California: New report calls for FITs

The Bay area’s Local Clean Energy Alliance published Community Power – Decentralized Renewable Energy in California to frame the debate about how the state can meet its renewable energy target as new governor, Jerry Brown, takes office.

During the Gubernatorial campaign, Governor Brown called for the development of 20,000 megawatts (MW) of new renewable energy capacity, 12,000 MW of which would be set aside for small, distributed projects.

Written by Bay Area activist Al Weinrub, Community Power considered projects from a suite of renewable technologies less than 20 MW in size. Weinrub argues that decentralized renewable generation can be brought on line more quickly with less environmental impact than large, central station renewable energy projects, and thus, are better able to help the state meet its renewable energy targets.

Decentralized generation, Weinrub notes, also provides more local economic benefits than large central station projects.

In Germany, farmers and groups of citizen investors can own renewable generation directly, without the need for "third-party" or corporate ownership as is common in the U.S. For example, half of all wind development in Germany is owned by farmers and cooperatives of people living in nearby communities. Revenues from locally-owned projects go into the pockets of local residents who then use their profits to buy local goods and services and pay local taxes.

To implement Local Clean Energy Alliance’s vision of decentralized development of renewable energy, Community Power suggests two strategies: community choice aggregation; and FITs.

Weinrub argues that policy action is needed, because the state will fail to meet its renewable energy targets. He cites a 2009 California Public Utility Commission report, which shows that although 129 contracts for more than 10,000 MW of large, central station renewable projects have been awarded, little has been built.

Based on experience in Germany, Denmark and Spain, Weinrub describes the key features of successful FIT design. He says that a FIT program with these features is simple, stable, and importantly, fair. Furthermore, he believes a well designed program affords non-taxable entities such as cities, counties, state government, cooperatives and nonprofits, the opportunity to pursue renewable energy projects.

The report contrasts sharply with the inaptly named study by the Interstate Renewable Energy Council (IREC) on Model Program Rules for Community Renewables that omits discussion of both FITs and renewables. Despite its title, the IREC report was directed solely at PV, ignoring other technologies. The report also only examine its preferred mechanism – net-metering – with an emphasis on third-party ownership.

Current policy in the U.S. requires financial acrobatics to develop renewable energy with federal tax subsidies. Many projects developed locally have to sell ownership to a third party with a sufficient business tax to use the federal credits. Instead of IREC’s approach recommending third-party ownership, the Local Clean Energy Alliance’s report encourages more local ownership through FITs.

According to a recent report, 51 percent of the 43,000 MW of renewable generation in Germany in 2009 was owned by farmers and individual investors. Germany uses a sophisticated system of differentiated feed-in tariffs that enable almost anyone to develop renewable energy.

Much of the rapid growth of renewable energy in Germany has occurred during the past decade when Advanced Renewable Tariffs were first introduced.