Key benefits of distributed power generation (DP). Proven technologies for DP are widely scalable. Obvious example: a wind farm can be incrementally built in multiples of approximately 1.4 MW. Bigger doesn’t necessarily mean “cheaper” for DP. Customers can match the DP capacities to precisely known needs and not have to over-buy equipment. (see Figure 1… Continue reading
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About John Farrell
John Farrell directs the Energy Self-Reliant States and Communities program at the Institute for Local Self-Reliance and he focuses on energy policy developments that best expand the benefits of local ownership and dispersed generation of renewable energy. More
An interesting graphic that shows how the definition of distributed generation can vary by technology, since one “module” of a wind power plant (~1.5 megawatts) is very different than one solar module (~250 Watts).
Image credit:Electric Power Systems Research 57 (2001) 195-204; Ackermann et. al.
Wholesale market operators should probably pay providers of smart energy demand more than gas plant generators for ancillary services such as operating reserves. Why? Because the faster response of “a battery or a dishwasher or a water heater or an aluminum pot or compressor in a Wal-Mart [that] can respond on a microsecond basis… should be rewarded a higher payment because, in fact, it’s providing a better service.”
When discussing centralized v. decentralized solar power, there’s an inevitable comparison between solar thermal electric power and solar photovoltaic (PV). But the fact is that solar thermal power – or concentrating solar power (CSP) – can also be done in a distributed fashion. In fact, of the 21 operational CSP plants in the world, 18… Continue reading
Martifer Solar, a subsidiary of Martifer SGPS, alongside Silverado Power, signed today Power Purchase Agreements (PPAs) with Southern California Edison, for 113 MW solar projects.
These 113 MW consist of nine PV projects within close proximity to major utility lines in Southern California. These projects, expected to be concluded in 2013, are primarily located in Los Angeles County and will allow an energy supply to thousands of homes via a 20-year contract with Southern California Edison. [emphasis added]
Most states had to cut spending to close budget gaps in the 2009 fiscal year, and many face additional shortfalls in 2010. These cuts often mean shorter library hours and larger class sizes, but tax credits for renewable energy frequently emerge unscathed.
The cuts in government services tend to fall hardest on the middle and working class, while the energy tax incentives tend to benefit wealthier members of the community. The good news is that it doesn’t have to be this way. Wind turbines and solar panels don’t have to compete with schools and hospitals.
The fix is before Congress and many state governments, and it’s called a renewable energy feed-in tariff. It’s a “plug and play” policy for renewable energy, guaranteeing a grid connection to anyone with a wind or solar project, a long-term contract with your utility, and a price for electricity generation sufficient to make a small profit. It means that many more can be clean energy producers rather than just consumers, spreading the economic benefits of renewable energy over the widest possible area. A good feed-in tariff policy says, “It’s not just for rich folks anymore.”
Here’s how it works. A homeowner buys a solar power system and has it installed on her roof. The local utility connects it to the grid and signs a 20-year contract to buy her solar electricity. The price it provides will give her a small return on investment (say, 6 percent). If the homeowner’s electricity adds any cost to the system, the additional cost (amounting to pennies per month) is spread over all the utility’s ratepayers.
A feed-in tariff helped Germany get 16 percent of its electricity from wind and solar in 2010, with half its renewable energy systems locally owned, bringing economic benefits to every corner of the country. It did so at a lower price than other policy options, because having a guaranteed price lowered borrowing costs for renewable energy developers. And Germany didn’t have to argue for renewable energy tax incentives at the expense of health care, transportation or education.
A well-designed feed-in tariff can replace the maze of government rebates, grants and tax credits with the simple requirement that electric utilities pay producers for the full cost and value of renewable electricity. This strategy results in at least three significant benefits:
The policy can create a more democratic, decentralized electricity system because it removes most of the barriers to local energy generation. This dispersion of renewable electricity production will help maximize the use of the existing electrical grid (transmission and distribution). Locally owned projects return three times the economic benefits to communities that absentee-owned projects do.
The feed-in tariff also means transforming individuals from energy consumers to producers. Unlike traditional renewable energy incentives that target large-scale developments, the feed-in tariff lets anyone become a renewable energy producer. And when people make the shift from consumption to production, their energy use becomes a conscious effort to find equilibrium, rather than simply writing a check for the electric bill.
Finally, the feed-in tariff takes renewable energy incentives off the government balance sheet so that legislatures don’t have to choose between children and clean energy. It may even increase government revenues as hundreds of new renewable energy producers pay taxes on their electricity earnings. Furthermore, since these producers won’t be corporations with legal departments dedicated to reducing their tax payments, there will be more revenue per project.
State and federal budget problems recur regularly, but there’s no reason these shortfalls should pit energy independence and economic development against schools, libraries, or health care — especially when there’s a better solution for promoting renewable energy development.
This is an opinion piece I wrote this spring, published on Minnesota Public Radio’s website.
The bottom line is that Frame and other critics of the plan seem to think that electricity policy alone is what determines the survival of Ontario industry. It’s an important component, but the price on a bill doesn’t reflect other programs and initiatives in place to help alleviate the economic strain. Sure, looked at in isolation it may seem scary, and it’s easy to criticize something in isolation of other facts, but it’s not constructive to the debate…
Historically there have always been U.S. states and Canadian provinces with lower — in some cases much lower — electricity rates. Have we seen a mass exodus of industry into Quebec, or Manitoba, or Wyoming? No, because electricity rates are one of many factors that are weighed by companies. Ontario is still very much competitive with many of the states that count, including Michigan and Pennsylvania, and we’re far cheaper than New York State, New Jersey and California. The claim that our industries are going to pick up and run is scaremongering.
