Feed-in Tariffs: Solar FiT for the USA

End the ITC (Investment Tax Credit) Myopia and expand the United States Solar Policy agenda.

With the Washington International Renewable Energy Conference (WIREC 2008, Agenda) coming up this week, it seemed appropriate to jump into the US solar policy and incentive debate.

Repeated lobbying efforts by the Solar Energy Industries Association (SEIA), the US national trade association for the solar industry, have failed to pass an extension to the solar Investment Tax Credit in last year’s Energy Independence and Security Act and the recent Economic Stimulus Act of 2008. Future SEIA efforts continue to focus on the myopic pursuit of the elusive ITC extensions. Please see Solar Sharpens Weapons for Incentive Battle and Solar Industry's Five-Step Plan for background information.

Per Renewable tax credits likely to run out, leaving investment at home hanging by Chris Morrison at VentureBeat, the inside scoop is the ITC extension will not happen until the next US Presidential administration in 2009.

Given all this focus, is the ITC the best method to promote and incentivize the adoption of solar energy and photovoltaics in the United States? In fact, the answer to this question is a resounding No.

The European Photovoltaic Industry Association (EPIA), the European equivalent of the SEIA, has documented Winning Policies for Solar Electricity gleaned from Germany’s photovoltaic and renewable energy success story driven by their groundbreaking Renewable Energies Sources Act 2000 and EEG 2004 (Erneuerbare Energie Gesetz 2000, EEG 2004).

The EEG guarantees the rate paid for photovoltaic solar electricity generated and fed into the grid for a period of twenty years from the time of installation and interconnection. Rate payers (business and residential electricity customers) fund this program through increased electricity costs per kiloWatt-hour (kW-h). This is not tax money collected and dispersed by the national or state governments but handled under a legal framework by the utilities and grid operators as shown in how the feed-in tariff works in practice. As first exposed in Feed-in Tariffs: Getting off the Renewables Roller Coaster by Michael Hoexter with Californians for a Feed-in Tariff Working Group, Adam Browning of Vote Solar has made erroneous claims about the cost of the EEG in Feed-in Tariff versus Marginal Incentive, both found at RenewableEnergyWorld.com. Per the Solar Generation IV – 2007 report developed by EPIA and Greenpeace:

In Germany, the monthly extra costs per consumer due to the premium tariff for solar electricity are currently €0.20. The result is also that every electricity consumer contributes to the restructuring of the national electricity supply network, away from a fossil-based one, and towards a sustainable and independent structure.

This EPIA press release, Feed-in tariffs make solar photovoltaic electricity more and more competitive, highlights the key provisions of successful Feed-in Tariffs:

• Guarantees the price of PV solar electricity without depending on the State budget. It is indirectly paid by all electricity customers and enables every consumer to promote the development of renewable energies through its monthly electricity bill.
• Secures financing for PV system; a feed-in tariff established by law will serve as a guarantee for individuals willing to purchase a PV system.
• Encourages cost reduction; the constant reduction of the feed-in tariff for new systems connected to the grid will put pressure on the PV-industry to bring down costs.
• Forces the industry to significantly improve performance; the return on investment depends on the performance of the system and customers will opt for systems with highest return.

Germany’s success with the Feed-in Tariff model for photovoltaics and renewable energy has encouraged Spain, Italy, Greece, and France to adopt similar Feed-in Tariff laws to promote the adoption of solar generated electricity. After taking steps to improve and streamline grid access (Access to the grid: A precondition for the solar photovoltaic market to take-off), Spain emerged as the fastest growing market for photovoltaics in 2007.

A quick survey of the SEIA and the Vote Solar Initiative, Solar Nation, and the Solar Alliance activist websites finds nary a mention of Feed-in Tariffs. Perhaps they never read this San Francisco Chronicle OPEN FORUM article, The future is just overhead, by Professor Eicke R. Weber, Director of the Fraunhofer Institute for Solar Energy Systems (ISE)?