learning while doing’ as part of its development,” Hamm said.

GRU’s Solar FIT program will add 20 megawatts of solar electricity to GRU’s power supply within 5 years. GRU has received enough completed applications to reach the utility’s annual target of 4 megawatts through 2016.

The feed-in tariff has proven to be the best way to get quick movement in renewable energy development and create a lot of jobs,” said state Rep. Matt Pierce (D), who has introduced a feed-in tariff proposal in Indiana. (New York Times)

In Florida, the Gainesville Regional Utilities adopted a feed-in tariff with a rate of $0.32 per kilowatt-hour guaranteed for the next 20 years. The program is modeled closely after European systems and reached its self-imposed cap of 4 MW in minutes after accepting applications. In comparison, the U.S. Department of Energy took over three years to award the first loan guarantee for solar after the Energy Policy Act passage in 2005.

Perhaps similar to the problems in using European benchmarks in the current U.S. healthcare debate, FITs are still seen by some as some strange, exotic policy not applicable to the U.S. market. Some observers have even claimed that that the type of incentives does not matter, just the amount. One solar lobbyist even said about Germany, “They’ve been handing out bags of money and calling it a feed-in tariff. People think that they want a feed-in tariff, but what they really want is those bags of money.”

“A lot of the charm of the feed-in tariff is solid, take-it-to-the-bank security and confidence for the investing community,” said U.S. Representative Jay Inslee (D-Wash), a sponsor of legislation that would establish a nationwide FIT. His bill was introduced in Congress last year and would use FITs to incent small projects up to 20 MW and help streamline grid interconnections.

An analysis by the National Renewable Energy Laboratory (NREL) also confirmed that countries with feed-in tariffs have cheaper renewable electricity than those with renewable energy credits, the mechanism behind RPS. The tariff system is less risky, and investors are willing to accept lower profits for long-term stability, according to the report.

“We deal with data and the evidence is very clear,” said Toby Couture, a researcher with the NREL in a report by the Sarasota Herald-Tribune (March 22, 2009). “Feed-in tariffs have consistently proven to be cheaper for consumers. That’s the bottom line.”

Increasingly, FITs are seen as complimentary to well-crafted RPS policies. One report concluded, “RPS policies appear to be converging with some of the design characteristics typically associated with feed-in tariffs. As a result, it could become increasingly possible to incorporate elements of feed-in tariffs into RPS policy making,” (Feed-in Tariffs and Renewable Energy in the USA – a Policy Update, May 2008). A similar conclusion was made in a March 2009 report by the NREL that concluded: “FIT policies…can be used in parallel and wholly separate from RPS policies, they can replace a part of the current mechanism (perhaps to support a solar carve-out, or distributed generation), or they can be used to entirely replace RPS mechanisms. Of course, they can also be used by states with voluntary renewable energy goals to advance renewable energy development (Technical Report, NREL/TP-6A2 45549 March 2009).

Despite their proven effectiveness and ability to work in conjunction with RPS policies, national, state and regional FIT legislation has been a grass roots affair, not supported by national environmental or renewable energy associations. Rhone Resch of the Solar Energy Industries Association said in January, “What you are also going to see is a focus by industry to create feed-in tariffs at the state level. Creating these programs at the state level will provide a laboratory that shows the federal government how this kind of incentive program stimulates the market. So we are probably a couple years away from a major push on feed-in tariffs at the federal level.”

Call them what you will, but feed-in tariffs or performance-based incentives need to be seriously considered by every country and every policy maker in the world looking to expand the contribution of solar energy. They will be required to reach meaningful national climate goals and achieve significant job creation and economic stimulus. Elimination or marginalization of FITs by many policy makers in the U.S. cannot be a healthy sign for optimal legislation in the future. While near-term legislative action needs to focus on winnable, achievable victories, long-term success will require effective instruments grounded in solid economics.

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The GRU feed-in tariff program has the potential to attract major new renewable energy investments and provide a vital boost to the local economy. More than 220 companies currently produce, sell or install solar PV products in Florida alone. While the program does not require that solar PV equipment be sourced from or installed by local or in-state companies, products and service providers must meet all applicable national and local standards and be licensed to operate in Florida.

Indeed, solar companies in the Gainesville area reported that the initial implementation of the feed-in tariff program was good for business. Wayne Irwin, president of Pure Energy Solar, a contractor based in the city, says the program will “grow the industry.” Mike Antheil, executive director of the Florida Alliance for Renewable Energy, agreed that investments could amount to as much as $50 million in the long run. However, because preference for local solar companies was not written into the program, it may also attract solar companies from out-of-state who aim to capitalize on the expected growth.

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At the start of the 20^th century, the city of Gainesville, Fla., installed modern municipal water, electricity and sewer systems, which made it an attractive location for the University of Florida and helped it become a major educational and cultural hub in the state. Now, more than 100 years later, Gainesville is once again taking bold steps, this time to become a clean energy pioneer in the United States.

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