Last week I briefly reviewed IREC’s new (almost) Best Practices for Community Solar and Wind Generation. Craig Morris provided another review this week that provides a very good perspective.
For one, Craig notes that there’s an unhealthy focus on net metering to the exclusion of other policies (like feed-in tariffs) that can provide a higher value for community projects. I think he illustrates one of the biggest problems with continuing to rely on net metering for distributed renewable energy projects:
Generally, under net-metering the utility company gets your “excess” solar power for free, say, at the end of the calendar year – solar power that offset the most expensive power on the spot market during times of peak demand in the early afternoon during the summer. You give that to your utility for free under net-metering. [emphasis added]
The report also misses a chance to highlight the global best practices for community renewables, or even the best practices in the U.S.:
Perhaps unsurprisingly, when IREC went looking for best practices, it did not look at leading global markets, but stayed within the confines of US borders. The study is typical of US analyses in that respect (see this report at Renewables International). Clearly, the dominant global policy to incentivize renewables is feed-in tariffs, especially in ramping up community projects. IREC even ignores FITs within the US, comparing policies in Massachusetts, California, and Maine, for instance, while Vermont, which has successful, but rather limited feed-in tariff scheme, is mentioned only in terms of its “group billing program.”
Craig also notes the glaring issue of ownership. The IREC report defines community ownership as “direct ownership, third-party ownership, and utility ownership.”
Which begs the question of what kind of “community” system can be owned by a utility. Certainly in Germany, a community system is by definition one owned by the community.
IREC goes on to state a preference for utility ownership, an idea I find appalling. As I noted in my review, utility-owned community solar projects have often asked community participants to pay more for electricity, at a time when most people going solar are making a return on investment.
Overall, I think I agree with Craig’s conclusion:
Given the current policy framework in the US, the report is probably useful. For instance, it discusses how community projects can avoid having to pay income tax on the power generated and how federal tax credits can be utilized. In other respects, IREC’s thinking is clearly still bound to net-metering; if you switch to feed-in tariffs, for instance, the question of “demand charges,” which seems to be an important issue for IREC, becomes completely irrelevant. In effect, the proposals basically show how progress could be made within the current legal framework without any major changes.
IREC’s report provides a good perspective of how to advance community renewables under a “business as usual” policy framework. If you agree that we might be able to find better policy, however, you might want to read [shameless promotion alert] Community Solar Power: Obstacles and Opportunities instead.
The CEO of a leading Indian solar energy firm issues a call for a U.S. federal feed-in tariff in yesterday’s New York Times:
Two things happened last month to give us pause to reflect on clean energy. First, Germany added the equivalent of nearly 1 percent of its electricity supply with solar energy between January and August. The first 1 percent took 10 years to achieve; the next 1 percent just 8 months. Second, the author of this revolution, Hermann Scheer, died.
The United States is one of the two top energy consumers in the world (along with China), so the world cares how fast America becomes convinced that there is a viable replacement to fossil fuels. The domestic American market should reach 1,000 megawatts next year. But to put that in perspective, Germany next year could add 1,000 megawatts in just 1.5 months.
To catch up, President Barack Obama needs to push for a federal feed-in tariff, or a mandate for states to have one, and fund it with a surcharge on conventional power — small enough to pass, but big enough to move solar away from cumbersome grants and tax incentives that come and go with the annual budget circus.
American renewable energy policy consists of a byzantine mix of tax incentives, rebates, state mandates, and utility programs. The complexity of the system results in more difficult and costly renewable electricity generation, and hampers the ability of states and communities to maximize the benefits of their renewable energy resources.
Evidence from Europe suggests that a simpler, more comprehensive policy achieves greater renewable energy development, but at a lower cost and with greater economic and social benefits like local ownership. It is called a feed-in tariff, a price for renewable energy high enough to attract investors without being so high it generates windfall profits. The tariff can be varied to spur new emerging technologies or to achieve social ends.
Denmark and Germany both used a feed-in tariff to drive renewable electricity generators to more than 15 percent market share. This policy also resulted in large-scale local ownership, with near half of German wind turbines and over 80 percent of Danish ones owned by the residents of the region.
In 2009, one Canadian province (Ontario) and one US municipal utility (Gainesville, FL) have enacted a feed-in tariff. As many as 11 U.S. state legislatures are seriously considering adopting the system as a complement to their renewable electricity mandates. State and federal policy makers should strongly consider turning to a feed-in tariff as the key mechanism for encouraging renewable energy development. It’s fairness, simplicity, and stability can help the United States maximize the benefits of the renewable energy revolution.
Update January 2011: A new name for this policy has been adopted in the U.S.: CLEAN contracts, for Clean, Local, Energy, Accessible, Now.
ILSR’S FEED-IN TARIFF CONFERENCE – 2009
ILSR held a feed-in tariff conference in Northfield, MN, in January 2009 to help bring visibility to this policy tool to people and organizations in the Midwest. The meeting was attended by approximately 120 people – from regulators and legislators to renewable energy developers and activists.
- We learned how cities, counties, non-profits and more individuals can become owners of renewable energy projects
- We saw how renewable energy can promote more economic development
- We discovered how developing renewable energy can be made more simple